🌱 Navigating the complex climate maze #003

how to think about where to get started

There has never been more pent-up demand in climate for investor dollars, talent, and startup ideas. As the tech sector contracts with layoffs across the board, climate companies with strong execution and sturdy business plans have continued to raise money and hire. Climate tech as a theme is early and growing, but also difficult to compare to past technological waves. As a result, emerging founders and job-seekers in climate wonder how to even get started with forming theses around the space.

Everyone has their own origin story for “How did you get into climate?” which is actually a two-parter. First, there’s “The Why” which may come from a love for the outdoors, having a newborn child, or simply a profound sense of empathy for humanity. Then there’s “The How” which are the actual steps on how one entered the space. Everyone has a different story and it all starts by first understanding what falls within the surface area of “climate”.

Today, we’ll go through a step-by-step playbook for how to narrow down your climate startup search from knowing you care → finding what you care about the most, whether you’re an emerging founder or a job seeker.

Getting up to speed includes:

1. Understanding the goal

2. Climate is a theme, not an industry

3. Running a search lab on climate areas

4. Forming your own opinions

5. How climate is different

Understanding the goal

In A mental model for combatting climate change, Head of Climate at Stripe, Nan Ransohoff paints a clear picture:

To avoid the most catastrophic effects of climate change, we should aim to limit global average temperature increase to 1.5°C above pre-industrial levels, which corresponds to reducing global annual emissions from about 50 gigatons of carbon dioxide equivalents (Gt CO2e) as of 2019, to net zero by 2050. We need to get about halfway there by 2030.

Source: stripe.com/climate

Why 1.5?

1.5°C of global warming is the demarcation that experts refer to as our north star goal because of its legibility. However, the real goal lies on a thermal gradient rather than a single point.

Another critical thing to understand about global warming is that it’s not the case that everything up to 1.49999 degrees is rainbows and unicorns and free ice cream for everyone. (But once we cross the 1.5 degrees-line, the Four Horsemen of the Apocalypse polish off their martinis, look at each other, and say, “It’s go time.”)
- Climate Reality Project

By simplifying down to this 1.5°C figure, we opt for simplicity and alignment over precision. The reality is that these temperature increases are not uniform and some areas have already crossed the 1.5°C threshold:

Source: NASA

So why 1.5°C? Why not set the goal at 1.6°C or 1.7°C?

At 1.5 degrees warming, sea level is expected to rise by 10 to 30 inches (26 to 77 centimeters), putting 10 million more people at risk from coastal storms and flooding. Heat waves will continue to get worse, exposing 14 percent of the world population to extreme heat at least once every five years.
- Inside Climate News

Things get worse from that point on:

Going from 1.5 degrees of global warming to 2 degrees could mean:

• 1.7 billion more people experience severe heatwaves at least once every five years.

• Up to several hundred million more people become exposed to climate-related risks and poverty.

• The coral reefs that support marine environments around the world could decline as much as 99 percent.
  - Climate Reality Project

Unfortunately, it already seems like it’s already unlikely to hit our goal of limiting to 1.5°C global warming. To be clear, this should be a sign that we need to move faster with a greater sense of urgency, rather than ignore the problem and be doomers. We need all hands on deck.

Climate is a theme, not an industry

One thing I’ve noticed among climate enthusiasts is that the initial motivation to help hinders us from figuring out exactly what to do. Many people, if not the majority, get into climate because they feel the strong sense of duty to be a part of the solution, but aren’t sure of where to start.

Trying to find a job or start a company in climate without having a specific starting point is trying to boil the (rising) ocean. That’s because climate is a theme, not an industry. There are far more differences between a zero-waste circular fashion brand like For Days and long duration storage startup Form Energy than two completely distinct industries such as eCommerce and FinTech. The former pair of companies fall under the umbrella of climate, but diverge in skillset, product, and strategy whereas the latter overlaps a lot.
Rather than searching for a climate job or startup idea with vague but strong interest, start with an initial vertical to dive into. There’s no right way to slice and dice it, but I like CTVC’s seven climate verticals:

Just the first step in selecting where to dive into requires upfront research to understand what each vertical entails. But going through this process will be worth it because starting out with just the high-level goal of working in climate is too broad. There’s a switching cost every time you exit one area in climate and begin learning a new one. Finding the right balance between breadth and depth is crucial. To get started and hone in, put aside the climate verticals that you have little interest in and focus on the ones that seem compelling. The breakdown of these seven categories is useful in the beginning, but as you peel back the layers of climate like an onion, you start to realize that there’s a ton of overlap. The next step in determining which arena to operate in is to overlay your skillset and personal experience.

Knowing your shape

Considering how broad climate is and how much the problems vary, building each corresponding solution differs in skillset. What you work on is not just a matter of finding a flourishing field with promising potential for profitability and climate impact, it’s also a matching process between the work and you, the individual. Finding the most effective match requires mapping out your skills, interests, and preferences.

Since I used to be a product manager, I’m taking a page out of the PM career playbook and suggesting to identify your archetype. Even with the same title, PMs tend to be “spiky”, exceptional in a particular skill and generalist in others. Broadly speaking, product can be bucketed into four groups: analytics-driven (good with data), business-driven (thinks like a general manager), design-driven (high user empathy), and engineering-driven (loves complex systems). This framework of thinking in functions rather than job titles results in a wider exploration of jobs-to-be-done, rather than pigeon-holing oneself to a fixed career ladder.

‘Finding your shape’ is necessary in deciding what position to play on the climate field. Although geared towards founders, David Rusenko proposes a taxonomy of founder archetypes mapped to five climate categories. I found the pairings of charimastic storyteller <> science-required and software-minded <> green fintech to be unexpected, but true. Companies based on scientific innovation typically take longer to commercialize and scale so being able to raise sufficient capital is critical. On the flip side, the fundamentals of “green” finance are similar to traditional finance so the key advantage is being able to leverage software effectively i.e. APIs and high-quality underwriting data.

