Scaling Climate Tech – Industry Report

Climate tech companies, especially those focusing on hardware or materials science, face longer times to scale, higher capital requirements, and greater market risk compared to their software counterparts. 

This industry report aims to lift the lid on how climate hard-tech companies scale. Drawing on qualitative interviews with Australian founders and global frameworks, the report identifies five key stages – referred to as ‘valleys of death’ – where Australian climate tech startups struggle to scale. 

Key findings

• Today, there is no one ‘playbook’ for rapidly scaling climate hard-tech startups.
• Vulnerabilities described in the five valleys of death may be addressed through the strategies outlined in this research. 
• Accountability for addressing the valleys of death in climate tech is not the responsibility of founders alone. By adopting recommendations in this report, investors, government, and ecosystem supporters can influence success and velocity.
• Access to different funding models and more funding at the commercialisation and scale stage is imperative to scaling. 
• ‘Snail-scaling’ climate tech has larger negative consequences beyond poor productivity or economic returns, including potentially irreversible damage to the environment and life as we know it.

Recommendations include:

• Founders should prioritise market-led approaches and deeply understand market dynamics as technologies that will reduce perceived risk, costs or change requirements for end-customers will scale faster. 
• Stakeholders should adopt a sector-specific approach in programs of support and more adequately address the differential challenges specific to ‘hard-tech’.
• Founders should consider earlier internationalisation to overcome local market limitations, achieve economies of scale and become globally competitive at scale.
• An increase in both the quantum of funding and more diversified types of funding at commercialisation and scale-up stages is required. including blended financing options and attracting new sources of patient capital.
• Founders should double down on strategic corporate partnerships where relevant, leveraging partners’ industry knowledge, access to customers, technical capabilities, distribution channels and strategic funding opportunities.
• Governments can accelerate market adoption of new climate technologies through clearer, bi-partisan alignment of long-term goals in priority sectors, using regulatory policy and funding demand-side incentives to accelerate market-pull from customers.
• Climate hard-tech scale-ups may benefit from access to strategic operational and financial capabilities, including capacity planning, unit economics and capital management.