According to BloombergNEF, the stationary energy storage market tripled in 2023, a surge we might not see again, but the momentum isn’t slowing down. With an expected annual growth rate of 21%, battery storage is set to outpace both wind (9%) and solar (7%) in the coming years. The question is: where’s the opportunity now, and how has the investment landscape shifted? Source: https://about.bnef.com/blog/global-energy-storage-market-records-biggest-jump-yet/ Let’s break down the key business models in stationary battery storage and see which ones still have room for VC-backed growth, and which are now the domain of long-term institutional investors. 1. OEM (Original Equipment Manufacturer) What’s this model about? Manufacturers produce battery cells, modules, and packs that are integrated into energy storage systems. This is your normal hardware OEM play - build a factory or assembly facility and sell the product.  Examples: Think CATL, LG Chem, and EVE energy - major players producing batteries not just for EVs but for stationary storage too. There are also numerous dedicated players like Pomega in Turkey, or just assemblers of ESS containers.  Investment Outlook: This market is fully commoditized. When 90% of your conversation with clients revolves around price, you know the product has become a commodity. Margins are thin, and differentiation is minimal. For VCs seeking exponential growth, this isn’t the play anymore. Instead, OEMs are now ripe for long-term institutional investors, who are looking for steady, predictable returns rather than risky bets. 2. New Technologies (Thermal Batteries & Long-Duration Stationary Energy Storage) What’s this model about? Innovative solutions like thermal batteries and long-duration storage aim to solve grid stability issues by storing energy over days or even weeks and decarbonizing industries using a lot of heat.  Examples: Companies like Malta Inc. (thermal storage) and Form Energy (iron-air batteries) are pushing the envelope in long-duration storage. Most companies in this space are startups.  Investment Outlook: These technologies are still developing, but the question remains: is it worth investing in? For VCs looking for a 10x return, probably not. Long-duration storage and thermal batteries are niche markets within the already niche stationary storage sector. They lack the scalability and market size to deliver explosive growth. However, they can still be solid investments for impact funds or patient capital, offering decent but not transformative returns. 3. Utility-Scale Storage What’s this model about? Utilities integrate large-scale battery storage into their grids to balance renewable energy inputs and improve grid stability. Examples: Tesla’s Megapack deployments, Fluence’s grid solutions, and Octopus Energy storage and demand-response projects are leading the way. Others, like Flower, Field, or TerraOne focus on demand response and developing software for battery integration and management.  Investment Outlook: This is where things get exciting. Utility-scale storage is just hitting its stride. As countries ramp up their renewable energy portfolios, co-location of batteries with solar and wind farms is becoming the norm, either through regulatory mandates or market incentives. The decoupling of software from the capital-heavy infrastructure gives room for scalable solutions, which is perfect for VC-backed startups focusing on energy management software. Expect this segment to grow rapidly as utilities seek to optimize their renewable integration. 4. Developer Model What’s this model about? Developers find strategic locations, secure land, and permits, and build or sell battery storage projects. Examples: Grid-scale battery developers like Stem Inc. and Key Capture Energy focus on identifying critical grid points for storage deployment. Investment Outlook: Think of this as the real estate of the energy world. Developers scout locations near transformer stations or weak points in the grid, secure land and permits, and either build the project or sell the rights at a premium. While this model can be highly profitable, it’s not scalable in the way VCs prefer. Each project is location-specific, and growth is linear, not exponential.  The Bottom Line The hardware side of battery storage, OEMs and developers, is shifting towards traditional capital sources like long-term loans and infrastructure funds. However, the rapid deployment of batteries is opening up new opportunities in the demand-response market , where agile startups, particularly those leveraging AI, can achieve exponential growth. For VCs, the sweet spot lies in the software and services that optimize and manage energy storage systems. Think AI-driven grid management, predictive maintenance platforms, and energy trading algorithms. These are the areas still ripe for disruption and scalable growth. What’s your take on the future of stationary energy storage? Are you betting on new tech, utility-scale growth, or software-driven solutions?

