Dr. Chris Wedding is the Founder of Entrepreneurs for Impact, a private climate CEO peer advisory group, and a professor at Duke University and UNC Chapel Hill. He is also the Founder of IronOak Energy Capital and a registered representative with Finalis Securities LLC (Member SIPC/FINRA). He produces ZERO, a climate finance newsletter, and The Climate Torch, a climate CEO interview series. Dr. Wedding is a member of CEBN’s Business Network. CEBN staff invited Chris to offer advice for cleantech startups looking to raise capital.
**Please note that the Clean Energy Business Network does not serve as a financial advisor. The information below is solely the opinion of the author and is for informational purposes only. Specifically, this content does not include a comprehensive discussion of all factors needed to make an informed investment decision. Nothing herein constitutes an investment recommendation.**
On the heels of the White House unveiling a $2T infrastructure plan boosting clean energy deployment and ahead of an updated U.S. commitment to the Paris Agreement, climate tech investment is front and center. The Biden Administration is looking to lead on climate ambition, but government can’t get us there alone.
Fortunately, climate is hot, and investors are piling in.
As proof, consider some numbers:
- $501B was invested in clean energy globally in 2020; this includes mostly solar, wind, and electric vehicles, with much smaller numbers from electrified heat (e.g, heat pumps), energy storage, and hydrogen (in that order). This is more than 2x the invested amount in 2013. (Source: BloombergNEF)
- $2B+ has been invested in carbontech (e.g., capture, upcycling) to date, across 323+ companies in 27 countries. (Source: Circular Carbon Market)
- $490B was invested in green, social, and sustainability bonds, and another $347B was invested into ESG-focused investments funds in 2020 (Source: Bloomberg)
- $60B was invested in climate tech venture capital between 2013-2019, with an 84% compound annual growth rate, plus another $17B in 2020. (Sources: PwC; BloombergNEF)
And on top of that, Special Purpose Acquisition Companies, or SPACs, have already raised more capital in Q1 2021 than all of 2020, topping $87B so far.
As a refresher, SPACs are known as “blank check” public companies that raise money in order to acquire a private company, thereby taking them public through a merger process instead of the typical IPO (initial public offering) route.
And some experts, like The Cleantech Group, suggest that cleantech or climate companies make up about 30% of the demand for SPAC strategies. That’s a lot of dry powder for sectors that we in CEBN care about.
Despite all of this new capital focused on companies tackling climate change, finding the right capital is not quite as easy as holding out your hat.
First, where might you find investors?
Below are a few resources to get you started.
Next, the investor meeting…
As you rev up for a discussion with potential capital providers, consider these tips below for what not to do. I think I’ve made all of these mistakes before, so now you’re off to a better start than I had many years ago.
- DO NOT show up late or go over your allotted meeting time.
“If you’re on time, then you are late.”
Being on time for the beginning and end of your meeting is a sign of respect.
And respect is a great foundation for a long-term investor-entrepreneur relationship.
- DO NOT start the meeting before engaging in small talk.
Do you start with a healthy dose of small talk? Or get right to the agenda ASAP?
The correct answer is usually the former, if the investor allows you to do it.
Build rapport first. Connect emotionally before getting into facts and dollars.
People like to do business with people they can relate to.
- DO NOT create a slide deck longer than, say, 10-15 slides.
Remember: “A new bus comes by every 15 minutes” for investors.
You have about 15 minutes to convince the investor that your business is worth their time and capital.So get to the point early in your deck, and start where you will finish — that is, your vision.
- DO NOT squeeze your entire knowledge base into each slide.
You’re an expert on your business. And you’re passionate. Congratulations.
However, white space is your friend. Less is more. Dense slides don’t improve audience comprehension.
And add a single call out on each slide with the main takeaway to make sure they remember what you want them to retain.
- DO NOT talk about the investor’s business as if you understand it better than they do.
You should do your due diligence on the investor before you arrive. After all, it’s a two-way buyers’ street.
But do not assume things about their business based on a website (e.g., it’s often outdated or intentionally imprecise) or on secondhand intel (e.g., deal- or time-specific factors make every investment consideration different).
- DO NOT get into lots of technical details unless asked.
Most investors are not technical experts in your industry.
Start with the big picture, the vision, the pain, the emotion, and the possibilities.
First hook them. Later all those nitty gritty details will be extracted from you during Q&A and their investment due diligence.
- DO NOT refute feedback from the investor as if they are uneducated newbies.
“Feedback is the breakfast of champions.”
Criticism is not a threat. It is just data. Don’t be a fragile little flower.
Instead, say, “That’s a great point. I’ll give it more thought and talk it over with my team.”
- DO NOT go too blue sky with overly ambitious projections.
“If those projections are correct, then I need to quit my job in finance and go work for this startup or project developer,” said no investor ever.
Aim high, but don’t be Icarus. The investor’s sun can melt the wax of your wings quickly.
- DO NOT show internal disagreement among your team.
No team has perfect alignment all the time.
But do not let any differences of opinion come across during your investor meeting.
One. Unified. Force.
- DO NOT leave the meeting without asking for advice.
“If you want capital, then seek advice. If you want advice, then seek capital.”
Advice can sometimes be more valuable than the capital.
But if the investor is a good fit for your company, please include the “ask” slide. No ask, no get.
- DO NOT delay on following up after your meeting.
Most people are very bad at follow ups. So here is your chance to stand out.
Within one day of your meeting, send a thank you email and note the good feedback they gave you.
Within 3-5 days of your meeting, send a detailed response to their questions or criticisms.
Then ask for their suggested next steps.
Raising capital can be a major distraction from your core business. But to grow more quickly and stay ahead of competitors, it might just be essential.