Part II: Collab x The Climate Crisis
In Part I, we covered why we believe there has never been a better time to start a company addressing the climate crisis. A core part of our hypothesis is: as climate technology expands to cover the entire economy (rather than just the energy sector), there is nearly unlimited upside.
While the massive scope of the opportunity is inspiring and energizing – there are so many ways founders can succeed – it’s also abstract.
For some, climate tech is synonymous with clean tech. Others limit their interest to software-based solutions. And then there are folks who would only work with businesses that prevent the climate crisis, and couldn’t touch an adaptation project.
Now, let’s offer some context for how Collaborative evaluates new businesses, and determines what is vs. isn’t in scope for our fund.
The first step of diligence is identifying the primary type of risk the business will face. While understanding potential challenges won’t get us to invest, it’s a good first screen to determine if a business is too risky for us to commit to. Plus, it sets up a more efficient decision-making process.
In general, we can categorize each business by one of the following risks:
Technical – The product hasn’t demonstrated comparable performance and price to the carbon-based technology it will replace
Business model – Demand for the product - in terms of willingness to pay and overall market size - is unproven
Regulatory – The product is more expensive or cumbersome than existing alternatives, (Read more...)