Speakers at the ConNEX Workshop: Securing Working Capital & Advanced Financial Planning

On July 25, 2024, we hosted a virtual workshop on Advanced Financial Planning, attended by entrepreneurs from all over California and as far as Ethiopia. The event provided insights into the unique financial landscape for clean energy startups and featured the following speakers:

• Moderator: Shawn Garvey, Founding Director, Momentum X Ventures
• Chante Harris, Founder & Managing Partner, Eunoia Group
• Scott Pitts, Founder, Socket Capital
• Erin Davis, Co-Founder & COO, Enduring Planet

Key Takeaways

Chante Harris: Navigating Risks and Finding Value

Harris delved into the shifting landscape of clean energy funding. She highlighted the necessity for startups to communicate their intrinsic value beyond their technology and look for additional revenue and collateral options. Harris discussed blending public and private capital to transition projects from the research phase to viable businesses.

Harris also highlighted the importance of doing product market fit work before the product is ready. She encouraged entrepreneurs to ask:

“Who’s started to think about earmarking money for the specific problem you’re solving, and if they haven’t done that yet, how do you get them to?”

Scott Pitts: Creative Funding and Cash Flow Management

Scott Pitts shared insights on creative funding solutions, emphasizing the importance of finding financing partners who are open to innovative approaches. He provided the example of how his financing partner bought equipment and resold it to the startup, using collateral to secure more funding. Pitts discussed the need for high-fidelity cash flow forecasts and building strong relationships within the industry – before needing to ask for money.

“If you only manage your business based on the money you have in the bank, you have a capacity issue,” explained Pitts. He encouraged leveraging incubators and local venture/angel groups to find supporters passionate about clean energy.

“Find lovers with money.”

He urged entrepreneurs to find people who are excited about their technology and have the resources to invest.

Erin Davis: Simplifying Equity Raises and Financial Maturity

Davis encouraged founders to use SAFE notes (Simply Agreement for Future Equity) using the Y-combinator template. She stressed the importance of securing non-dilutive capital quickly and bridging funding gaps with loans. Davis highlighted the significance of maintaining well-organized financial records and building a robust pro forma. She encouraged companies seeking early-stage financing to visit Enduring Planet’s website and apply.

Strategic Advice for Startups

The session concluded with strategic advice for startups. Pitts emphasized the importance of having a backup plan and advised being prepared for potential capital crunches. Harris encouraged treating regulatory requirements as drivers of innovation and leveraging networks to increase funding access.

Resources & Tools

Funders & Accelerators

• Elemental Excelerator
• Enduring Planet
• Activate
• LACI
• The Clean Fight – New Energy Nexus

Grant Writing

• Climate Finance Solutions

Recruiting

• Climatebase
• Climate People

Financial Management

• Climate Finance Tracker: funding transparency tool
• CARTA: SAFE Note management tool
• Boundless Impact: Life cycle analysis
• MainStreet: Tax credit platform

Special thanks to our partner, Momentum, and funder, The California Energy Commission.

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Digital financial technology (known as fintech) has already disrupted the global financial system. Recent improvements to banking, customer experiences, and investment decision-making do not always consider issues such as climate change or energy access, which is why New Energy Nexus is working to foster fintech solutions that can drive 100% clean energy for 100% of the population.

Together with the Yangtze River Delta Hi-Tech Park (Zhaoxiang), we announced 11 startups at our Climate Fintech Accelerator Open Day in Shanghai –  the first time our fintech accelerator has been hosted in China! 

Our 2023 Climate Fintech Accelerator aimed to accelerate fintech innovation by providing support services to startups such as commercial matchmaking, training, and networking.

The 11 startups accepted into the first batch of our 2023 cohort come from six countries – China, United States, Singapore, the United Kingdom, India, and Nigeria – and are focusing on Web3 and sustainability, carbon accounts, payments, banking, lending, investment, trading, risk analysis, insurance technology, and regulatory technology.

The 2023 Climate Fintech Accelerator is a rolling program and we’re looking forward to receiving applications from all over the world. Apply now and check out more information on our website.

