You’ve just had a successful demonstration with a customer. Now what?
For any technology startup focusing on climate, water, and nature issues, achieving your first pilot project, demonstration, or prototype is no trivial task. The past two years have been particularly trying. On top of navigating the sea of uncertainty and risk inherent to being a climate or nature tech startup, external factors like geopolitical turmoil, inflation, and rising interest rates have dampened investor enthusiasm for these critical solutions. Funding from the first half of 2024 is down 20% from the same period in 2023 and over 40% from the second half of 2023.
In this environment, getting the financing to develop your first-of-a-kind project and stand out in the crowd of emerging technologies is an accomplishment on its own. So, it’s understandable that crossing this first “valley of death” is where startups and investors direct most of their attention.
But what happens when you secure a pilot project or demonstration with a customer, and it goes well? Say you’re a startup working on data center cooling hardware, and you’ve just finished a 3-month pilot project with a big tech company. Now, your customer wants 50 more units to roll out across their operations. How do you prepare for this scale, and on the timeline your customer wants?
The attention demanded by the first valley of death has created a blind spot for startups, who risk falling flatfooted on manufacturing and scaling because they’ve been hyper-focused on prototype development and securing their first big customer demonstration.
Read on to learn what challenges you might face during this next phase of scaling and 3 tips for successful post-pilot-project execution.
Challenges to scaling climate, water, and nature technologies
Corporate customers work on different timelines and strive to followestablished processes for all aspects of their operations. Whether you’re being asked to scale from 1 unit to 50 or 50 to 2 million, the scale and timeline of their demands may catch you off guard.Technology startups often struggle to meet these for 3 reasons:
Re-aligning internal team members
To embrace this opportunity, your company will need to allocate the vast majority of its attention and resources to scaling with your customer. Clearly communicating and aligning stakeholders toward this new priority can be a challenge, as not everyone may agree that this is the best path forward, and other projects may need to be put on the back burner.
Closing the financing gap
Securing financing for your initial prototype or proof of concept is one thing, but obtaining the resources to scale at the level your customer wants is another. Ensuring this new influx of cash is ready by the time you need to order materials, secure real estate, and stand up a facility requires long-term strategic planning and coordination.
Developing operational structure
Nobody likes to talk about process and structure, especially in startups. However, without effective operational infrastructure, governance, decision-making frameworks, team roles and responsibilities, and fully dedicated staff to manage necessary workstreams, your venture can’t scale on the timeline required.
3 tips for scaling your climate, water, or nature technology venture
With proactive thinking, planning, and collaboration during the pilot project or demonstration phase, your startup will be better equipped to meet your customer’s expectations following a successful outcome. Consider these 3 tips to help you scale:
1) Gain mutual understanding with your investors, suppliers, and corporate partner
Educate key stakeholders on your needs, ask questions, and understand their expectations. Remember, asking questions isn’t a sign that you’re unprepared or inexperienced. It shows that you’re thoughtful and proactive and helps you build trust. Here’s how to approach each stakeholder:
Many investors want to see a successful customer demonstration or pilot project before committing. Engage these stakeholders before closing the deal to ascertain their interest in funding a customer order and their ability to meet the investment required to scale if your pilot goes well. What do they need from you and your customer to feel comfortable investing in the next phase?
Also, get clarity on their level of commitment by communicating how much their decision will impact your ability to deliver. Should your demonstration go according to plan, are you relying on one investor, or are you considering others? Make sure your investor knows if you’re counting on them as your sole source of funding.
Climate, water, and nature technologies are cutting edge and require highly specialized components, often from new producers. These goods may have much longer lead times than you expect, especially when ordering in large quantities, so contact your suppliers early to get an accurate assessment of availability and realistic shipping times. How much padding do you need to build into your timeline to accommodate this?
Get clear on what your customer expects so you can discuss what’s feasible and help them understand the obstacles and limitations you might face as you scale. For instance, if you're going to experience supply chain difficulties with a certain material needed for manufacturing, let your customer know and see if they’d be open to a new timeline.
Similarly, if you have an investor interested in funding a customer order and committed to financing these steps coming out of a successful demonstration, explain how the timing gap between your customer’s order and the transfer of cash might impact your ability to deliver. Leading corporations understand how critical climate technologies are to reaching company-level and global decarbonization goals, so more often than not, they’re amenable to working with you.
