Financing Climate Innovation Playbook

In Cleantech 1.0, billions of dollars were invested into clean energy startups, almost entirely in through venture capital. While some companies during that period succeeded, many failed due to limited financial tools for growth. Venture capital is most useful in rapidly scaling businesses with product-market-fit, but is not well-suited to address scientific breakthrough, early engineering development, and project repeatability. Since Cleantech 1.0, forms of capital specifically suited to address each phase of risk in a climate/energy company lifecycle have emerged. This project aims to understand each of these funding sources as well as when and how they should be used in combination.

The project is exploring established and emerging climate funding sources, including government agencies, grant providers, incubators/accelerators, fellowship programs, angel investors, venture capital funds, growth stage capital firms, project finance capital, strategic corporates, and other less-known financing mechanisms.

Partners on this project include Stanford Graduate School of Business, Stanford Law School, Stanford Climate Ventures, Precourt Institute for Energy, Doerr School of Sustainability, and Stanford Research Initiative on Long-Term Investing. Additionally, we leverage the knowledge of external climate-funding organizations (ex: NYSERDA, Prime Coalition, Greentown Labs, Breakthrough Energy, Lowercarbon Capital, G2VP, Hannon Armstrong, Stripe).

Our goal is to develop playbooks that guide innovative climate companies in their capitalization strategy and provide a template for potential mechanisms to fund the full lifecycle of company growth. Outcomes of this project may include:

  • A repository of funding resources organized by stage, including business and legal analyses of each source led by students/faculty from GSB and SLS.
  • Case studies of climate companies and the financial mechanisms used at each stage of growth, particularly covering alumni companies of Stanford Climate Ventures.
  • Programming with representatives of different funding organizations, including the potential external partners listed above, to assess the function that each organization plays in the capital stack as well as the complementary roles between various financial tools.

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Green startups play a crucial role in the transition to a sustainable economy, yet there is a gap in the literature about the legal and policy challenges these startups face. This Article seeks to fill that gap through interviews, surveys, and focus groups with senior law firm partners...