The FOAK Impact: the First Two Questions to Ask a Would-be Scaleup.

BMW is famous not only for its cars, but also for its approach to advertising. One such great advert shows two scientists developing teleportation technology. It works, and they exclaim - “This changes everything!”. They then look back, see their BMW standing behind them, look at each other, and shake their heads. One of the scientists erases all formulas from the whiteboard, and another purposefully spills coffee on their computers, destroying any evidence of their breakthrough. 

This ad delivers in a light-hearted way that not all technological breakthroughs are worth scaling. The right time to ask these questions is just before you are ready to start scaling up your technology, just as the two fictional scientists did. Scientific research can take any direction, and that’s ok, as the consequences are limited to the laboratory. Money and resources spent on R&D are always many orders of magnitude less than money and resources spent on deploying this technology at scale. We need to use available resources wisely, especially the most limited of them - time. Working to avert climate change, we are racing against time and need to focus our energy and resources only on solutions that can deliver tangible results now, not many decades in the future. 

So, the first and foremost assessment of your technology is not for product-market fit, price, or delivery timeline. If that were it, this article would be just another startup management article. No, we are doing this business, we are developing this technology for a purpose - to make our planet livable for generations to come. The irony is that we, the founders and investors, might not even live to see the full result of today’s actions. But our children, and their children, certainly will. And if not, then we were doing something wrong. 

It doesn’t feel well to devote the rest of your life to developing a technology, thinking that it will help make the world a better place, and end up doing simply another business that makes money, but fails to move the needle on climate. What’s the point? If we set out on this noble crusade, it is best to make sure that what we are doing will really make a difference and will have a positive impact on the climate and society. We thus need to ask ourselves, will our technology reduce a meaningful amount of man-made CO2 or its equivalent, and are there any unforeseen consequences of deploying our technology at scale? This is how to assess your FOAK Impact.

The first question on the FOAK impact: Can this tech eliminate 1% of global emissions if scaled across the industry?

Aviation is responsible for almost 2% of global emissions, so it makes sense to do something to decarbonize air travel. Universal Hydrogen, a US-based startup, claimed that it would do just that. A closer look revealed that the company seemed to target only propeller aircraft, which are responsible for 10-15% of all commercial air traffic. In case of success, Universal Hydrogen’s technology could, in theory, eliminate 0,3% of total man-made CO2 emissions. On the scale of challenge we are facing - it’s a rounding error. Yet, at least $100M was raised and spent, and the team was working on it for four years precisely because it was positioned as a climate technology. 

The first question you should ask any cleantech startup is simple: is your cleantech truly clean, or just pretending? It is important to distinguish between business-as-usual ventures and those that can genuinely reduce CO2 emissions on a global scale. And if you’re not, it’s not a problem! You still can do business, but please, for the Earth's sake, rub out all mentions of how you’ll help to solve the climate crisis from your pitch deck. 

Bill Gates, in his excellent book “How to Avoid the Climate Disaster”, suggested a good rule of thumb to test technologies for climate impact. Consider whether the technology in question could, in principle, reduce 500 million tons of CO2 annually. That’s roughly 1% of global emissions, which are estimated at 50 billion tons of CO2 equivalent. We are talking about not your specific scaleup here, but the entire market adopting this technology. 

It is extremely important to get this right. Capital, talent, and, most importantly, time are scarce. We simply cannot afford to waste resources. There are many other global problems that we need to fix and that are competing for capital, talent, and time. Artificial Intelligence is one. Global pandemics, food security, nuclear deterrence, and a multitude of other things that require our attention. So, if you are sure that your scale-up can be a great business, but its technology will fail to make a meaningful impact, then rebrand your company in any other way and find different investors. You’ll do everyone a favor. 

The Second Question – Does it avoid creating new systemic risks or rebound effects?

One of the epic economic achievements of the turn of the century was the rise of China. More recently, China has been hailed as an “electric state” - a country whose primary energy source is electricity, rather than fossil fuels. One of the key reasons for “going electric” is the unintended consequences of fossil-powered economic growth. In a rush to pull the country out of poverty, the government relied on tried and tested technologies like coal power and internal combustion engines, neglecting health risks. In 2005, 2,6 million people died in China from air particle pollution. Towards the turn of the first decade of the XXI century, the Chinese government fully acknowledged the problem, declared a “war on air pollution,” and by 2019, total deaths attributed to air pollution (all causes) were estimated at approximately 1.85 million.

The danger of unintended consequences is not limited to fossil fuels. My favorite example is green hydrogen. The world is currently producing around 100 million tons of hydrogen, predominantly from fossil fuels. Making one kilogram of green hydrogen requires approximately 50 kWh of clean energy. Thus, to decarbonize hydrogen completely, we will need 5,000 TWh of clean energy per year. Total renewable energy generation in 2023 was 8500 TWh. So, we would need to almost double today’s output of clean energy to simply make all currently used hydrogen clean. Instead, we could have used clean energy to decarbonize our electricity grid, pushing out coal energy generation.

The Oath of Hippocrates, sworn by doctors worldwide, says, “First, do no harm”. Our case is the same. Our technologies have already taxed the planet to the extent that we start to feel rebound effects (people in China certainly did). The key to decarbonization is to create technologies that will improve the lives of people on this planet and avoid creating new, unintended, and systemic risks. This includes your technology. 

Not everything that can work in the lab should be scaled worldwide. When assessing a climate technology, think holistically, think like a circular economist. Examine what be upstream and downstream effects of deploying your technology at a planetary scale are. Look at what critical raw materials are required. Where and how are you going to get them? Be careful of unintended consequences, as the EV industry found out, that the prevalence of nickel-manganese-cobalt cathodes in EVs led to widespread child exploitation in the DRC in the mining of cobalt. Never in history have we run out of raw materials, but time and time again, from coal mines in England in the XVIII century to cobalt mines in the DRC in the XXI century, technologies were certain led to the exploitation of people.

Check the energy needs of your technology. How much would it need at a global scale? Is it available? Where will your company and its competitors get it? Would that clean energy be better used elsewhere to decarbonize energy generation? Go downstream, and think about how your product will be used. How about end of life? How will your product be disposed of or recycled? 

Climate change is the first worldwide crisis that has forced humanity to think far beyond the next couple of years. Tackling climate challenges makes us think in decades, even centuries. At this timescale, we need to consider not only the immediate effects of technology on its use cases and our business. We need to look wider at what economists call “externalities” of running a business.