Cleantech spent decades alternating between boom and bust. Here’s why.
What do you think about when you hear “cleantech”?
If you’re thinking solar panels, electric vehicles, and renewable energy, well, you’re not exactly wrong. It’s just that there’s more to it than that. Here’s the definition from Cleantech Group:
The concept of “clean” technologies embraces a diverse range of products, services, and processes that are inherently designed to provide superior performance at lower costs, greatly reduce or eliminate environmental impacts and, in doing so, improve the quality of life. Clean technologies span many industries, from alternative forms of energy generation to water purification to materials-efficient production techniques.
Essentially, any technology that provides a more sustainable and less environmentally invasive way to live and work can fall under cleantech, with solutions ranging from reducing energy consumption, sustainably using resources, and even eliminating wastes.
Also read: Using old science to solve new problems, plus other insights from cleantech startup CleverHeat
How important is cleantech, though?
In Asia alone, 700 million of the 4.4 billion people have no access to electricity, deforestation rate is faster than anywhere else on Earth, and by 2030, the agriculture sector would need to produce 100 percent more food with diminishing water supply, on top of having more than 1 billion vehicles emitting 80 percent of air pollution in the cities.
Basically, we are careening along the path of self-destruction and we need cleantech to at least curb the negative impacts of the way we currently live and work.
But cleantech startups face more challenges than typical tech startups, causing lagging interest from investors, partners, and markets, which explains its history of constantly alternating between boom and bust.
1. Cleantech startups have long development cycles
Given the highly scientific and technical nature of most cleantech products, the time it takes a cleantech startup to go from idea to launch is longer as compared with other sectors. Developing breakthrough materials may even take years of constant research and prototyping, with no guarantee of success
How can startups overcome this: Short of taking short cuts (which you shouldn’t, come on), there really is very little you can do to speed up the development cycle of highly technical products. Prioritisation goes a long way, though. And, as contradictory as it may sound given that we are talking about product development, remember that said product need not be perfect before you launch or test them out. Creating a minimum viable product (MVP) and introducing it to your market allows you opportunities to see if it works the way it was intended outside of your test environment
And to that point…
2. They don’t always work the way they were intended
Cleantech product development is experimentation. Cleantech startups are trying to create solutions that are vastly different from convention, while maintaining or surpassing the level of productivity of these conventional means. Apart from the possibility of it taking years before producing a truly disruptive product, there is always the chance that startups may have to make tweaks or totally scrap it and go into an entirely different direction.
How can startups overcome this: Scrap it and go into an entirely different direction, if that’s what is needed. It does not mean that you cannot continue developing the product that you initially intended to create, but it would be wasteful not to utilise the product that you accidentally did.
Also read: The change; and how to survive this rapidly evolving business environment
3. Significant capital resources are required
Cleantech startups require a significant amount of resources; research and development alone can incur costs that are larger than expansion costs of non-cleantech startups. Unfortunately, not a lot of investors are keen on handing over huge sums of money to technologies with are too high risk. And it’s not just the idea stage cleantech startups that require huge resources. Even those that are past the research stage and are well into the production stage may require larger capital, given that the technology to be produced requires specialised equipment or materials.
How can startups overcome this: Work and fundraise in stages. There is also a renewed interest in cleantech, though generally lumped under “deep tech”, that you can take advantage of. It would also help to look into funding alternatives such as grants from academic or government bodies, and even crowdfunding.
4. Cleantech startups are highly specialised
Developing breakthrough materials such as those required in cleantech products requires not only technical knowledge but expertise. Finding the right talents to develop cleantech products can be a struggle for the startups, especially those in countries with a shortage in specialised manpower. There is also the possibiliy that a startup’s technology becomes fully dependent on the specialised knowledge of a single person – something that investors may find risky.
How can startups overcome this: Expand your manpower pool to overseas talents and when you have someone with expertise on board, ensure that all aspects of the product development is well-documented. It would also be helpful to approach industry experts to be outside advisor so that there is a continuous exchange of ideas.
Also read: 4 reasons your startup needs a mentor
5. Money and convenience talks
While we generally want to believe that the majority of the world’s population want to do right by the planet and its inhabitants, it is oftentimes the bottom line that makes the decision on which action to take. For people and businesses, shifting to cleantech may be something that they quite literally cannot afford. Take for example electric vehicles. People are not going to immediately replace their fuel-powered vehicles even if a lot of people endorse the benefits of electric cars; there are many things to consider such as costs and the convenience of charging stations. At the end of the day, the transition to cleantech depends largely on the financial capacity of the market.
How can startups overcome this: Provide options for initial integration to ease your market into the transition – both in the financial and operational aspect.
6. The market may need more convincing
One of the biggest hurdles that cleantech startup may encounter is not only educating, but changing the mindset of the market. The market may understand the benefits of the cleantech product, it may even wholeheartedly agree that a cleantech product is better than what they are currently using. But actually using it and, in the process, disrupting status quo is a different story. Once again taking electric cars as an example, it doesn’t mean that if one person talks about the benefits of driving an electric car he would go out and buy one of his own. He might encourage other people to, but would oftentimes think of himself as an exception since his current car is working quite perfectly for his needs.
What are startups to do: Understand the motivations behind the decision-making process of the market. It also helps if you involve your target market in the product development process as a way to not only begin educating them, but to also ensure that the product you are building is something that could be easily integrated into their habits.
With the increased awareness for the need of clean technology, there is a resulting increase in demand for eco-friendly products and services and cleaner alternatives. So while these hurdles may be daunting, it is undeniable that the future of cleantech startups in Asia is promising.
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