How overcapacity in battery manufacturing can lead to a change in the gigafactory business model? According to a recent Boston Consulting Group   report , global battery cell production could outstrip demand twofold over the next five years , leading to intense price competition and major pressure to cut costs. The 30% Cost Reduction Challenge Battery producers must slash conversion costs (costs minus materials) by up to 30%  to stay competitive. The big question: how?  The report outlines two primary approaches: Retrofitting existing plants  with new process optimizations Building next-generation facilities  from the ground up, integrating cutting-edge technology The Electrode Tech Is The Key  The most impactful cost-saving innovations are happening in electrode manufacturing , including: Continuous mixing  – Increasing throughput 3x while eliminating buffer storage Infrared drying  – Cutting energy use and reducing drying time Electrode dry coating  – Eliminating solvents, reducing costs by up to 19%, but still an unproven tech at scale. Self-controlled slot die systems  – Using AI to optimize coating parameters and reduce waste Yet, scaling these innovations from lab to full-scale manufacturing remains a massive challenge. The Scale, Skills, and Formats  Startups and second-tier battery makers face three major roadblocks  to adopting new technologies: Scaling these innovations from lab to manufacturing - all of the above work fine in the labs but have so far not scaled successfully  Lack of expertise  – Many new players lack the deep process knowledge required to scale these innovations Uncertainty of future cell formats and chemistries  – Committing to a single format (cylindrical vs. pouch) locks in 50-60% of equipment, making flexibility a key concern Why Dedicated Electrode Facilities Make Sense Now, what follows below are my conclusions and not those of the BSG.  I see that the BCG report strengthens the case for separating electrode production from cell assembly.   ✅ Bridging the scale-up gap  – Small-scale dedicated electrode facilities (300-2000 MWh) can serve as an intermediate step between lab and mass production ✅ Training & know-how transfer  – Partnering with experienced manufacturers helps startups navigate the steep learning curve ✅ Specialization for market needs  – Dedicated facilities allow for tailored cell production, rather than forcing a one-size-fits-all factory model The Takeaway The arguments of NMC over LFP chemistries have dominated the lithium-ion debate for the last couple of years. In my opinion, this is a “smokescreen” debate, centrally irrelevant to the industry. Overcapacity will make efficiency the new battleground, and those who fail to cut costs, bridge the know-how gap, and adapt to uncertain market conditions  risk being left behind. Regardless of which chemistry they choose.  📩 If you’re working on scaling up battery manufacturing  or bringing new electrode innovations to market , reach out—let’s talk! #gigafactory #scaleup #batteries #lithiumion #nmc #lfp #scaleup

"Find mistakes on a small scale and make a profit on a large scale." This simple yet powerful insight from KERONE Engineering Solutions Ltd.  sums up the entire purpose of a Pilot  when scaling cleantech. Before you dive headfirst into building a Demo or FOAK (First-of-a-Kind) facility, your Pilot is where you de-risk your technology , understand your manufacturing constraints , and identify problems while they’re still small and fixable . Skip this stage or underestimate its importance - and pay the price when you scale too soon. What is a Pilot? A Pilot is your first real-world test —where you prove that your technology works outside the lab . It’s not about commercial success (yet). It’s about learning how your product behaves under real-world conditions and what challenges you’ll face at scale. Think of it as your first cautious step into industrial reality. How Big Should Your Pilot Be? The golden rule : Keep it as small as possible, but big enough to give you reliable data. The standard recommendation is that a Pilot should be 1x bigger than your laboratory setup . But in reality, the availability of equipment  and supplier constraints  will dictate the actual size. Take lithium-ion cell manufacturing as an example: Laboratory scale : Anything under 100 MWh per year Pilot scale : Defined by mixer size—labs typically use 5-10 liter mixers , while Pilot lines use up to 50 liters . Pilots help bridge the gap between theory and industrial reality—and that means focusing on five key areas that will shape your scale-up strategy. What Your Pilot Should Teach You 1️⃣ Adjusting Your Core Technology  Your product might work in the lab, but industrial production is a different beast. Standardized manufacturing equipment, commercial-grade materials, and real-world conditions might require tweaks to your design or process . ✅ Track changes  during Pilot production. If your tech doesn’t fit off-the-shelf equipment or available raw materials, it’s time to adapt. 2️⃣ Mapping Out Equipment Constraints  A Pilot is often the first time you engage with real suppliers . You’ll quickly learn:  ✔️ What equipment is available ✔️ What’s too expensive or slow to deliver  ✔️ Which vendors are reliable Even though you’ll start with the smallest available machines , this knowledge is crucial when planning your next step—your Demo plant . 3️⃣ Understanding Production Speed & Automation  Lab work is slow and manual. Scaling up means introducing automation—even at the Pilot stage.  ✔️ How do your materials behave at higher speeds?  ✔️ Can your process handle continuous operation instead of batch production?  ✔️ Where do you start seeing bottlenecks? These insights help you optimize your production flow before moving to full-scale operations. 4️⃣ Preparing for Industrial Environments  Scaling isn’t just about the product—it’s about the entire manufacturing ecosystem. A Pilot forces you to consider:  ✔️ Space requirements (worker passages, lighting, ventilation)  ✔️ Health & safety (fire hazards, waste management)  ✔️ Environmental compliance (air purification, emissions control) These i nfrastructure challenges become much bigger when you move to Demo and FOAK levels—better to start addressing them early. 5️⃣ Identifying Quality Bottlenecks I’ll never tire of saying that lab-scale products often don’t translate directly to industrial-scale manufacturing. At the Pilot stage, you start seeing:  ✔️ Which quality control issues appear first ✔️ How consistently your raw materials perform  ✔️ Where automation creates variability in output Quality issues increase with scale, but Pilots let you catch the worst ones early—saving millions in later-stage corrections. The Takeaway: Don’t Skip the Pilot Stage 🚀 Scaling too early = costly failures.  🛠️ A well-executed Pilot gives you data, not just assumptions. 📊 The smaller the mistakes, the bigger the profits later. Your Pilot is not about proving you can sell—it’s about proving you can make. The insights you gain here will determine whether your scale-up journey is smooth or painful. What’s your experience with Pilots? Drop your thoughts in the comments! #Cleantech #ScaleUp #FOAK #Manufacturing #PilotToScale #Startups #IndustrialTech #EnergyTransition

