We review commercial structures in cleantech and chat with the co-founder of Cloover on the back of their recent raise

Cloover got us thinking we should highlight the ways cleantech firms can make money to drive growth - some are new for these industries. We also highlight a free consulting offer from a partner.

Jul 10, 2024

Financing options for efficient home improvements are expensive and complex. This is not helpful for adoption. You often need to research financing solutions separately from your provider, which creates an additional barrier and burden for the consumer. Imagine a world where almost none of the car dealerships had financing options, and you had to do all those meetings separately and in parallel. That also creates a higher lending cost as the lender is uncertain about the end product versus when the solution is internalized. That would be bad for the consumer, and fewer cars would be sold. That’s the world of home efficiency financing today, but few are pushing for a better solution. That’s where Cloover comes in, and we were lucky enough to chat with the founder.

The Cloover discussion reminded us that many cleantech companies are in the stage where new commercial arrangements must be tested. Founders and consumers are very passionate about the solution, but the industry hasn’t had the rapid iteration of the best commercial structures other industries have. This means there are still lots to try. We outline them below using simple language in case it lets you serve your customers faster.

We also chat with Rise to Zero's founder about what they see in the market and share their free consulting offer with our readers.

This is a different newsletter structure, but we’ve been lucky to meet great builders in the space through our community and want to share their stories. Please let us know what you think.

Emissions Decisions is a newsletter reviewing our thesis on environmental solutions. Thank you for reading it.

Existing subscriber? You don’t need to do anything, but please share.

Was this forwarded to you? Become one of our subscribers by clicking below.

Co-founder of Cloover, Valentin Gonczy, Accelerates Efficient Homes

Cloover offers software and financing solutions to reduce household emissions. Their platform provides sustainable home improvement companies with plug-and-play software that puts all parts of the process in one place for their customers, including an embedded financing solution, which improves the current financing experience.

Financing for rooftop solar expands the addressable market by eliminating prohibitive upfront costs. The average household says that coming up with over $1,000 would be difficult, and the higher upfront costs of solar narrow the market drastically. We were lucky to catch up with the Cloover co-founder Valentin Gonczy.

What was the genesis of the business?

“In the renewable energy sector, we identified a significant opportunity and challenge. Energy sources play a crucial role in greenhouse gas emissions and achieving Net Zero goals. Accelerating the transition to renewable energy is therefore essential. While delving deeper into the market, we quickly realized that although companies such as Enpal, 1KOMMA5°, and Zolar are well-known, the true heroes of the renewable energy transition are the SME installers, which account for over 85% of all installations. We recognized the need for financing in this market. Many cannot afford to pay for their solar installation in cash. This realization led to the creation of Cloover, enabling SME installers to offer financing directly to customers, making renewable energy accessible to all.”

How have you found adoption to date?

“There is currently a very high demand for our software and financing solutions from installation companies.”

What is the commercial structure for you, partners, and homeowners?

“The partner companies install the systems at the customers' locations. Cloover purchases the systems from the installation companies and concludes a contract for an installment purchase with the end customers (homeowners).”

Have governments helped support the company given it accelerates their environmental goals?

“So far, no governments have supported Cloover in offering financing and software solutions to installation companies.”

Can any home improvement company now offer loans with your tools?

“Every craft business that installs renewable systems, such as PV systems, heat pumps, storage systems, or wallboxes can pass on financing solutions to its end customers in the context of a partnership with Cloover.”

What are some of the benefits companies have been seeing as a result?

“Our partner companies can benefit in particular from two aspects: On the one hand, a much larger customer segment can be addressed, as people who cannot pay cash for a solar system also have the opportunity to have such a system installed. On the other hand, the sales process of the installation companies is made much more efficient, as the conclusion of the customers is simplified by digital solutions.”

Any resistance?

“So far, we have not encountered any resistance. On the contrary: The installation companies are pleased that they can offer a solar system to more potential customers and the process of financing works much faster and less bureaucratically than when customers work independently with house banks.”

Commercial Structures for Cleantech Companies

One of the things we like about the Cloover discussion is that it shows how changing the economics of the customer can be needed to achieve environmental goals. To that end, we wanted to summarize different commercial structures. Many of the cleantech founders we chat with are passionate about the problem but may not have experienced different ways they can build a company around solving it. They could have a great idea but the wrong approach to deliver it commercially. Testing the strategies below may work well, and we will try to use really simple language so that everything can be understood and actioned. Many people use complex language to protect what they are selling or working on. This is on purpose, and it’s usually not that complex.