Many investors want to see a successful customer demonstration or pilot project before committing. Engage these stakeholders before closing the deal to ascertain their interest in funding a customer order and their ability to meet the investment required to scale if your pilot goes well. What do they need from you and your customer to feel comfortable investing in the next phase?
Also, get clarity on their level of commitment by communicating how much their decision will impact your ability to deliver. Should your demonstration go according to plan, are you relying on one investor, or are you considering others? Make sure your investor knows if you’re counting on them as your sole source of funding.
Climate, water, and nature technologies are cutting edge and require highly specialized components, often from new producers. These goods may have much longer lead times than you expect, especially when ordering in large quantities, so contact your suppliers early to get an accurate assessment of availability and realistic shipping times. How much padding do you need to build into your timeline to accommodate this?
Get clear on what your customer expects so you can discuss what’s feasible and help them understand the obstacles and limitations you might face as you scale. For instance, if you're going to experience supply chain difficulties with a certain material needed for manufacturing, let your customer know and see if they’d be open to a new timeline.
Similarly, if you have an investor interested in funding a customer order and committed to financing these steps coming out of a successful demonstration, explain how the timing gap between your customer’s order and the transfer of cash might impact your ability to deliver. Leading corporations understand how critical climate technologies are to reaching company-level and global decarbonization goals, so more often than not, they’re amenable to working with you.
2) Pull back the curtain on your financing needs to identify win-win solutions
In addition to appreciating the importance of climate and nature technologies, corporations are beginning to develop literacy on climate finance as they navigate their own decarbonization journeys.
If, after exploring options with your investor community, you still have a financing gap that hinders your ability to scale at the level your customer wants, let them know exactly how much and come to them with a proposed solution. With enough heads up and a clear demonstration of financial value, your customer may be willing to use their resources or connections to lend a hand. For instance, in exchange for your customer filling your financing gap, you could explore profit-sharing agreements.
Corporations need your innovative climate technologies just as much as you need their business to scale. Don’t be afraid to come to them with an ask or invitation to co-create mutually beneficial solutions.
Your solution doesn’t just have to involve a transfer of cash – there are other creative ways to generate value for both parties that don’t include direct financing. Perhaps your customer could purchase certain components at wholesale rates, such as batteries for charging infrastructure, and secure them earlier than you could because they’re not limited by financing timelines. Or perhaps your customer has an existing facility you could use to scale your prototype as an intermediary step to commercialization. This saves you time negotiating real estate agreements while reducing your financing costs. The savings, in turn, drive down the unit cost of your technology solution for your corporate customer.
These are just a few examples. The idea is to find ways to share existing assets or relationships that ease your financial or administrative burden while lowering the net cost to your customer and accelerating the delivery timeline.
3) Use attention while you have it
Your corporate customer is likely balancing a variety of competing workstreams and priorities. The next steps identified after your pilot take time to align around and formalize. It could be weeks or even months before your customer can give you the same level of attention. That’s why it’s crucial to get your questions answered during the pilot project so you can get your back-of-house operations in order.
See how widely your customer might want to scale your technology if your demonstration goes well and on what timeline. If you know they’ll want 100,000 units by the end of 2025, you can set key internal milestones you'd need to hit for securing financing, sourcing materials, setting up operations, and more.
Corporations also know how important operations and team functionality are to scale, and they’ll want to see that you understand this, too. Demonstrate initiative by exploring what their systems and processes look like. What practices can you learn from and implement in your organization? You could even ask to talk to your customer’s procurement team or one of their preferred suppliers for tips on effective working styles. Every corporation has its own culture, preferences, and purchasing processes – showing deference to that can lead to a great partnership.
Beyond the first-of-a-kind swim lane
Fundamentally, the 3 tips shared above all require planning for the “then” rather than just the “now,” and at a level of detail many founders have done to no end in the past. Securing a customer demonstration or pilot project is a formidable undertaking, but unless you start planning ahead and creating another swim lane to prepare for the next phase – manufacturing and scaling – you'll be scrambling to execute when your customer gives you the green light.
Also, keep in mind that there can always be a conversation. Corporations have far more rigid and rigorous rules and planning processes, but they still need innovative climate, water, and nature technologies to meet their goals. Co-creating solutions with your customer opens the door for a more meaningful, long-term partnership as opposed to a one-time transaction.
Need help getting your water, nature, or climate tech venture off the ground? Our team can support you throughout all phases of the journey, from identifying product-market fit to identifying the right blend of public and private financing strategies.