“You’re not taking this prototype home. I’m buying it.” That’s the kind of response every hardware founder dreams of. And Sergei Ignatiev, the founder of Bobsla , was lucky enough to hear it from one of his first potential customers. Bobsla, an Austrian startup, is a masterclass in nailing customer value propositions . Back in 2018, Sergei built a prototype—a mix of an electric go-kart and a snowmobile. Fast forward six years, and he’s selling Bobsla vehicles to ski resorts, working on autonomous snow transporters , and gearing up to disrupt the snowmobile industry —all while bootstrapping with minimal investment. Today, while recording my next WattsUpWithStartups  podcast episode with Sergei, I reflected on two key lessons for hardware founders: ✅ Sell the experience, not just the tech.  Yes, Bobsla is electric, but customers don’t buy it because it’s green. They buy it because it’s fast, fun, and safe —with sustainability as an embedded feature. ✅ Start small, then disrupt.  Bobsla follows the classic disruptive tech playbook. It started with a niche market (ski resorts) and is steadily working its way toward reshaping the snowmobile industry . Hard tech moves at its own rhythm.  If you want to hear what it takes to build, sell, and scale a hardware startup, stay tuned for my next podcast episode with Sergei. It’s packed with insights from the frontlines of clean mobility and startup grit. What’s the best customer reaction you’ve ever received? Drop it in the comments! #ClimateTech #HardwareStartups #ScaleUp #EVs #Snowmobiles #Entrepreneurship #SkiResorts #DisruptiveTech

When planning your FOAK (First-of-a-Kind) project, it’s tempting to start small—minimizing CAPEX, raising less money, and avoiding too much dilution. But here’s the catch: your FOAK should also serve as a blueprint for future Nth-of-a-kind (NOAK) facilities. Ideally, you’d want to “copy-paste” it without changes. Let’s take a look at Northvolt—once the North Star of European cleantech, now a cautionary tale. Their scientists developed battery chemistry in the lab and scaled it straight to a 16 GWh FOAK facility , capable of supplying 300,000 EVs annually. Their scale-up was more like a leap of faith than a cautious step. So, scaling too fast can be fatal. How do you get it right? Based on investor insights and my own experience, the best approach follows a 3-step framework , as described by Mario Fernandez of Breakthrough Energy Catalyst: 1️⃣ Pilot Stage:  1x the scale of your lab. Prove the technology works beyond the bench. 2️⃣ Demo Stage:  5-20x of your pilot. Iron out the process and get market feedback. 3️⃣ FOAK Stage:  10x of your demo. Now you're ready for prime time. This phased approach ensures you don’t jump into an unmanageable scale too soon, avoiding costly failures and building investor confidence along the way. 💡 Scaling up is an art. Do it too slowly, and you’ll lose market opportunities. Do it too fast, and you’ll burn through cash and credibility. Are you planning your FOAK? Let’s talk. I’d love to share insights and help you avoid the pitfalls. #ScaleUp #ClimateTech #Manufacturing #FOAK #EnergyTransition #StartupLessons #Northvolt

According to the research by Planet A, Norrsken, and Speedinvest, investors agonize that founders do not think deeply about their business model when scaling up. Now that you have a bird-eye view of different possible business models for your scale-up, how do you choose the right one? The Zen-master style answer is to follow the money. But as you are reading this book, not to gain enlightenment but to learn concrete steps to scale your startup, there are four steps you need to take to figure out which one fits your company most. We’ll get there, don’t worry. But first things first. Following the money should be your guiding principle in selecting your business model. Even though your startup is a cleantech startup, and you work to make the world livable for this generation and those that will come after, you won’t succeed in this goal if your business doesn’t make as much money as possible. How do you make that? You try to build a monopoly. Pieter Thiel, in his famous book “Zero to One,” writes that successful startups do not enter a competition with others - they build monopolies. Only a monopoly position will allow you to build a lasting company, impact the world, and get those 10x or 100x returns your investors crave. Two things can get you there – your technology and your business model. While you are thinking about your business model and working through the steps of the framework, keep this guiding principle in mind – follow the money and try to secure a monopoly position. The following 4-step framework for choosing climate tech scale-up business model sets out to break down the logic of finding the right business model: 1.     Start with determining the value a customer will get from your product/service 2.     Work back upstream, determining many suppliers, including your startup, will be involved along the value chain 3.     Identify which part of the value chain will have the biggest pricing power, being able to dictate prices to the rest of the value chain, and why 4.     