Ways to make money in cleantech:

Sell something, including a tangible good, a subscription, or a service: Most companies do this by selling something for a set price once or multiple times.

Trade something today for an expected non-subscription revenue stream: We are starting to see this strategy in hard tech where something is sold at cost (generator, battery, rooftop solar), and then the company makes money off maintenance in the future from their larger installed base. This is identical to legacy auto and why it’s been so hard for new car companies to compete for decades (a high installed base provides maintenance revenue to subsidize new models and maintain that base). Offset companies that make most of their economics off the tail of deals are another example of trading value over time.

Franchise model: A franchise approach can quickly grow something repeatable you’ve invented without raising much capital. We are seeing this model amongst some vertical farming operators with unique approaches.

Monetize communities: Communities are valuable, and you may have built one through events, volunteering for a cause, etc., and assuming what you are delivering is aligned, they can be leveraged for everything from crowdfunding to subscriptions and tickets.

Make money off associated offerings (sometimes called freemium): Basic services are offered for free, or sometimes at cost, with the actual margin embedded in premium or associated offerings. A model like this is critical for almost all apps, as we’ve seen hundreds of applications come and go that offer to help people understand their emissions footprint for a small fee. People just don’t pay it - adoption in tech is tough enough as it is - and an auxiliary offering or another monetization approach above is required. This is what people have done with warranties and insurance for decades. Think about what auxiliary services make sense and sell them simultaneously.

Make money off referrals: If you don’t want to offer the services above, someone else would gladly pay for the chance to offer them to your customers. This includes simple marketing as well as items such as loans and insurance.

Rental/leasing approach: Some renewable energy companies already use this approach, offering households temporary use of their assets for a fee.

Free Consulting, from Michael Szego, for Clean Economy Companies

Michael Szego runs Rise to Zero which helps clean economy businesses with marketing and strategy. We chatted with him about what he’s seeing in the space and we also wanted to bring his offer to readers.

Tell us about your experience in the sector and what you do?

“I work with clean and circular businesses to help them pitch better, go to market effectively and get customers. I've been doing this work for the past few years and have worked in clean energy, district energy, heat recovery systems, ESG SaaS, nature-based solutions, carbon to value and others.”

How are cleantech founders finding the current environment? What is most difficult?

“It's a grind. Chequebooks have gone into hiding, both at funders and customers. The most pressing issue is larger customers committing to pilots, projects and purchases. It's just not happening on a timeline that is supporting founders.”

What subsectors are you seeing investors spend the most time in and what’s slowing down?

“I'm not the expert on this but from my vantage point, I see district energy, renewables and demand side solutions getting a lot of attention.”

How are founders finding the quantification of benefits for both investors and customers? Are those stakeholder groups making distinctions based on the greatest impact?

“Founders struggle to articulate the benefits, mostly because they are technical experts, not communication experts. I recently watched 15 pitches at a climate investor day and all 15 need to keep working on their stories. It's very difficult to get out of your own head to articulate the value of your company as it is literally part of your identity.”

What are the keys to successful customer acquisition?

“There is obviously no perfect recipe, but earning visibility, demonstrating momentum, providing tangible proof of efficacy, removing risk for clients are all essential. There is usually a lot to do before any traditional marketing is required.”

What are some tips for founders raising today?

“Don't be boring. Focus on the outputs and their proven value, not the process you have built.”

How do you think about the pros and cons of grants? We’ve heard the pros of non dilutive capital from our readers but we’ve also heard the cons that grants are milestone-based which impairs iteration, the foundation of every successful tech company.

“My take is the only con of grants is distraction. It can be a ton of work to find, prepare, submit and fulfill the responsibilities for grants. Canadian governments are cautious too and there is a lot of scrutiny on grant money. This can be a huge con. But securing a grant also is a signal to clients that you've demonstrated you're on a pathway and you are making progress. There are companies now that can help you find and submit for grants that allow founders to stay focused.”

Anything else you’d like to share?

“I'm offering free consulting to cleantech and circular founders, in exchange for 30 mins of their time.

If you're a climate, cleantech or circular economy founder, and you feel that getting customers or raising money are key challenges right now.

You know something needs to change. A 30-for-30 call:
1. First 30 min: me asking you some set interview questions (recorded)
2. Next 30 min: me providing advice on your biggest problem for free, as a thank you (not recorded!)

There are limited spots so if you're interested, please book time in my calendar here.”

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.