Solving the gaps for technical cleantech founders in order to achieve success
Many great cleantech companies have stalled due to a lack of finance and BD resources/experience. Founders often can't afford hires in these roles so we put together this resource to provide support.
There are hundreds of cleantech companies globally that are going to run out of money because a) the sales cycle is taking too long and b) they don’t have access to funds to bridge that gap. A lot of these companies have highly technical founders and industry experts who are more likely to build the best solution, but then the solution gets lost because they aren’t as comfortable with sales and fundraising (which is also sales…).
It’s underappreciated how many tools/strategies are available to solve these problems, and in many instances, the founders have just never seen these strategies if they were in technical roles for their careers. To solve this problem we’ve put together a list of BD strategies and financial strategies to ensure that founders can get their companies to the scale where they can make a real impact. We hope this helps! Share it with any cleantech teams that you think could use it.
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Financial tools
There are more than enough blogs that cover how to raise money, but not nearly enough on how to avoid raising (i.e. how to extend your runway). This is because everyone gets paid on a raise (lawyers do work, VCs deploy capital, CRE agents show the company extra space, etc.), and so infinite literature is created to show founders that it’s the natural next step. Instead of this we want to talk about how to do more with less.
The great thing about focusing on extending your runway is it forces you to build a stronger business for when you do raise. It also makes the raise easier because you are negotiating from a position of strength (the terms you will receive are wildly different if it’s clear you have to take a deal versus having multiple levers available to extend your runway.)
Below we’ve outlined several of these underappreciated levers.
Pulling cash forward from customers on deals. You can often sell longer-term subscriptions, offtakes, etc., where a client pays you today for better terms in the future. You just run this against your cost of capital and advance this structure if it’s better. We’ve even seen multiple companies get their buyers/off-takers to help pay for their construction of the facility. If you don’t know how to structure these deals, please reach out, and we can send you some notes and coordinate free calls with commercial experts in our network who have volunteered to help.
Sell non core parts of the business such as IP, or business units. One item that's underappreciated is it can sometimes be cheaper to sell a business unit for zero than shut it down (since various contract terminations can cost an organization a lot of money). Many companies may even want that footprint (and you may find its worth way more to them). We have a list of companies looking to expand into certain areas if your tools/verticals are a fit - happy to put you in touch.
Grants. There are lots of orgs and programs out there including NRC IRAP, ERA, Alberta Innovates, Scale AI, Mitacs Accelerate, and many others where you can access critical dollars to advance cleantech technologies. If you don’t have time to pursue your own grants there are multiple orgs such as Thin Air Labs that will apply for you. If you can’t run your emissions calculations (required to show the benefit) there are even software names such as Arbor that can do the entire calculation for you quickly. There shouldn’t be an excuse to not source non-dilutive funding for critical new technologies. The only thing to keep in mind is to be very wary of the programs that put too much emphasis on rigid milestones (everyone who has built anything knows that iteration is the path to success) and ones that have an IP claim (makes it impossible to raise new funds and sell).
Outsource near-term hires. Fractional roles are less cost, and reduce burn, as role requirements arise. This can help bridge companies to when they need a full-time person. Feel free to send us a message and we can introduce you to fractional team members that we’ve seen be successful. Firms also exist such as Leeg Group that can provide entire fractional verticals.
Adding venture debt to the capital structure is often cheaper and faster than a new round in many markets right now. Also gives you more room to plan and solve problems. Leo Tam at ATB, Stefan Chiasson at BDC, and Jeffery Lightburn, CA at NBC all do a good job of providing capital solutions.
Optimize working capital. This can include getting a higher rate on the cash you hold, reducing expenses by tracking T&E and automating approvals, extending payment terms with vendors, getting cashback on spending, and speeding up receivables requests (time to invoicing), along with many other strategies. If you don't have someone with a finance background there are tons of great providers like Ramp that now do this for you or use a fractional resource that can quickly install these solutions and then part ways (see above).
Make more money off your tools today, without going through your entire sales process. This can include selling a right to sell your product, licensing it, or selling partnership exclusivity in a region (if you are a founder/owner make sure that you put a term limit on this). You've built something good and partners will pay to provide their clients with the benefits, or to be the only advantaged entity.
Factor receivables. This can be a slippery slope, but for some, it's a useful lever.
