Second-hand equipment and loans for equipment in FOAK
- Emin Askerov
- Jun 10
- 2 min read
Financing and executing a FOAK is an exercise in creative de-risking. On top of all the uncertainty you have about new tech, which has never been tested in the real world, you don’t have collateral for loans, you don’t have a future income stream from off-take, and your CAPEX is eye-wateringly high.
Yesterday, I had two interesting conversations, totally independent of each other, yet linked, and both pointing to ways of de-risking your FOAK. In one, we talked about a startup in biochar, getting ready to raise its next round to build a pilot plant. We spoke about the ways to de-risk its proposal and lower the necessary CAPEX. Going in incremental steps, such as suggested by the Breakthrough Energy Catalyst pilot-demo-FOAK, is one. Another one discussed was to ask equipment suppliers to provide finance for the equipment.
The other talk was with a platform, bringing together B2B players for second-hand equipment in oil, gas, renewables, and even carbon capture. The oil and gas industry is cycle-prone, so there is a lot of used, but perfectly sound equipment available. Retired wind turbines can still find new uses. And you can even buy a carbon capture and storage facility (not that you really need to, but still).
Using equipment finance lowers your equity needs and helps to avoid dilution, but using second-hand equipment reduces CAPEX. There are tradeoffs, such as lower flexibility in project scheduling in the former case and a higher risk of malfunction in the latter.
Using second-hand equipment might work for the pilot or demo stages, where you don’t need to run it for thousands of hours, and are still tweaking your process. And these stages might prove too small for equipment manufacturers to provide you with a loan. When building your FOAK, though, you’ll have a greater need for reliability while having a scale decent enough for equipment manufacturers to consider finance.
Would you consider using second-hand equipment for your pilot/demo/FOAK?
