Clean technology startups have made it their mission to tackle some of the planet’s most dire issues. Through innovative technology and ideas, these companies are promising solutions to pollution, energy, the environment, and other modern-day issues. Cleantech entrepreneurs have relied heavily on financing from venture capitalists to take their innovations to market. But with non-software cleantech investment in a decline in the last few years1, cleantech entrepreneurs are turning to other, non-traditional funding sources.
Cleantech incubators and accelerators were started just for this purpose: to help new cleantech businesses gain critical knowledge and funding. The funding gaps that prevent startups from getting to market are often called the “valleys of death.” These gaps have proven especially challenging for energy-related companies that sell to highly capital intensive, project-based markets or to regulated customers.
Many cleantech incubators have selection requirements and niche areas of focus. The popular Greentown Labs focuses on the hardware sector; the Shell Foundation Incubator specializes in helping low-income customers; Urban-X chooses to focus on innovation in city environments2. Wells Fargo’s Innovation Incubator (IN2) is a technology incubator and platform that facilitates commercialization and adoption of clean energy technologies.
Incubators and startup accelerators, such as the IN2, help cleantech companies in three main ways.
1. Technical validation. Beta-testing a technology in a real-time environment is invaluable for tech startups. This helps to ensure optimal performance and reduces risk, thereby making it easier to secure investors, and improve speed to market. The incubator also acts as a confirmation to potential investors that there is enough market for the new company to scale.
2. Financing. Obtaining non-dilutive capital, which doesn’t require repayment or sacrificing equity in the business can prove very challenging for startups. However, it is advised to secure as much non-dilutive capital first, before pursuing dilutive deals to allow the company to grow more quickly. The financing provided by programs like IN2 is often non-diluted capital.
3. Strategic partners. An incubator can help validate the technology and provide guidance on other issues that often go unconsidered, such as cyber security. Incubators are often part of an ecosystem of universities, national research organizations, and channel partners, all of which can provide valuable insight and a strong network to cleantech entrepreneurs.
In short, it takes a village to raise a cleantech startup. Incubators connect entrepreneurs to people, ideas, and ultimately capital, which allows them to focus on what matters most — the core business.
1. Report. Cleantech venture capital: Continued declines and narrow geography limit prospects. Brookings Institution. May 16, 2017. https://www.brookings.edu/research/cleantech-venture-capital-continued-declines-and-narrow-geography-limit-prospects/
2. The 8 Top Cleantech Corporate Incubators and Accelerators. Tech.co Aug. 21, 2017 https://tech.co/8-top-green-tech-corporate-incubators-accelerators-2017-08