Check where and how your startup can take place in the value chain. Let’s dive into more detail for each of these steps. The 4-step Framework for Choosing Climate Tech Scale-Up Business Model Step 1. Determine the value to the customer If you get to the scale-up stage, you should have a pretty good idea of what value your customer will get when your product or service is massively deployed. After all, until this point, almost every meeting those pesky investors started with them grilling you exactly about your value proposition. For this step, you’ll need to get quite specific. Look beyond your next step and model a situation of NOAK – Nth-of-a-kind. Model what the price would be for a customer and why he would pay it. Find and pinpoint customers’ 10x gain over substitutes or whatever the customer is using now. As we know, this doesn’t have to be literally a 10x price difference. It can be a similar status difference or safety improvement. For example, LuxWall has innovated in the building materials sector by creating highly insulating, transparent vacuum-insulated glass. Their product dramatically reduces energy loss in buildings, leading to significant savings in heating and cooling costs. This efficiency offers a compelling advantage over standard double-pane windows, providing both economic and environmental benefits. Step 2. Map the value chain Starting from your customer, work back upstream, and write out all major material components and services you will need to pull together to provide the final product/service to the customer. Startups that make everything in-house are unheard of, so you will need to rely on one or another sort of supply chain. The key here is to name particular suppliers and note their market condition. Work through the following questions, when analyzing each supplier. Are they enjoying a monopoly position? Do they face pressures from competitors? Are they obliged or will they soon be obliged by regulators or their other customers to reduce their carbon footprint? How big is the demand from other customers? What kind of market power do those customers have? How deep and detailed you’ll have to be will depend on the maturity of the market you will operate in. In established markets, like renewable energy or manufacturing of electric vehicles, the supply chains will be fully developed, and you will have to do quite a bit of analyzing each layer of the value chain. In others, like synthetic fuels or small modular nuclear reactors, the supply chain will be much sparse, with some components not produced at all or produced for different industries with slightly different characteristics. Here is an example of a new market. Our team at Red Wind was thinking about which components of a wind turbine to make at our factory near Volgograd, Russia, and which to outsource. There was no wind turbine supply chain in Russia at that time, so we were free to pick and choose which parts to make ourselves. We took our bill of materials (BOM) and went through all potential suppliers in the Russian market. We called or met them at their factories to assess whether they could deliver what we wanted. Step 3. Identify choke points Now that you have mapped your value chain, study it closely and try to find monopolies and supply bottlenecks. Some vendors or service providers may be the only ones who can sell you the stuff your startup desperately needs. This doesn’t have to be existing monopolies, like a sole supplier of a particular piece of equipment. It can be a potential monopoly situation if the market is not there yet. Find the gatekeepers. Look also on the other side – who are the buyers of your suppliers and can influence them? Some might have big and powerful customers from other industries who can overwhelm your supplier with orders, leaving your startup out of the picture. | Now, determine what part of the total value your product or service will generate that you’ve established in Step 1 will be eaten up by all the choke points in your value chain. Your goal here is to find the part of the value chain that, due to a combination of factors like location, technology, know-how, regulations, or another type of a “moat” will be able to collect most of the value. Coming back to the Russian wind turbine example, we decided that we would own the manufacturing of the generator and assembly of the nacelle. The generator was the heart of the turbine and its quality and reliability mattered critically for the operation of the turbine. For the rest of about 6000 parts of the bill of materials (BOM), we decided to source externally.   Step 4. Fit in your startup It is time now to take a step back from the analysis of the value chain and look instead at your startup. How instrumental is your startup in the generation of value? Which parts of the chain can you occupy and won’t be dethroned in a short while? Where will your market position be the strongest? What will be your leverage over suppliers, customers, and competition? Blue Ocean Markets Novel products that require whole new supply chain setups will give you the most flexibility. Think from two perspectives. First, choose the parts that will generate the most value. This can be the manufacturing of a critical component, mining of key material, or distribution. Second, find the parts that while not generating much value, may seriously hamper your product roll-out. After identifying those, mark them as the ones that you should do in-house.   For example, Tesla ensured the success of its EVs by rolling out the Supercharger network and making it free for Tesla owners. Tesla went downstream to charging to create a monopoly-like advantage for itself in a market that is potentially competitive. In the same logic, Telsa eschewed car dealerships and sold cars directly to its customers. In this way, Tesla eliminated a bottleneck in the value chain and was able to control costs.   Red Ocean Markets When deploying your product in established markets, your analysis will be the same, but your options will be more limited. Existing suppliers would be well-established and possess enough staying power to outlast your attempt to dislodge them. You will need to think harder about the leverage that you can employ that will carve out a monopoly position for you. Conclusion Choosing the right business model for your climate tech scale-up requires a deep understanding of your value chain, market maturity, and potential choke points. In emerging markets, an OEM or usage-based model might work best, whereas established markets may favor licensing or subscription approaches. However, remember that every startup’s path is unique—this framework helps you validate your hypotheses and build a resilient business model. How well it fares in the real world will depend on how well you execute your FOAK (First-of-a-Kind) deployments to demonstrate value and scalability. Now it's time to put this framework into action and start shaping your scale-up strategy.

