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6 lessons from the previous climate-tech boom

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6 lessons from the previous climate-tech boom

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But the optimism comes with a warning. As a journalist who wrote extensively about cleantech 1.0, which began around 2006 and collapsed by 2013 as countless solar, battery, and biofuel firms failed, I have a sense of wariness. All of it feels a bit too familiar: the exuberance of the VCs, the hundred of millions going to risky demonstration plants testing unproven technologies, and the potential political backlash over government support of aggressive climate policies. Writing about the current climate-tech boom means keeping in mind that most previous venture-backed startups in cleantech have failed miserably.

Today’s investors and entrepreneurs hope this time is different. As I discovered in speaking with them, there are plenty of reasons they might be right; there is far more money available, and far more demand for cleaner products from consumers and industrial customers. Yet many of the challenges seen in the first boom still exist and provide ample reason to worry about the success of today’s climate-tech startups.

Here are some of the key lessons from cleantech 1.0. To learn more, you can read my full report here

six die with the facing sides arranged in a line from one to six.

Lesson #1: Demand matters. This is basic to any market but is oft ignored in climate tech: someone needs to want to buy your product. Despite the public and scientific concerns over climate change, it’s a tough sell to get people and companies to pay extra for, say, green concrete or clean electricity.

A recent study by David Popp at Syracuse University and his colleague Matthias van den Heuvel suggests that weak demand, more than the costs and risks associated with scaling up startups, was what doomed the first cleantech wave. 

Many of the products in cleantech are commodities; price often matters above all else, and green products, especially when they are first introduced, are typically too expensive to compete. The argument helps to explain the great exception to the cleantech 1.0 bust: Tesla Motors. “Tesla’s been able to differentiate their product: the brand itself has value,” says Popp. But, he adds, “it’s hard to imagine that there’s going to be a trendy [green] hydrogen brand.”  

The findings suggest that government policies are probably most effective when they help to create demand for, say, green hydrogen or cement rather than directly funding startups as they struggle toward commercialization. 

Lesson #2: Hubris hurts. One of the most obvious problems in cleantech 1.0 was the extreme hubris of many of its advocates. Leading cheerleaders and money men (yes, nearly all were men) had made their fortunes on computers, software, and the web and sought to apply the same strategies to cleantech.

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