🌎 A framework for building Climate Tech & lessons from Good Energy’s Juliet Davenport

Startup Bulletin: Earth Day Special

Apr 22, 2022

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Let’s start with a hard truth. Whilst most people say they are concerned by climate change, the majority do not prioritise it in their day-to-day decisions.

But capitalism is changing—and there is now an expectation from consumers (and shareholders) for companies to create more sustainable products and services. But this creates a gap. Consumers want more sustainable offerings, but businesses know most people won’t actually be willing to pay for them.

So how do we solve this? We can use ‘carrots’, creating accessible innovations that people want that deliver sustainable outcomes at a fair price. Or ‘sticks’, using policy or regulation that forces everyone to change to be more sustainable, with someone bearing the cost.

At Founders Factory, we are in the business of carrots. As a community that follows the natural flow of founders, we have witnessed an accelerating migration of the smartest people wanting to build things to help our planet. So we are doubling down in this space, to provide more infrastructure and support to help bring more of these startups to life.

To celebrate Earth Day, we’re releasing this special edition newsletter, hoping to share some of the top learnings from building in climate and sustainability, as well as spotlight some of the exciting things we’re working on.

This month’s newsletter includes:

A framework for building in climate tech
Lessons for founders from Good Energy founder Juliet Davenport
Our portfolio spotlight on sustainability
Sustainability & climate tech news

🧠 A framework for building in climate tech

Advice from operator and impact investor Jamie Rowles

There are some hard truths about how the majority of startup investors, who whilst being in the business of taking risks, think differently about the climate space:

They are (normal?) people. See hard truth #1 above—while they say they are concerned about climate, they don’t prioritise the environment in their day jobs (i.e. the investments they make)
Coming to the atoms issue, most don’t like hardware or “capex” (based on a general heuristic around capital efficiency)—e.g. things that put constraints on so-called “scalability”
Most don’t like non-software business models, as they don’t understand the metrics and milestones that come with growing and financing scale-ups of less standardised businesses

On the one hand this creates opportunities for investors who do care; but this does however narrow the universe of people you can raise money from (although this universe is growing). So if you are trying to bring a product to market with a climate impact, there are some archetypes that can help you articulate the risks to investors based on 1) how you look at your technology, and 2) the challenges of bringing it to market to help fix our climate challenges.

🌳 Category 1: “Greenfield innovation”

e.g. Smarter energy; cleaner & cheaper materials

When do we get excited? When a team has developed a product, service or technology that is better, cheaper and net planet positive
What are the risks? The usual ones—does it work, can you build it? So make sure you pick authentic, mission-aligned investors (as they should be queuing up)

⚡️Category 2: “Same need, but greener”

e.g. Electric cars, clean energy, green materials

When do we get excited? When a team can articulate how they bring this vision to life, understand the pathway to adoption and the levers to accelerate change?
What are the risks? Will you be able to move beyond the early adopter base if there are structural barriers (i.e. price/convenience)?

🏭 Category 3: “Fixing a problem”

e.g. Air pollution, plastic pollution, CFCs

When do we get excited? When a team can “prove” unequivocally that the timing is now for the change required
What are the risks? How does your solution fit within the planned future (i.e. regulation or the future consumer preference)?

From my experience partnering with startups in this space, the characteristics of the companies that have the capacity to rewire an industry are:

Founders driven by the required system change (impact is at the core)
Those who can articulate the mission to attract the best talent, customers, and investors
Those who have a plan to scale to global solutions (think 10x rather than 10%)

Big things are coming soon in this space at Founders Factory. If you are building something where this resonates, please let us know

💡 Lessons for founders from Juliet Davenport, Good Energy founder

Juliet Davenport founded Good Energy, one of the first ‘challenger’ energy companies supplying clean energy to consumers. We asked for some of her biggest learnings along her journey disrupting an incumbent industry and spearheading a sustainable revolution

1. Mission-driven businesses will have a hardcore customer base—so make the most of it

Startups with an environmental mission will find they have a core group of dedicated customers which can prove to be critical to your business. For us, we tapped this group up to crowdfund the business when we struggled to raise VC money.

If anything, I regret not utilising this group more. These consumers can be your biggest ambassadors, and should be core to your marketing and growth strategy. Tesla, for instance, has a members’ club for their owners. Giving those customers a platform to talk to each other, but also as a wider outreach to get more customers, can be very powerful.

2. People-centric businesses have the biggest impact

Entrepreneurs, at their core, are problem solvers. The bigger the problem, the more utility you have, and the more likely people are to engage with your product.