Partner with suppliers. If you’ve developed a new hardware solution that can be deployed (everything from batteries to recycling plants to carbon capture sites, etc.), then your suppliers are going to want you to succeed financially. Many founders never think of this, though, and simply treat them as arms-length sources of materials. Talk to your suppliers and see if there are ways they can help you succeed (we’ve seen equipment companies help with financing all the way to investing in new solutions that deploy their materials).
Reduce capital outlays (especially in hard tech). There are often cheaper ways to assemble pilot projects and assets. An easy example we’ve seen is acquiring brownfield sites, borrowing against the value of those sites, and then selling surplus equipment at those sites to further reduce the purchase price. A platform such as Fuelled can quickly do this for you in the majority of industries (please do your own diligence on partners for your specific case). These types of steps can suddenly cut the required equity cheque in half.
BD/Sales Strategies
Below we have included the basics (table stakes for your core sales strategy) and a few hacks that we’ve seen be successful in accelerating traditional sales.
Founder led sales. In the early stages of a solution (hardware or software) prospects will only ever buy from someone that they’d also take advice from. This is fine for technical founders, as you probably understand the solution better than anyone, but it means you either have to be in every sales meeting or you need someone trusted who can do it. The point is that in the early stages, you will never find the right “salesperson” (companies will often churn several junior people).
Understand what about your solution is measured. Without being measured there is no market for it. i.e. hundreds of environmental dashboards have come and gone because they just show people “better data.” No one’s bonus or job is tied to “better data.” Figure out what is measured (reduced costs? reduced incidents?) and sell a solution to that. The same is true of hardware. i.e. if hydrogen is already a worry for parts of your industry (refineries), and you are a hydrogen company, look at solving their problem first.
Be honest about sales timelines. A lot of companies have disappeared because they waited to get lucky (expecting to get an inbound from that unique client that signs in a few months, etc.). This doesn’t happen and they built their company incorrectly hoping it would. Founders have also ruined good deals/prospects because they tried to skip sales steps with a client.
Be ruthless about eliminating clients. Clients that say they could use a product if it had “x” feature or attribute are not early adopters and you won’t interact with them for a decade. Don’t engineer a solution for them. Find the clients that get value today and iterate with them instead. Don’t waste any additional time moving clients through a funnel if there isn’t commercial alignment.
Don’t count on an RFP if you didn’t help write it. In many industries, the RFPs are co-written by consultants who already have a solution in mind (often one they’ve integrated before) or by competing service providers who have been planning a solution with the name for years and detailing what they’d need. For the vast majority of industries, if you didn’t know the RFP was coming in advance, then the likelihood of winning is almost zero. Allocate resources correctly in response to this.
Funnel management is much more boring than people expect. There are set stages (discovery, qualification, NDA, demo, proposal, etc.) and you should steadily eliminate friction like you are running a manufacturing process. If you don’t care about a sentence in your NDA, or MSA, that clients keep getting hung up on then why is it there - it will compound in lost value over the life of your org. If a client gets to your MSA and you realize the commercials aren’t aligned (either them or yourselves don’t make enough money), then you’ve wasted internal resources and need to be more ruthless in discovery (even if it hurts and half your funnel disappears).
Pursue distribution partners to accelerate your sales cycle with limited resources. A lot of industries already have non-competitive entities that sell to your clients (consultants are a natural example in all industries). They already have the relationship and are typically very happy to stack another product and revenue, especially when they didn’t have to engineer the other product themselves.
Don’t put a lot of value in your network or the network of others. People always overestimate a network’s value for selling innovative solutions (by contrast, it’s great for selling template stuff), leading to the wrong selling pursuits and signals. Both employees and founders make this mistake. It is rare that an economic deal was held up because someone couldn't get in front of someone else (networks are great for pushing bad deals over the finish line, but they eventually churn). If the differentiated commercials/value for a new solution makes sense (most of the prior work) then you can always get in front of the right people. The opposite is true where you can meet infinite times with no progress if you are all about the network and haven't spent the time on commercial alignment.
We hope these ideas are helpful and are happy to put you in touch with any of the above references. Good luck out there!
Impact Logic, a technical recruitment leader for impact-driven founders, sponsors our jobs section below. Reach out to them here as you look to fill critical roles.
Jobs that are worth looking at today include
Ops and BD roles with Carbon Upcycling
Process Engineer role at Ionomr
Marketing, Finance, Technical, and Engineering roles at Hydrostor
Engineering and Sales roles at CarbonCure
Engineering and Ops roles at Northvolt
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