Yesterday, I wrote about Canoo’s bankruptcy , adding another name to the growing list of failed EV startups—Arrival, Fisker, Proterra, and others. But today, let’s flip the script with some good news. Meet TOGG, Turkey’s rising EV star. In just its second year of operations, TOGG sold over 30,000 electric vehicles in 2024 , becoming Turkey’s top-selling EV brand. For context, Tesla sold 37,547 cars in Germany  in the same year. That puts TOGG right between Mercedes (34,000 EVs)  and Skoda (25,000 EVs)  in the German market. So, how did TOGG do it? TOGG was founded in 2018, around the same time as many hyped EV startups. But instead of chasing the spotlight, they focused on building a solid foundation: 🔧 Designed in Germany  – Leveraging top-tier engineering talent.  🔋 Powered by Farasis Energy  – Reliable battery supply.  🏭 Built in Turkey  – Smart localization strategy with a joint venture factory for battery packs. TOGG's journey wasn’t accompanied by global media hype. Yet today, their vehicles are a common sight in Istanbul, sharing the streets with Teslas. The company is now planning to ramp up production to 100,000 cars per year  and launch a new model. 💡 Key Takeaway:  Sometimes, less hype means more bite. I’m keen to dive deeper into what makes TOGG tick and what lessons other climate tech startups can learn from their approach. Stay tuned for more insights! What do you think? Is TOGG a case of solid execution over flashy promises? Or is it just a case of being successful in a captive market? Let me know your thoughts. #EV #TOGG #ScaleUp #Cleantech #Automotive #SuccessStories #Türkiye

𝗥𝗮𝗶𝘀𝗶𝗻𝗴 𝗠𝗼𝗻𝗲𝘆 𝗜𝘀 𝗘𝗮𝘀𝘆. 𝗕𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗣𝗿𝗼𝗱𝘂𝗰𝘁 𝗜𝘀 𝗛𝗮𝗿𝗱 The EV industry is abuzz with the news of Canoo’s bankruptcy. What did it do? Like 99% of EV and cleantech startups, Canoo claimed to offer “breakthrough electric vehicles that reinvent the automotive landscape with bold innovations in design, pioneering technologies, and a unique business model.” In reality, they were just trying to build an electric minivan. I don’t know the inside story of Canoo, so I can’t say exactly why it failed. Some commentators blame its SPAC structure—a shorthand for Wall Street’s “pump-and-dump” model. Others point to bad management like $1.7M spent on the CEO’s private jet despite revenue of just $800K. Some cite technical shortcomings, such as the lack of safety airbags. All of this may be true—or not. I want to highlight something different. Canoo raised approximately $1.5B (according to PitchBook). It secured a non-binding offtake agreement with the U.S. Postal Service. It had a CEO with a strong track record. It kinda Yet, it still failed. Discussions around scaling up climate tech often focus on financing. That makes sense—startups need money, and investors talk confidently about investing. But Canoo, along with Arrival, Redflow, Universal Hydrogen, and Northvolt, proves that raising capital is just one piece of the puzzle. 𝗙𝗶𝗻𝗮𝗻𝗰𝗲 𝗶𝘀 𝗻𝗲𝗰𝗲𝘀𝘀𝗮𝗿𝘆, 𝗯𝘂𝘁 𝗶𝘁’𝘀 𝗻𝗼𝘁 𝗲𝗻𝗼𝘂𝗴𝗵. Scaling climate tech requires more—operational excellence, engineering rigor, and execution discipline. The high failure rate shows that neither founders nor investors have fully mastered these skills. What do you think? What are the biggest challenges beyond financing for climate tech startups? #scaleup #climatetech #cleantech #funding #SPAC #EV

Over 37% of climate investors decide not to invest in hardware companies because of the business model and long sales cycles. These are the results of a survey, carried out by Planet A, Norrsken, and Speedinvest. The survey also highlights investors' preference for X-as-a-service and licensing business models over others. So, choosing a business model can make or break your startup.   The business model aims to determine how exactly you will make money. There are many ways for a climate tech startup to earn a buck, but not all are equal in the face of climate investors. The Stanford Precourt Institute for Energy has one of the best summaries of business models in climate tech (see picture below). But what are the specific climate tech startups, utilizing these models? What should you focus on, should you choose one? And what are the pros and cons of each? Let’s break it down. 1. Sell a Thing Classic and timeless. Whether it’s an Apple iPhone or sustainable cement from Brimstone, this model is about creating physical products and selling them for cash. While this sounds simple, in reality, this is the hardest model to pull off in climate tech. Tesla is probably the most well-known example of a successful hard-tech climate startup. Others, like First Solar, manufacture and sell solar panels, or like Brimstone, make and sell sustainable cement. To make this business model work, you’ve got to master the art of unit economics —aka making sure your costs are low enough actually to make a profit. This is harder than it sounds. Scaling up manufacturing is the only way your company can grow. And once you are in making stuff, competitors will quickly pile in, so you’ll need to constantly work on differentiating your product from myriads of imitators. The biggest benefit of this business model is its simplicity. Tangible products are easier to understand and market. The problems are numerous though. This model requires high upfront investments in manufacturing and supply chain development. And its linear scaling makes it unpopular with venture capitalists. According to Planet A, “ Building and Scaling Climate Hardware: A Playbook, ” hardware is “often associated with one-off equipment sales thus steady, low gross margins where enterprise value only scales linearly with volume.” Venture Capitalists like exponential value growth, and it is tough for hardware startups to jump on the exponential growth curve. 