Given addressing climate change is diverse and multifaceted, identifying your climate archetype is essential in finding the optimal match between you and what’s needed. The design-centric founder would be better suited to convince homeowners to embrace demand response than tackling carbon credits with satellite imagery. Finding the right fit on an individual level is key to making a meaningful contribution. After all, we’re in it for the long haul.

Running a search lab on climate areas

In the finance world, a search fund is an investment vehicle that enables an entrepreneur to raise money and then acquire a company that they intend to operate as the CEO. Inspired by the name, Roger Dickey started a blank company to go through the ‘search lab’ model: “a full-time, funded effort to systematically launch and test business ideas until a promising candidate for a company is found.”

The sequence of a search lab is flipped because typically a company is only funded once there’s a singular idea to pursue (and often some initial traction). Given how broad climate is, the search lab framework narrows down the set of possible paths by eliminating areas that aren’t a good fit and also pulling us towards alluring ones. If a search fund explores companies to acquire, and a search lab leads an entrepreneur to a startup idea, then a climate search lab filters to a narrower set of areas within climate.

Here’s how this could play out (based on a true story):

In such a complex, large-scale problem, deciding what not to do can be just as important as choosing what to explore. Navigating a climate area search lab helps to iteratively cross off items of potential interest on a quest to find the right rabbit hole to dive into.

Forming your own opinions

Climate is not one particular industry that operates unanimously in consensus. We’re all united under a common goal, but have a diverse range of views, resulting in distinct climate tribes. You may end up finding yourself nodding your head to some things and feeling skeptical about others. Having an initial viewpoint on a variety of climate-relevant topics will help guide you towards a more specific set of ways to participate in the climate game. In the beginning, it’s less about being right and more about simply moving forward.

To start, identify the trends and transitions that you’re willing to bet on. It might be one or more of these:

• ⛽️ Fossil fuels → Renewables

• 🔌 Centralized grid → Distributed energy resources (DERs)

• 🚗 Gas guzzlers → EVs

• 🚜 Industrial agriculture → Regenerative agriculture

• 🌾 Heavy land use → Vertical farming

• 🥩 Factory farming → Cultured meat

• 🏭 Globalization → Re-shoring of manufacturing

• 👕 Fast fashion → Circular economy

However, simply resonating with one or more of these transitions isn’t enough to navigate your way through the climate maze. The vast majority of people in climate would agree that these trends are all shaping up. Now, the less-obvious question is where you lie across spectrums that don’t have insider consensus. Where do you think you see yourself participating? The point of this exercise isn’t to pit one solution against the other, but to at least get the ball rolling towards a specific climate path. In reality, not all of these are as dichotomous as they’re set up to be:

• Individual action vs. Collective change

• Degrowth vs. Green industrialism

• Scaling existing solutions (solar + wind) vs. Future Bets (Green hydrogen and DAC)

• EV-maxxing vs. Public Transit adoption (s/o NUMTOTs)

• Carbon insetting vs. Carbon Offsetting + Removal

Not everything climate is in consensus. Debate is healthy and truth-seeking is what moves us towards progress.

How climate tech is different

What makes climate tech different than other tech? Fair question. Given it’s such a physical, tangible problem, it’s valid to question the role that software can play. Climate tech still requires much of the same as non-climate companies, but there are some unique quirks. Compared to other areas, climate tech increasingly integrates academic research, hardware, and policy. Software persists, either as the primary product or as the connective operational tissue.

Research <> Commercial

We’ll see more combinations of academia bringing the R&D breakthroughs joining forces with entrepreneurs who can commercialize. Activate aims to do this by running a fellowship for scientists looking to take their tech to market. Heirloom, a carbon removal startup, was founded by a repeat founder teaming up with a professor.

Hardware <> Software

Decarbonization is the goal and that ultimately requires changing in the world of atoms, not bits. Software has superpowers like being able to transmit information at zero marginal cost and create delightful user experiences, but there are limitations. The marriage of hardware and software in a vertical approach can be a strategic way to avoid dependencies. An example of this is Gradient, a sleek heat pump A/C that can be installed DIY-style and has an accompanying app.

Plenty of software opportunities remain

The presence of additional opportunities in the hard sciences and hardware doesn’t diminish the potential for software-only businesses. Every physical product still needs to be planned, designed, simulated and sold using software. VIA Rail’s driving software for train operators can lead to a 15% reduction in fuel consumption. Remix is building planning software for public transit agencies. Archive and Trove are helping brands spin up their own trade-in and resale programs.

Decarbonization as a byproduct of clever businesses

Not every company needs to brand themselves as a climate company or make climate their focus to actually make an impact. Since climate is all encompassing, there are startups that are addressing a key gap in climate without necessarily branding themselves as a climate tech startup. Sealed helps homeowners upgrade their insulation to cut down on their energy bill. Upsmith helps people get a job in the skilled trades such as an electrician or HVAC technician, both of which will be key in the energy transition.

Policy as a stakeholder

The tech industry frequently blows off the public sector’s relevancy, but when it comes to climate, policy deserves a seat at the table. Laws are being passed that can change the tide and greatly accelerate progress. Looking at the EU as a forward-thinker, France is requiring solar panels on all parking lots. They’re also banning short-term flights in favor of rail. And of course, the $370B IRA bill is the most important climate legislation ever passed.

What’s next

Over the past three issues, we’ve covered why I’m starting this newsletter, why you should build in climate, and now, how to think about opportunities within climate. Up next will be the first deep dive, Software in Solar 🌞. If you enjoyed this piece, feel free to share it and stay tuned by subscribing!