For great cleantech start-ups, today’s economic climate is both a gift and a burden. Climate change, both in its environmental and economic senses, has brought new opportunities to clean technology. With carbon reduction an ever-increasing priority, and an economic situation where conservative behaviour is no longer an option, the time is ripe for disruptive technologies in the cleantech space. However, the challenge is to make sure that companies with these great technologies don’t drop off the edge just because they cannot find the cash to keep them going.
So what should companies do if they are struggling to find finance? The good news is that there is still money out there for companies who have a strong technology with great commercial potential - it’s just that the bar is higher. The answer for start-ups is firstly to really nail down their proposition, and secondly to target their search for investment effectively.
This advice sounds simple, but of course is virtually impossible for most start-ups to actually follow, for three main reasons.
The first issue is time. Early stage start-up companies have a massive limitation on bandwidth, and even if they know exactly what steps they need to take to build a compelling business case, it would require a 12-day working week to complete it before the company was screaming out for cash.
The second is expertise. Even a company with a well balanced skill set within its management team is unlikely to have all the expertise required to succeed. Starting a company requires a diverse range of skills, experience and know-how – including fundraising expertise, market insight, and capability in sales, finance, market research, R&D, manufacturing, IP, marketing and human resources. A solid business plan has to address elements of all of these.
The final issue is contacts, both in the market and investment space. Who should you talk to, to get that killer pitching opportunity, deal or collaboration? What creative sources of funding might there be? Who is it that happens to have a penchant for your particular type of technology, market proposition or business model? And then, how best to get your foot in the door, and to make the right impression when you’re there?
This is why there are a number of virtual incubators and consulting companies out there which specialise in providing support to early-stage start-ups. This has never been more important than in the current climate, when only the best companies are likely to raise money. These incubators can help companies with aspects such as fundraising strategy, market analysis, IP strategy and technology evaluation. In addition, there is the invaluable bonus of having an independent party vet your offering. This means that any conclusions reached with the help of the incubator have greater credibility and impact when talking to potential investors.
Some of these services can be accessed for free. One example is the Carbon Trust incubator scheme, which provides up to £70K of free consulting services (‘virtual’ incubation). A recent company which has benefited from the Carbon Trust’s scheme is 4energy. 4energy have developed innovative cooling systems which protect thermally sensitive equipment without air conditioning, saving money and energy. Pat Tindale, MD of 4energy, says “The scheme proved invaluable in supporting our incubation and fundraising through their networks of industry and financial contacts and their immense pool of business and technical expertise.”
Other types of subsidised support are also available, and this type of assistance can prove invaluable to early stage start-up companies. In this exceptional climate there may be unique opportunities, but only the strong will survive.
Lucy Butler is a senior consultant at TTP in the Carbon Trust – TTP incubator. She has prior experience in both management consultancy and life science research, and is trained in biology.
