Jonathan Strimling found himself in a challenging situation. After years of hard work, his company had successfully developed a technology that could transform old cardboard into top-quality building insulation. CleanFiber’s innovative technology produced insulation with fewer contaminants and dust, making it a hit among installers.
With this success, CleanFiber needed to scale production significantly. However, transitioning from a scientific project to a commercial business is no easy feat.
“Launching our first plant was a tough endeavor. It cost more and took longer than expected, which is quite common,” shared Strimling, the CEO of the company, in an interview with TechCrunch.
Startups are inherently risky, especially in their early stages. While investors are more willing to take on risks during the initial phases, transitioning to a mature company poses significant challenges, particularly for hardware-focused startups in the climate tech space.
“Hardware, hard tech, and infrastructure are still areas where investors show hesitancy,” noted Matt Rogers, co-founder of Nest and Mill, emphasizing the difficulty faced by climate startups.
The financing gap between early-stage venture capital and infrastructure funds presents a major hurdle for emerging climate tech companies, deemed as the “commercial valley of death” by Ashwin Shashindranath, a partner at Energy Impact Partners.
Overcoming the Valley of Death
The challenge of securing funding at the middle stages of growth is evident in previous startups encountering difficulties as they aimed to scale their operations. The deficiency in specialized talent and the complexities of navigating manufacturing and infrastructure issues further compound the financing challenges.
Investors are increasingly urging startups to recruit experienced professionals in manufacturing, construction, and project management early on to address operational gaps.
Strategies for Sustainability
To bridge the financing gap, investors are exploring various strategies, including provisioning larger funding rounds, utilizing continuity funds, and exploring alternative financing mechanisms like asset-backed equipment loans.
Companies like Spring Lane Capital are pioneering innovative approaches that blend venture capital and private equity to support scale-up efforts and navigate the challenges of industrial production.
While the road ahead may be daunting, the pursuit of climate solutions through innovative technologies remains imperative. With a collective effort from investors, startups, and industry partners, the vision of a sustainable future can be realized.
