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Investing at the Vanguard of Climate Tech

Thursday, May 18th 2023 By Desean Taber

Dynamo Energy Hub is pleased to announce the release of our joint report with Alvarez & Marsal titled, Investing at the Vanguard of Climate Tech. This report is a tool for anyone working in the energy sector who is investing in the energy transition – either large operating companies or as investors in the space. It is the lens through which companies can create a roadmap to approach their climate tech goals from a business model perspective.  

The foundation of the paper rests on the question, what’s different now in the climate world? From 2006-2011, investors put about $25 billion to work and lost half of that amount. Examining the pitfalls of cleantech 1.0—macroeconomic headwinds, falling gas and PV prices, high cost of renewables, and an emphasis on the software business model—can give us an opportunity to look towards the future and rectify those mistakes.  The cleantech industry requires a different model of engagement— ‘invest in what you know’— and current entrepreneurs should determine which business models are compatible with their expertise and develop capabilities to navigate market complexity.  

The report emphasizes the relevance of the ‘flywheel effect.’ Effectively, it’s how increasing capital deployment produces a flywheel effect to the market and why it’s so important to the new way of investing as the energy transition grows—investing trillions of dollars into decarbonization creates its own economy and its own demands. The best example lies in EV vehicles. 15 years ago, there were only a couple models of EVs on the road; today, there are 179 models being produced. In other words, investing causes the total addressable market to grow and thus requires increased diversity of products and services.   

Next, the report looks at the role of oil and gas majors as corporate investment in newer technologies grows. Oil and gas majors are making massive investments in the energy space and will play a critical role in climate tech. However, although money is important, it is not the only impact these corporations can make. How do oil and gas companies build systems or scale up their expertise? How do they enter new markets or manage risk? These are all processes that traditional energy companies have experience doing and can bring that expertise to the table.  

Investors should also seek to avoid the ‘Valley of Death‘— the period when companies emerge from their earliest stages and begin to approach commercial scalability, but are not yet profitable and investment washes up. What’s different now, as clarified in the paper, is there are many more types of capital, government funding, and corporates that are willing to step in to invest in startups earlier. 

There are wildly different business models in any sector and to “invest in what you know.” Segmenting climate tech startups by business model allows investors to invest in the business models they understand and be better suited to enable a company’s success.   

In addition, this report referenced several Dynamo members, including TeraWatt Infrastructure, Inpipe Energy, Amperon, and Equinor who are some of the critical cleantech leaders in their sectors.

The report is available to download here. Dynamo would like to thank all contributors who made this report possible. On the Dynamo side, thank you to Meade HarrisKristin Barbato, and Desean Taber. On the Alvarez & Marsal side, thank you to Julie McLaughlinRachel Burns, and Hedan Liu.

Click here to reach the full report.



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