2. Rent a Thing Not everything’s worth owning—sometimes, borrowing is all we need. U-Haul rents you trucks for your awkward cross-town move, while Renewell lets you lease what you rarely use. Similarly, car-sharing services build their business models on easy and convenient car rentals. If we search closer to climate tech, Sunrun leases solar panels to homeowners, enabling access to clean energy without the upfront costs. This model thrives on consumption . The goal is to maximize the value of stuff that sits idle for most of the time. The higher the utilization rate – the more valuable is your business. To get there, you’ll need to make sure that your customers love renting from you. Customer experience is paramount here. The main benefit of this model is that it generates recurring revenues, that entice investors. The rental model is also of interest to B2B customers, as it allows them to enjoy the benefits of a product without spending capital. It is often easier for corporations to approve a slight increase in operating expenditures rather than approve a large additional capital investment. Same as with hardware sales, the rental model requires a lot of upfront expenditure on assets. This makes it vulnerable to a drop in utilization rates, should customers find the service inconvenient.   3. Take a Cut A bit fancier term is an “enabler” or less fancy - a “fixer”. You connect two parties who have services or goods to exchange and take a cut. Platforms like Airbnb don’t own a single hotel room, yet they make billions by connecting people and taking a piece of the action. In climate tech, the take-a-cut model is popular within the carbon credit markets. For example, Patch is a marketplace for carbon credits, enabling businesses to purchase verified carbon offsets. LevelTen Energy “helps carbon-free energy buyers, sellers, advisors, and financiers get better deals done.” CICON.App , a UK-based startup, connects fashion-conscious customers with local care products, cleaners, repairers, resellers, charities, and recyclers, charging a commission for each transaction. The success of the model depends on GMV  (Gross Merchandise Volume)—fancy talk for how much money flows through their platform. The bigger the pie, the bigger their slice. You have to get as many transactions as possible on your platform. To do that, you have to master two things. First, is trust. Market players have to trust you to find quality counterparts and deals on your platform. The second is convenience. Your platform should be easy and convenient to use. Applying this model doesn’t require much capital and has an option of exponential growth. While this model works great for software startups, investors are known to shy away from this model in climate tech. One reason is that most of the time it is applied in carbon markets. Investors have a hard time trusting carbon markets due to their voluntary nature and absence of clear government regulation. Other drawbacks include vulnerability to competition if switching platforms is easy and the need for substantial marketing investments to build a trusted brand.   4. Charge a Subscription Subscription is the king of software business models as it thrives on what investors value – recurring revenues. The customer may or may not use your service but still pays a subscription. This business model is ideal for services that customers regularly use. Yes, this is why you have a Netflix subscription. In climate tech, the subscription model is also mainly found with software startups. Planet Labs charges a subscription for satellite imagery and climate monitoring data. Climeworks enables its clients to remove a certain amount of CO2 from the atmosphere by subscribing to Climeworks. To make this model a success, it is necessary to make your platform so engaging that customers wouldn’t want to leave. In VC-speak, this is called the “retention rate”, for the share of customers who stay on your platform. However, the holy grail of all subscription services is the lifetime value (LTV) of a customer. It is the amount of money your customer brings over the time he is subscribed to your service. This model’s main benefit is that it is the easiest for investors to understand and the most comfortable one. It provides predictable and recurring cash flow while allowing for rapid scaling with few investments. The problem is that competition is fierce, and a misstep could spike your “churn rate” – a measure of how fast customers leave your service. 5. Charge Based on Usage This is a pay-as-you-go model. Every time you sell energy or carbon offsets, you charge your customers per unit of your product consumed. This model is popular in climate tech. Most clean power companies make money by charging per kWh of energy generated. EV charging station startups are prime users of this model, as well as clean energy power plants. There is also an inverse model, where you get paid for reducing consumption of something, usually of energy, known as an energy service company model (ESCO). To get ahead with this model you first need to invest in related assets, such as a charging network or a power plant. This is a classic infrastructure investment, where you need to incur large upfront costs that are later recouped through user fees. Choosing the right location is paramount to your success, as it will determine both your output capability (depending on wind, insolation, or grid conditions) and your demand (again, depending on grid conditions or customer traffic). The advantage of the model is that you create an asset that can be used as collateral for loans to lower your funding costs and that you might have a clear vision of future revenues for the long term. The problem with this model is that it requires a lot of capital to build a power plant or a refinery. Most importantly, this model rarely enables exponential growth. Importantly, licensing your tech frequently falls under charge based on usage. Your licensee, the one who bought your license, will usually pay you some initial one-time fee and will follow up with a specified fee for each product he makes using your license. The difference with other pay-as-you-go schemes is that your investments will be limited to R&D, your pilot, and your FOAK plant. 