The challenge with climate change created markets
I’ve got a deeper explanation as to why climate founders get stuck between the planet’s climate imperative and a startup’s business imperative.
Climate PMF Newsletter by Peter Nocchiero
Hey, I’m Peter and I help climate founders find and improve product/market fit. The climate imperative isn’t enough for a startup to win.
I created a practical, experience-based approach — born out of my operational work with nearly 100 startups — called PMF 2.0 for Climate Startups. Learn More.
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Let’s dive in.
Agile
In 2001, a group of software developers got together and created the Agile Manifesto (they were at Snowbird ski resort, proving once again that nothing bad comes from skiing). The manifesto was a response to documentation heavy software development processes that dominated the industry at that time. Peering back into this unique and pivotal moment, the Agile software development methodology was born out of these simple principles:
“Individuals and interactions over processes and tools.
Working software over comprehensive documentation.
Customer collaboration over contract negotiation.
Responding to change over following a plan.”
10 years after Agile was created, the Lean methodology rocketed to fame. With roots in Agile, Lean focuses on a more holistic approach to building startups through rapid experimentation and build-measure-learn loops.
Today Agile and Lean are still the dominant methodologies for building products and startups across the world. At their truly base level these methods reframe building anything from solution-first thinking to problem-first thinking. Back to this in a minute.
Platforms
I’ve argued forever that platforms create markets and are a foundational element to achieving product/market fit. They are a precursor to PMF and without them PMF is not even possible.
A simple, yet powerful example of this is Instagram and the iPhone. The iPhone is a platform that had to exist for Instagram to have a market opportunity and find explosive product/market fit. There are many other examples that you can think of by just glancing at this Our World in Data chart of critical technological inventions – I’ve zoomed in on the Information Age.
From my perspective, each point on this curve is a platform that has given birth to countless successful companies that have found PMF. Platforms are not just technology driven, they could also be based on policy, social/zeitgeist, etc.
The highest level version of critical moments — or platforms — over time in a climate context looks something like this:
This chart shows key global consensus moments:
IPCC 1: humans are causing warming
Paris Agreement: limit warming to 1.5°
IPCC 6: rapid, large scale GHG reductions are required
UAE Consensus: phase out fossil fuels
Forecast: multi-trillion dollar climate change market
I realize that there’s myriad other versions of this that might include things like the invention of PV, renewables becoming cheaper than fossil fuels, landmark legislation like CSRD, and so on. Nonetheless, the chart above is the soundtrack to our lives for climate founders or anyone working in climate.
So we are in the money now, right? Climate builders have a clear platform to stand on as a precursor to finding product/market fit and building big businesses?
The confusing part about these platforms is that they are presented as a problem. And clear as day, they are in fact that. Some of the biggest and most important problems in human history.
Perceived Platforms
Picking back up on Agile and Lean… From a product, startup, and PMF strategy standpoint, startup founders across the world have thrown out solution-first thinking. We are Lean and Agile, problem-first thinkers. We use this strategy to intelligently approach building our companies.
Climate change is a problem (we just proved it), therefore the products we build are born out of our Agile/Lean, problem-first thinking. A signal to climate founders that it’s “go time”. There’s a platform, a market, a huge set of problems so building a big business is fait accompli.
Like it or not, as powerful of a problem as it is, the climate imperative often has little to do with a founder’s ability to find product/market fit and create a successful business. The climate imperative often (not always) cannot help the largest emitters, which are also the largest businesses, make money. We are in a late stage capitalism paradigm, so money talks. It’s the only thing that talks.
Climate founders can make very creative and compelling arguments about future corporate pain/gain, moral responsibility, and so on, but if we can’t make the connection to making/saving money today or improving stock price today it all falls on deaf ears. This means that in reality the climate change platforms — or climate change created markets — from above are actually just perceived platforms.
Building a product on top of a perceived platform is a form of solution-first thinking. Web3 applications have suffered from this issue, though it’s not black and white. Platforms and the products being built on top of them can tango in their seminal stages. Web3 is not lost. It’s in its galvanizing moment and time will tell if it ends up being a platform as influential as smartphones (Web2).
Enter climate tech. We are in our galvanizing moment too. Much like Web3, we don’t have the luxury of building on top of a well established platform. We have to tango and thrash and fight. We have to advocate for the creation of our platform while simultaneously building on top of it.
I can’t tell you how many climate startups I see that come to market with a solution focused on solving climate change with a hopeful business model forced on top of it. I do think it’s OK to have inspiration strike around solving a climate problem, but the immediate next thought and actions around startup building have to be around business model and product value validation. This validation can only happen in market with prospective customers. And it’s never too late to start, even if you’re already in market.
Product/market fit is the bridge between the planet’s climate imperative and a startup founder’s business imperative.
PMF-centric strategy is a forcing mechanism to answer key risks around economic viability for products and businesses. It’s not an output (I hit PMF!), it’s an input. It’s part of the process.
An actual path forward to make sense of this duality we all live in.
Climate founders have to find and sell the business case in real time and sell to teams that have budget and influence today. We have to understand our customers’ business goals and then ensure there’s a connection to reducing global warming. Not the other way around.
Thanks for listening.
Peter💚✨
🙋♀️ Questions about PMF? DM me and I’ll answer them.
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