At this moment in time, the UK faces a particularly pressing challenge around the rising cost of living. This calls for entrepreneurs who can bring products/services to stabilise or reduce rising costs. Here, I feel that climate tech has a real opportunity. Take a solartech startup like Solivus (for whom I sit on the board)—by introducing solar panels for both domestic and commercial buildings, they’re able to decentralise energy production to the point of use. This means that 20-to-30% of energy costs are fixed, shielding those customers and businesses from inflation.

Keeping people at the centre of the product will also mean you don’t have to worry too much about government policy or regulation—their loyalty will help you weather these external factors.

3. The tide is shifting, and climate tech is having its moment

When I founded Good Energy, we came up against two challenges. Firstly, awareness around climate change was in its infancy; secondly, climate tech garnered little interest from investors.

Both of these have now changed. For one, the majority of people have an active awareness of climate change and their personal impact. Secondly, there’s been a tidal wave of grant funding into climate tech, allowing founders to develop tech with non-dilutive funding. This in turn has attracted more interest from private capital, who can invest in founders further down the line.

Finally, and perhaps most importantly for changing behaviour, is that the cost of technology has gone down to a point where many green solutions are cost-effective, or even cheaper, than the dirty alternative. Green entrepreneurs should capitalise on this inflection period.

These are excerpts from an interview. Read the full article here

🔦 Portfolio spotlight on: SUSTAINABILITY

Across our accelerator and venture studio, we’ve worked on a number of projects across the sustainability space. Here are just some of these companies addressing climate and sustainability challenges:

☀️ Solivus

Problem they’re addressing: Demand for clean energy (especially with crippling energy prices), and a lack of differentiated solar solutions for consumers
Solution they’re building: Solar panel innovations—an ultra-thin solar film for commercial buildings; the Solivus Arc, a domestic, portable solar panel unit
Founder(s): Jo Parker Swift (CEO)
Traction & 💰 raised to date: £5m raised (recently crowdfunded £2.4m); trial with Cotswolds Airport in the UK to become the solar-powered airport

🔃 Again

Problem they’re addressing: High cost of reusable packaging & lack of efficiency in cleaning process
Solution they’re building: Highly-efficient smart cleaning system for refill & reuse, with aim of making reusable packaging cheaper than single use plastic
Founder(s): Matt Kennedy (CEO)
Traction & 💰raised to date: £2.55m raised; live pilots with AB InBev, Greene King, Arsenal FC and Diageo

👗 Zoa Rental

Problem they’re addressing: Wasteful fashion industry that needs to reduce emissions by 50% to hit targets
Solution they’re building: White label software to help fashion brands launch rental offerings (“Shopify for rental”)
Founder(s): Isabella West (CEO)
Traction & 💰raised to date: winner of Tech Nation Rising Star prize; D2C platform Hirestreet partnered with M&S, Decathlon & more

🚆 Byway

Problem they’re addressing: Carbon-emitting, unsustainable travel industry centred around flying
Solution they’re building: Flight-free, slow travel company powered by tech to create customised trips
Founder(s): Cat Jones (CEO)
Traction & 💰raised to date: £1.1m raised; recipient of Innovate UK SMART grant; B Corp certified

🧴 Bower Collective

Problem they’re addressing: dominance of single use plastic for home and personal care products
Solution they’re building: e-commerce platform for sustainable & refillable home and hygiene products
Who is building it: Marcus Hill & Nick Torday (co-CEOs)
Traction & 💰 raised to date: £2.1m raised; B Corp certified

📰 Sustainability & climate tech news from the FF family

🌳 Founders Factory launched the Mission Studio, a joint venture with UK innovation agency Nesta to build new mission-driven ventures. The first focus area is reducing household carbon emissions. We’re developing two projects on this:
- Project Kevin - purpose-led property developer driving household decarbonisation by buying up leaky housing stock and renewing property to meet energy efficiency standards
- Project Rita - a managed marketplace to streamline the end-to-end process of retrofitting your property

Our next focus area is on narrowing health inequalities, particularly around obesity. Tell us about your ideas here

🌎 We also launched the Sustainability Seed Program, in partnership with Bratislava-based VC collective G-Force.
- We’re investing €150k, alongside six months support, in startups building around circular economy, sustainable food/feed production, carbon/methane capture & storage, sustainable energy & mobility, and sustainable housing & manufacturing.
- We’ve already made two investments: Solivus, a solar tech disruptor, and Metalchemy, creating innovative nanotechnology in packaging to extend the shelf life of food
🚀 Climate Tech is hosting its Summit at London Tech Week on June 14th
- Sessions on the agenda include: ClimateTech and Cities, Food and Agriculture, Decarbonising the Supply Chain, Fundraising in the Climate Space
- You can register here
- Keep up to date with what they’re up to by subscribing to their newsletter

See you next month 👋

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The Founders Factory Startup Bulletin brings you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.