SolarMoney Africa

SolarMoney Africa is dedicated to promoting solar energy adoption in Africa, providing accessible financing for households, communities, and small businesses to purchase solar products for their power needs. SolarMoney Africa collaborates with photovoltaic manufacturers to purchase solar products at lower down payments and sell them to African households through installment payment models. With the use of mobile technology, digital platforms, and innovative financial mechanisms, SolarMoney Africa has become an innovator in the African climate fintech sector.

BlockCarbon

BlockCarbon aims to unlock the global market for Asian carbon assets. The company uses multisource remote sensing technology and deep learning algorithms to develop a carbon asset management platform based on remote sensing and AI technology. This platform identifies potential high-quality carbon asset projects at low cost and verifies, monitors, and manages carbon offset projects. BlockCarbon serves carbon asset developers, traders, and buyers, making carbon assets more traceable, verifiable, and monitorable, encouraging more market participants to generate high-quality carbon assets.

Climatize

Through the Climatize platform, investors can directly invest in renewable energy projects such as community solar, energy efficiency upgrades, and electric vehicle charging infrastructure with a minimum investment amount of US$5. Retail, accredited, and institutional investors can browse Climatize’s project selection and participate in project investments for energy transition. Climatize stands out with its user-friendly product platform and quantifiable environmental impact.

Carbon Baseline

Carbon Baseline is dedicated to helping clients address challenges in achieving carbon neutrality goals through software products and consulting services. Their team utilizes artificial intelligence and other means to provide clients with climate and sustainable development management and green finance analysis tools with internationally advanced knowledge systems. Their core technology products include carbon emission and reduction calculation software, carbon reduction pathway optimization software, climate risk quantification models, and green finance risk and pricing models.

Climind

Climind is a Data-as-a-Service (DaaS) platform that focuses on complex climate data such as climate physical risks, transition risks, and nature-based solutions. Climind utilizes technologies such as artificial intelligence and knowledge graphs to extract value from climate data. By establishing data workflows, Climind helps users automate and predict climate risks of projects and businesses, providing customized sustainable strategic and scientifically accurate decision-making.

Nika.eco

Nika.eco aims to help carbon investors discover opportunities and risks before committing time, money, and effort to support a project through interactive reports provided by their software. The company develops a B2B SaaS platform and utilizes remote sensing and artificial intelligence technologies for automated due diligence of early-stage carbon projects. Nika.eco integrates multiple public and proprietary land classification data sources and trains AI models to align with existing methodologies for product iteration.

Tanbii

Tanbii connects the real world (Web2) and virtual world (Web3) by developing a Web5 application and innovative gamified approaches in carbon reduction. By utilizing advanced technologies such as blockchain and artificial intelligence, Tanbii accurately tracks, calculates, and rewards users for reducing their personal carbon emissions. Tanbii turns environmental actions into tangible benefits, presents personal carbon credits in a gamified manner, and supports reforestation projects in real-world environments.

Zero Circle Inc

Zero Circle provides an innovative green finance market aiming to offer convenient access to green loans for small and medium-sized enterprises while helping lenders track the usage of green loans. The Zero Circle platform automatically conducts eligibility assessments for enterprises based on their policy documents, certifications, provided metrics, and third-party data focused on sustainable development. Compared to manual processes, the platform simplifies the green loan process, saving time and resources.

CarbonNewture

CarbonNewture is a technology company focused on empowering enterprises to address climate change risks and undertake green and low-carbon transformations. They provide solutions, including enterprise carbon inventory, product carbon footprint, zero-carbon strategy consulting, and carbon asset management. They deploy IoT, big data, artificial intelligence, and blockchain to provide comprehensive carbon neutrality digital solutions.

Continuous Regeneration

Continuous Regeneration is committed to building a carbon-neutral DAO (Decentralized Autonomous Organization) network with a focus on digitization and decarbonization. Continuous Regeneration provides end-to-end services in creative planning, artistic presentation, product development, technological application, and project execution for major brands, institutions, and governments in China and overseas.

