Yesterday, I sat down to chat with Dr Clea Kolster, partner and head of science at Lowercarbon Capital, the VC firm cofounded by Chris Sacca. Lowercarbon is based in the US but invests in Europe, too.
Raising money for climate tech companies in 2023 is very different to doing so a year or two ago — venture funding for the sector in Europe dropped more than 40% in the first half of 2023 compared with 2022.
With that in mind, here are three of Kolster’s top tips for funding climate tech in 2023.
1/ Prove that your tech milestones are attainable
Founders need to alter their pitch decks to suit the current financial climate, Kolster says. Investors want more proof that technical milestones are attainable within certain periods.
“One thing we’ve seen evolve in the last year is less appetite for uncertain outcomes. That doesn’t mean there’s less appetite for certain companies — it just means that founders and investors need to change the way they’re thinking about how they see company milestones,” she says.
Founders should demonstrate the milestones they’ve reached already and how they feed into upcoming milestones — this will reduce the amount of risk that investors feel they’re taking on.
2/ Derisk through your team
There are other ways that founders can reduce the amount of risk investors feel they’re signing up for.
Kolster recommends demonstrating how team members and their previous experiences will help to derisk different parts of the tech that companies are building. Show you’ve hired people who have worked on similar tech or who have a proven track record working on part of your process.
3/ Secure commercial engagement early on
It’s more important than ever to show investors how much capital a company will need in its lifetime — and where it’ll come from, Kolster says. A way to do that is to get customers to buy into the product early on.
For companies building infrastructure or hardware, that can mean building a pilot version of the tech early and using it to prompt commercial conversations.
“Is there a pilot or commercial demonstration you can build that shows how your tech works and gets your customers excited? It’s important to engage your customers as soon as possible and bring them along the journey,” Kolster says.
“Get them to buy into what you’re building early on — it’s a great way to ensure you have a customer at the end and to derisk the capital you need to build the tech.”
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