Climate tech needs a new sales strategy

14
Jan 25
By | Other

Climate technology solutions must enter the market as soon as possible. Of course, more funding and policies are needed to finance and enable this growth, but these instruments can only do so much without having valid and repeatable customer demand, as well as an efficient strategy to achieve it, for the solutions themselves .

To date, most sales efforts have focused on the urgency around global warming, an appeal to the altruism of investors and buyers, or the threat of bad PR. However, companies need to take a much more thoughtful and nuanced approach to marketing climate solutions.

As much as it’s a funding and policy game, The Great Shift is a massive global sales effort. In the absence of an effective sales strategy, we have a long, long way to go.

We still have a long way to go

There is still a long way to go in the green transition. In 2023, the share of renewables in the global energy mix was approximately 30%, up from 10% in 2010. By 2025, the total global penetration of electric vehicles is expected to reach 16.7% of global vehicle sales easy. This is significant progress and a major achievement, but a reminder that we are still in the early days.

For a while, we have relied on areas such as “doing good and doing good” to sell climate and sustainable products. We hypothesized that the urgency to decarbonize our economy and society would compel businesses and consumers to purchase and produce products with sustainable resources and production. However, these consumers and producers are in the minority. According to a 2024 Ernst & Young survey, 70% of consumers are not willing to spend more time or money on sustainable energy actions. For example, only 11% of consumers consider heat pumps a first choice for investment. Looking more broadly at sustainability, while 78% of consumers think it is important, only 55% are willing to pay more for sustainable products.

In parallel, major investment banks are moving away from climate coalitions, which may suggest that the themes of companies and products focused on climate and sustainability alone are not enough to attract many investors.

As much as we need more funding and potential policies, to make a dent in the green transition, we will need a more nuanced understanding of end users and buyers and more sophisticated strategies to reach them. .

Market access for climate tech startups is a challenge

Most climate entrepreneurs are focusing on customers who are hard to reach and even harder to sell to.

Consider typical buyers: energy and water companies, real estate and construction corporations, manufacturing and chemical conglomerates, local and national government agencies, to name a few. The solutions we need are not just disruption, but reinvention and reworking of the economy at a fundamental level, which can only be done by partnering and transacting with large public and private firms that operate with a slow and steady mindset, often by have little or no incentive. to change.

Securing partnerships with such massive players is difficult at best. Nina Ali, founder of First Matter, says: “As a general rule, the markets that climate technology companies are selling into are much more challenging. These clients are often slow moving and have a very low risk tolerance. For example, electricity and water utilities are important players in the green transition, yet the critical and non-competitive nature of their operations means they are more concerned with minimizing risk than keeping up with innovation. Such conservative companies do not make major changes unless there is some form of pressure effectively forcing them to do so.

Similarly, Ben Margolis, head of the Maryland Energy Innovation Accelerator (MEIA) says “Climate technology is fundamentally different from other types of technology. For a while, the technology sector has been able to operate with loss and just waiting for an acquisition. This cannot happen in climate technology. The business models and the underlying assets are very different. Unprofitable and unproven technologies will simply not be acquired. Entrepreneurs must show attraction”.

Navigating obstacles is possible with the emergence of new strategies and talents

A decades-old cement manufacturer won’t buy a low-carbon solution simply because it’s “good for the planet.” Any company that is successful not just in building a competitive climate technology product, but also in bringing it to market, will need to know the data of the target customer and industry – their decision-making processes, risk tolerance , procurement procedures, as well as senior leaders who can be internal allies.

According to Ali, “Climate technology companies often overlook a significant number of major hidden risks that are only known to people who have been in those industries for a long time. The most obvious risk is knowing how long it will take and the many steps that stand between you and a sale. Another example is that there is often an existing solution and even if a startup offers a better solution, customers will only buy if conditions exist that create strong motivation. Even if that’s the case, we’ve identified several other systemic risks that aren’t typically a problem for more conventional tech companies that could hinder success for a climate tech company.

To help companies navigate these risks, Ali and her firm, First Matter, pioneered the Goldilocks Startup Approach, a methodology to help climate technology startups create customized and effective commercialization strategies. Ali says: “Navigating climate technology is certainly complex, but there are strategic considerations and proven steps founders can take to find their focus, and when the stakes are so high and resources so limited, it’s important for climate tech founders to find a product and market focus that will be optimized for traction.”

According to Ali and the First Matter team, climate entrepreneurs need to decide early on the optimal go-to-market strategy. For example, it can be tempting to be opportunistic and chase a market because of the lure of a single enthusiastic champion customer instead of taking a step back to do a broader analysis with a longer-term perspective. Likewise, knowing your customer, needs, motivations, decision-making processes and risk tolerance are critical. At a minimum, companies will need to have a solid team of advisors to understand and implement the relevant regulations (e.g. EU sustainable products regulations) and the required technical, quality and performance standards (e.g. .ISO, IEEE).

Accelerators are also taking note of these needs and adapting accordingly. To help founders find the right product-market fit, Margolis and MEIA bring in industry experts to work directly with founders as part of their Energy Executive in Residence (EEIR) program. He says, “our teams often have tremendous depth in their technology area, but sometimes need industry-specific expertise or support. The EEIR program was created to do just that.” It’s a structure that helps early-stage entrepreneurs quickly understand their target industry and create an effective sales approach.

To move forward we must go back to the basics

What might a climate technology sales book look like?

Each company will have to build their own strategy, but we can at least help shape the mindset they should be in, and how they should think about their process.

First, much of the playbook will focus on solid asset infrastructure, sold and adopted by large public and private organizations, which often have long and difficult sales processes. In Ali’s words, “if startups are speedboats, corporations are cruise ships, and the corporations climate startups need to sell to are freighters.” Large incumbent firms feel little incentive to change, and if they do, it can take years to close deals.

Second, a set of solutions is likely needed in the sales process, not just one core product. Margolis says the most successful climate technology companies will offer customers a suite of solutions. Case in point: Tesla is not a manufacturer and seller of a specific product or technology, but a mix of inputs for electric vehicles and the infrastructure needed to power them. Markets will need innovation across the board, not just targeted inputs here and there, and any successful sales process will need to adopt this systems thinking mindset.

Third, know the customer inside and out and be focused on the problem they need to solve. No client is asking entrepreneurs to solve climate change themselves. For example, a cement manufacturer needs to know if a decarbonized cement solution is cheaper and as, if not more, durable over a period of many decades than the existing solution. Policy incentives, voluntary frameworks, and PR can be useful for forcing functions, but they are no substitute for solving a real customer pain point.

Fourth, as Ali would say, find your “Goldilocks”—the customer and channel that’s right for your company to develop a solid foundation. stay there Focus on profitability from day one, conduct rigorous user discovery and build a team and network with strong connections in your target industry.

Last but not least, we will need to be very intentional with building our climate technology sales force. As much as we need more climate finance and policy, we need the knowledge to bring these solutions to market. We will need specialized training and thought leadership, a stronger emphasis on developing climate technology sales talent, and more advanced programming to help bring these solutions to market. As Margolis says, climate technology won’t just “happen” but must be “pushed to market.”

No matter how urgent the climate crisis may be, or how “the right” thing to buy cleaner and greener products may be, few customers are motivated by these forces alone, if at all.

Without consistent and tailored sales strategies that get these products to market and sustain over time, the progress and promise of climate technology will remain aspirational.

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