The 5 Most Common Mistakes Early Stage Climate Tech Founders Make

Early stage climate tech founders are up against it. Unable to bootstrap, founders need to be able to build a business without even having made their final product yet. With so many challenges, there are many mistakes that are easy to make, particularly for first time or non-technical founders. This is why, if you’re building in climate tech, your techno-economic analysis (TEA) might be the single most valuable asset before you’ve raised capital or broken ground. Done well, a TEA helps you to get out of your own way, avoid some of these mistakes.

Here’s a breakdown of the five biggest mistakes we’ve seen made, and how a good TEA can protect you from making them. 

1. Messy Business Model

We’ve seen many times founders get distracted by trying to solve multiple problems with a silver bullet technology. However, what this ends up doing is adding restrictions to their product design, drives costs, and makes them less flexible to adapt to the specific needs of an industrial customer. 

With a strong TEA, founders can work with customers to understand why their product is a worthwhile investment—and what it will take to get there. 

2. Scope

Often founders don’t lack accuracy or detail on modelling specific units that are central to their product. E.g. modelling the specific reactions or kinetics around the core technology. However, where they do have blind spots is around the supporting infrastructure. Missing key steps either upstream, downstream, or as part of utilities that are core to getting the technology built at scale. 

For example, whether dewatering is required downstream, or gas cleanup is required upstream. These numbers can often be taken from a specific site as part of project planning with a customer – however it is vital that some assumptions are factored in as part of the analysis. 

It’s important to have an idea of what the system cost will be, not just the specific design of the main unit.

3. Scale

It’s super common for founders to mess this one up, especially as part of the TEA. Demonstrating bold claims about how many gigatonnes at scale your process can handle might be powerful for capital raising – but it is more important to understand what scale has the most chance of early commercial success. 

As a general rule – the scale you target for your technology should come from commercial dialogue with an industrial customer. Chose a specific site, or project, and use that to understand what your economics will be to handle that process at that scale. 

Don’t choose something arbitrary or TAM based – especially in deep tech, it’s important you fit the needs of the customer – not the other way around…

4. Scaling Factors

When it comes to estimating capital, one of the biggest missteps by founders is failing to price in economies of scale. Most equipment costs follow a power law relationship that reflects a tapering off in cost as things are manufactured at larger scale. Failing to recognise this, or assuming linear relationships can kill big picture thinking. 

Economies of scale work in your favour, as building bigger, with more impact should actually work out to be more favourable (from a levelised cost perspective). Of course the caveat is that it will also require more capital to be put down. 

This also applies to OPEX and kills assessments that are done using lab numbers. It’s so important to recognise that bulk chemicals prices per tonne will be orders of magnitude cheaper than the price per milligram for chemicals used at the lab scale.

5. Installation Factors

Unfortunately, a lot of founders don’t look any further than quotes for equipment purchase. But on top of the equipment purchase cost, the capital cost estimate needs to account for erection, piping, instrumentation, control, electrical, civil, structural, lagging and paint charges. 

Other contributions to the installation cost include offsite infrastructure charges, fees for engineering services, and contingency costs. 

This means the actual installed CAPEX ends up being 4-6x higher depending on whether the process involves fluids or solids. Ensuring there is an installation factor (sometimes referred to as Lang factor) applied is essential to ensure that the total capital required is reasonable and not severely underestimated.

Why you need TEA

Doing your TEA correctly, can save you from making any and all of these common and costly errors.

Ultimately, your TEA isn’t just a spreadsheet, some slides, or a report—it’s a decision making tool. Use it to guide commercialisation, nail investor conversations, and visualise your technology at scale.

Need help with your TEA? Reach out here.