6. Sell a Service Selling services most of the time means selling, well, time. All consultancy and engineering startups are service-based. They can make money only by devoting their time to solving a particular problem of their customer. Lawyers are famous for excessive billings for their hours, but climate tech has its own share of service startups. Bright Power provides consulting and implementation services for improving energy efficiency in buildings. JR Energy Solution provides manufacturing-as-a-service, by making lithium-ion battery electrodes for their customers. Engineering-procurement-construction (EPC) companies also fall under the definition of sell-a-service companies. The success of the model depends on your skills and marketing. You should relentlessly focus on maintaining your skills at a top-notch level. For example, making lithium-ion electrodes is an extremely difficult process, requiring highly skilled personnel with decades of experience. JR Energy Solution offers to make electrodes for aspiring battery startups or for overloaded battery incumbents. The benefit of this model is that it normally doesn’t require much start-up capital. You just selling your time. In some cases, like with JR Energy Solution, you need a lot of capital to build a factory, which will enable you to provide your service. The problem with this model is that it is very hard to scale. You only have so much time to sell. Sure, you can train additional staff, and charge a premium, but in the end, there are only 24 hours in any day. This is why investors tend to stay away from pure service companies. 7. Advertising Ah, the digital gold mine of the internet age. Facebook mastered this game by turning your attention into profit. With billions of eyeballs scrolling endlessly, traffic becomes the name of the game. The more clicks and views, the more money they rake in. At first glance, this model is hardly applicable to climate tech, but a few startups are exploring the possibilities. Project Drawdown develops and promotes educational campaigns funded by sponsorships. Trellis, formerly GreenBiz, monetizes climate-related content with advertising and sponsorships. If you focus on the advertising business model, getting as many visitors to your platform as possible is your top priority. This is how Facebook, Twitter, and TikTok became successful. Being in the climate tech space means that you will be targeting a niche of environmentally conscious clients, so your platform will not be as big as those. The benefits of the advertising model are first and foremost, its scalability. The marginal cost of getting your next customer is minimal. You don’t need a lot of upfront capital, and VCs love you. The problem with this model is that it is highly reliant on the volume of visitors, which may be hard to achieve in niche sectors like climate. Also, your revenue will depend on advertisers’ demand, making it less predictable, as opposed to say a subscription model.   8. Percentage of Assets Managing other people’s money never goes out of style. J.P. Morgan and their ilk make their living by charging a small percentage of massive amounts of cash. This model involves managing a pool of assets (like renewable energy projects or funds) and earning a percentage-based fee on the total value under management (AUM). Here, we pull a meditation trick when you “look for what is looking.” The best example of this model in climate tech is climate VCs and climate-related investors. They collect money from investors, invest in climate tech startups and projects, and earn a fee based on the assets under management. Pooling of assets is another way. CleanCapital manages solar energy portfolios and takes a percentage of returns. AUM (Assets Under Management) is the key metric for this business model. The more capital you handle, the fatter your fees. To get them, you have to prove that you can deliver reliable returns to keep investors and clients satisfied. The other ingredient to success is the ability to grow the asset pool to increase revenue without proportional cost increases. Finally, investment is always about reputation and trust, so it is crucial to build credibility through transparent operations and strong track records. The benefits of this model are that the revenues are predictable as your AUM grows, and long-term contracts provide stability. The main drawback is that you cannot influence how the assets are really managed, so your revenue is tied to external market conditions. Conclusion The amount of information may seem a little overwhelming, so let me summarize the key aspects of business models in a small table for you: Model Key Metric Pros Cons Examples Sell a Thing Unit Economics Tangible products, easy to understand/market High upfront costs, linear growth, tough competition Tesla, Brimstone, First Solar Rent a Thing Utilization Rate Recurring revenue, accessible to customers Asset-heavy, vulnerable to drops in utilization Sunrun, Renewell, car-sharing services Take a Cut GMV (Gross Merchandise Volume) Low capital needs, potential for exponential growth Competition, trust-building, vulnerable in unregulated markets Patch, LevelTen Energy, CICON.App Charge a Subscription Retention Rate, LTV Predictable recurring revenue, scalable Fierce competition, churn risk Climeworks, Planet Labs Charge Based on Usage Volume of Consumption Clear revenue visibility, asset-backed growth High upfront investment, limited exponential scaling EV charging networks, clean power companies Sell a Service Billable Time Low initial capital (for most cases), skill-dependent Hard to scale, revenue limited by available time Bright Power, JR Energy Solution, consulting firms Advertising Traffic Volume Highly scalable, minimal marginal costs Niche markets limit audience size, revenue depends on advertiser demand Project Drawdown, Trellis Percentage of Assets AUM (Assets Under Management) Stable, predictable revenue, long-term contracts Revenue tied to external market conditions, reputation is crucial CleanCapital, climate-related VCs, asset managers In my experience, the most common business models for cleantech startups are charges based on usage (including licensing) and sale of a product. Later, innovative service-based startups started to emerge, offering manufacturing-as-a-service or commissions. Advertising or subscription-based services are rare, as climate is still a niche market. This might explain why climate tech has fewer investors than say, AI. Advertising and subscription business models can scale exponentially, leading to the kind of returns that VCs are looking for.  Hardware sales, manufacturing, project-based, and carbon credit funding are much less interesting for investors. Knowing the differences in business models is one thing, but how do you choose which one is suitable for you? There is a way. Next week I’ll be publishing my framework for choosing a business model for your climate tech scale-up.