CarbonSense

CarbonSense assists enterprises in achieving zero-carbon transformations and provides an all-in-one carbon emission management and optimization platform for the manufacturing industry supply chain. They create an enterprise energy and carbon emission data platform using data and Internet of Things technologies, combined with enterprise carbon, green supply chain, and zero-carbon industrial park management systems. CarbonSense aims to provide real-time carbon footprint and carbon asset management systems, reduce operational energy consumption, and change energy-saving practices for enterprises.

The managing, trading, and financing of more and more distributed renewable projects, such as rooftop solar and EV charging stations, is becoming exponentially more complicated. Current energy systems and financing models are increasingly no longer fit for purpose, but this is creating new opportunities for climate fintech startups.

Blockchain technology, for instance, can help solve some of these problems given its transparency and immutability. Power grids, energy providers, and end users can use distributed ledgers via blockchain to track electricity generation and transaction records without a centralized organization in the middle. Financial institutions can also use blockchain to verify the operational data of the distributed renewable energy projects they have financed and decide their credit line, while minimizing the risks of operating miss and fraud.

So, how can startups best exploit this opportunity?

To answer this question, we first need to look at the ecosystem. Take a rooftop solar project, for example: there are many stakeholders in the value chain, including project owner, equipment supplier, financiers, and other service providers with different bargaining powers. As the end users, project owners usually have the greatest bargaining powers, but for distributed project owners, their bargaining powers aren’t as great as utility scale project owners.

Major equipment manufacturers have strong bargaining power as well, since the market is now dominated by just a few players. Among all solar equipment, the most relevant and important one that connects the physical world and the digital world is the inverter, a device that converts DC (direct current) to AC (alternating current), while recording electricity generation data. Top inverter manufacturers, such as Huawei and Sungrow, controlled 44% of the market share in 2021. Therefore, it’s natural for inverter manufacturers to develop blockchain solutions for downstream clients. Financial institutions are also key stakeholders in the value chain. However, they lack the adequate industry resources and knowhow, and rely on industry players as intermediaries, usually equipment suppliers, to develop businesses.

Given this competition landscape, what are the implications for climate fintech startups?

1. Startups need to define their value proposition in competing and cooperating with dominant equipment suppliers.

Even though inverter manufacturers might have some aspiration to develop blockchain technology by themselves, startups that focus on blockchain still hold a technological comparative advantage. Expanding their business to cover inverter suppliers is easier than inverter companies starting from zero. If startups can define themselves as an enabler and help inverter manufacturers complement their current business lines, they may avoid direct competition with these dominant equipment suppliers.

Dipole uses blockchain to make renewable energy more easily accessible across in Asia.

2. Target small and medium-size markets as an alternative strategy.

These markets are usually served by scattered small players who don’t have the right technology, abundant capital, or enough incentive to develop blockchain applications on their own. This gap could be filled by climate fintech startups. For instance, Dipole, a startup in New Energy Nexus China’s Excel Cohort, develops blockchain technologies and applications for distributed renewable energy projects, and has secured an investment from Jolywood, a medium-size solar equipment manufacturer. This has enabled this startup to access its investor’s market.

However, those with the most need sometimes cannot afford expensive technological solutions. The key for startups is to develop standardized products that are cost-efficient to attract small-size clients.

3. Partnering with financial institutions could be a long-term winning strategy for climate fintech startups.

Ready-to-use blockchain-based products from climate fintech startups will allow banks to enhance their due diligence and credit management processes. Compared with taking a one-time deal with assembly or inverter companies, long-term partnership with banks and other financial institutions is considered a superior choice. New Energy Nexus is actively helping climate finch startups, partner with leading green banks, such as China Industrial Bank.

4. Startups can leverage their position in other more fundamental and influential public blockchain projects.

Proactively joining public blockchain projects like the state backed Bit Factory project will entrench startups’ positions. Startups, especially for those at the scaling stage, should  make themselves the base (or a brick of the base) of the whole industry supply chain, instead of narrowing down to a single point. For example, by participating in the Bit Factory project, Rivtower, another startup supported by New Energy Nexus China, was able to attract investment from China Merchants Bank, and further extended its business into other climate finance projects.

Yafu Zhao is the Climate Fintech Lead at New Energy Nexus and is based in Shanghai, China.