I’m sure many of you are familiar with the concept of the red pill versus the blue pill, introduced to us by the iconic movie, The Matrix. The blue pill offers a comforting illusion, while the red pill reveals the harsh truth of reality.
Entrepreneurs are an optimistic bunch. We have to be: to persist against all the odds — often with enormous personal consequences — in the quest to bring our vision of a better world to life.
However after nearly a decade in the climate tech trenches, I want to share five brutally honest “red pill” lessons I’ve learned along the way. Hopefully they can help other climate tech founders avoid dangerous “blue pill” mis-steps, and in doing so, unlock the full potential of their startups.
Lesson 1: Market trumps team
Two decades ago, as a bright-eyed MBA student at Stanford, I was asked a seemingly simple question: “Would you prefer an A-team in a B-market? Or a B-team in an A-market?” Back then — like the rest of the class — I was convinced that an A-team could create, or pivot into, the right market.
Now I know better. The two biggest inflection points in my company Olio’s journey were market-driven, not team-driven. In 2020, the Covid pandemic turned local-sharing — our bread and butter — into a necessity. And our growth during that time wasn’t because of clever marketing campaigns or the latest features — it was the sheer force of market conditions. Similarly, when British supermarket giant Tesco decided to roll out Olio across its 2,700 stores, it wasn’t because of a magical sales pitch. They were simply ready.
The takeaway? Be ruthlessly honest about the true readiness of your market, and shape your burn rate and strategy to fit where the market is now — not where you dearly wish it was.
Lesson 2: Most of us are still too early
A sobering stat from IBM says it all: companies are spending 43% more on sustainability reporting than on sustainability innovation.
I see it too. While countless brilliant climate solutions abound, with the exception of startups working in the energy transition space — or carbon accounting — most are struggling to achieve the scale, traction, or funding they need.
This means that climate tech founders need to be really careful not to equate their early adopters with market readiness. Case in point: Tesco came on board with Olio in 2017, but it took another four years before we finally signed two other big supermarkets, Sainsbury’s and Asda.
The reality is, most of us in climate tech are way ahead of the curve; and that’s a lonely place to be. So we need to optimise for staying alive, not becoming the next unicorn. Doing so could be the difference between being around when the market finally turns, versus being consigned to the footnotes of startup history.
Lesson 3: B2B is the fastest route to impact
B2C can be a natural starting point for many climate tech founders, and it’s easy to romanticise: it’s sexy, it’s direct and it promises to disrupt the status quo. But here’s the harsh truth: B2C can be a bloodbath. High customer acquisition costs, low conversion rates and poor retention make scaling a consumer business something for the rare few, not the many.
I’d say around 90% of the B2C climate startups I’ve seen have eventually pivoted to a B2B or B2B2C model. Classic examples include sustainable textile manufacturers realising they need to partner with the fast fashion giants to get to true scale rather than continue to grow their own brand; and consumer behaviour change apps realising that corporates are the most effective, and monetisable, route to market.
So if your goal is truly climate impact at scale, you need to ask yourself whether you’re pursuing the right business model. Perhaps it’s time to find a ‘go to market’ business partner as soon as you can. Your B2C traction is the proof of concept, rather than the end game itself.
Lesson 4: Stop talking about climate
When we first launched Olio, our marketing led with the ‘Planet’ impact of what we were doing, followed by the ‘People’ impact as a secondary message. We never talked about the ‘Personal’ impact of sharing.
Since then we’ve learned that people care most about what’s in it for them. There’s no point in fighting it; you need to meet people where they’re at. This means leading with the ‘Personal’ (in our case: ‘it feels good to share’ for individuals, and ‘save money and and improve employee retention’ for businesses); followed by the ‘People’; and then only sprinkle the ‘Planet’ as fairy dust at the end.
This requires a major mindset shift, not only for founders, but for your team too.
Lesson 5: Climate tech probably isn’t the best way to solve the climate crisis
I’ve come to the grim realisation that climate solutions alone aren’t going to solve the climate crisis, no matter how existential the threat.
Consumer adoption of climate solutions isn’t happening because far too many people are struggling to get by; almost 10m people in the UK alone are living in food poverty and so unable to engage with something as enormous, and expensive, as the climate crisis.
The business adoption of climate solutions isn’t happening because shareholder returns reign supreme — and it’s always cheaper to deplete the planet, than protect it. And climate legislation to change this has been woefully slow.
And governments are far too beholden to entrenched corporate interests (who are making a lot of money from the status quo), whilst claiming they don’t have a ‘mandate’ from consumers, so very little is forthcoming here too.
Which leaves us all stuck in a horrible stalemate. A stalemate that can only be broken by addressing the root causes of poverty; by redefining business success to give equal priority to people, planet and profit (the Better Business Act would be a great starting point); and by banishing incumbent corporate interests from politics.
Bonus lesson: Impact will sustain you
Given all the above, climate tech founders are clearly in for a long hard slog.
To sustain us we would do well to take inspiration from an old Buddhist mantra: it’s the journey, not the destination that counts. Because it’s in the journey that we’re having real impact, day in day out. And that’s what makes all the difference.
Read the orginal article: https://sifted.eu/articles/climate-tech-founder-lessons/