For the third straight year, VC climate tech funding in North America and Europe has dropped. According to Pitchbook, here’s why investors are cooling off, while the world burns:   📉 The AI boom is siphoning capital away from climate.  📉 High-profile failures like Northvolt and Universal Hydrogen have shaken confidence.  📉 Uncertainty over the US political landscape, with a potential Trump administration, is making the future murky. But here’s the thing—blaming AI for “stealing” funding is pointless. Money follows opportunities. If climate tech wants to compete, it’s on us to create startups and scaleups that attract capital—not just VC but a broader mix of funding sources. Failures like Northvolt show us that execution, not hype, is what earns investor trust. Meanwhile, the right climate solutions—ones with strong business models and clear value propositions—can still thrive, even in this tougher environment. So, what’s the play? Build smarter, execute sharper, and broaden your funding strategy. The stakes are too high to slow down. 💡 If you’re working on scaling up your climate tech and want to break through, let’s talk. Together, we can ensure your venture doesn’t just survive but thrives. Reach out! Here is the source article: https://pitchbook.com/news/articles/climate-tech-vc-deals-fell-for-3rd-straight-year?utm_medium=newsletter&utm_source=daily_pitch&sourceType=NEWSLETTER #ClimateTech #VCFunding #CleantechScaleUp #Innovation #Hardtech #EnergyTransition

Scaling hardtech climate startups is notoriously tough, but I recently stumbled upon an excellent framework that doesn’t just talk about raising funds—it gets into the real  work. Breakthrough Energy Catalyst’s “12 Keys to Scaling Up”  offers practical steps beyond just pitching for capital. And having worked closely with climate tech founders, this list strongly resonates with my own scaling experiences. If you’re scaling a hardware climate startup, check out the full framework—it’s worth your time. And if you’re already knee-deep in scaling, I’d love to hear how you’re tackling these challenges. Let’s exchange lessons learned! Also, check out the accompaniying article by Mario Fernandez: https://www.breakthroughenergy.org/newsroom/articles/unlocking-capital-for-climate-tech-projects-the-12-keys-to-scaling-up/ #ScaleUp #ClimateTech #FOAK #HardTech #Execution #CleantechInvestments #StartupGrowth #VC #Investments

A year ago, I launched ETR , a startup aimed at disrupting sustainable heating and cooling. Today, I’m closing it. This wasn’t an easy decision, but in hindsight, it was inevitable. What went wrong? Let me break it down. 👨🏼‍💻👷🏻‍♂️ Losing a Co-Founder = Losing Momentum My engineer co-founder, who was critical to our core idea, left the project. I tried to find a replacement, but I couldn’t. VCs always stress the importance of the team—and now I fully understand why.  Takeaway 1.  A startup isn’t just a shiny piece of tech; it’s a team. When a key player leaves, you don’t just lose skills—you lose direction, energy, and trust. Without that solid core, it’s difficult to keep going. I learned that for early-stage startups, the team has to be 100% dedicated and located in the same place.  We lived in different countries and worked on parallel projects, and it took its toll. 📝 Red Tape Is a Startup Killer Our solution required high legal overheads for every customer connection. Every single connection came with complex legal costs—time, money, and mountains of red tape. The result? Customer acquisition costs were too high to make the business viable. Takeaway 2.  If your startup operates in a highly regulated space like energy, make sure you understand the legal landscape inside out . Hidden regulatory costs can sneak up and derail even the best ideas. Spend the time upfront mapping out every step, every fee, and every possible delay before committing fully. Building something great is hard, but it wouldn’t be worth it if it weren't. On to the next! #StartupLessons #HardTech #Cleantech #Entrepreneurship #SustainableHeating #Scaling