90 percent of target emission reductions can be achieved through technologies that already exist. Climate tech doesn’t have an innovation problem, it has a scaling problem. Most of the technology needed to achieve decarbonization has already been created, but is not yet widely deployed. The challenge now is accelerating innovation and scale-up to achieve technical and commercial breakthroughs. And unlike other emerging technology, climate tech requires collaboration to scale. 

Securing deployment partnerships for large corporates is crucial in achieving net-zero goals, especially as technology moves to the scaling phase. But so far it’s been hard to get both sides of the equation to find each other in the dark. Instead, the approach to corporate/venture partnerships has been fragmented, leading to what’s now ominously referred to as the “Valley of Death.”

Otherwise known as “death by pilots”, viable and commercial-ready climate tech is struggling to hit the market because they need corporate partners, but navigating the world of large incumbents is expensive, time-consuming, and opaque. Corporates are eager for innovation but often struggle with taking on execution risk alone. With no guarantees that upstream or downstream peers will do the same, interoperability challenges threaten to make novel technologies redundant, irrelevant, or too expensive without scale. There’s financial risk associated with operationalizing technology that might be out-competed by another startup partnered with rival corporate players, or even by a completely different technical approach going after the same market. Incumbents are understandably wary of making dead-end bets. The resulting corporate stalling has created a bottleneck for climate tech deployment – and emissions reductions. 

The transition from demo stages to commercial implementation is often a point of failure for young climate tech companies. Although many will have already de-risked their technology, most startups in this space just need real-world deployment opportunities to validate technological and commercial assumptions. On the other hand, the dearth of market-ready technologies leaves corporates struggling to meet their climate ambitions, as they’re faced with higher-risk technology investments that cannot meet the scale or timelines they need.

One of the main contributing factors to the deployment-stage Valley of Death is a lack of Series B funding, along with a widening timeline gap between Series A raises and Series B raises. Climate Tech VC recently reported that the time between A and B rounds has now reached 26 months, a 2.5x increase over 2021 timelines. Overall Series B funding dropped 24% in the first half of 2024 compared to 2023 levels as investors have pulled back and companies struggle to meet Series B milestones such as ARR targets and commercial partner agreements. 

Climate tech startups face a different set of hurdles when going to raise Series B rounds. In other sectors, a Series B-stage company will be in full growth mode, having demonstrated initial commercial traction and ready to hit the gas pedal on sales and development. Conversely, many climate tech startups at the Series B stage find themselves coming out of successful pilots still without much-needed revenue from commercial deployments. And these commercial deployments are expensive; scaling climate tech is inherently more capital intensive and complex compared to software-dominant sectors. It requires building or retrofitting infrastructure, constructing facilities for manufacturing and deployment, and transporting physical materials. This is why attracting capital for commercial scaling is such an area of challenge for many climate tech startups – as Ashwin Shashindranath of Energy Impact Partners aptly put it, it’s not just the Valley of Death, it’s the Commercial Valley of Death.

Additionally – and crucially – scaling climate tech hinges on consensus across entire value chains because of its physical nature. Adapting or building new infrastructure is a huge risk for both incumbents and startups if there isn’t validation throughout broader industries or verticals. For startups, this means securing not just corporate partners in general, but the right ones at different pressure points of a supply chain. And corporate partners can make or break startups’ ability to attract capital; one of the biggest ways to de-risk an investment in the eyes of growth-stage investors is to demonstrate that you have plenty of offtake agreements lined up.

“Another consequence of having to innovate or transform an established ecosystem is that it can be expensive and time-consuming to get buy-in from incumbents…One founder was told by a mentor that, ‘trying to get a pilot with [unnamed oil major] will bankrupt you.’”

Hara Wang & Cyril Yee, Third Derivative: Climate Tech’s Four Valleys of Death and Why We Must Build a Bridge

“Without…collaborative efforts through public-private partnerships, climate-tech start-ups will face ongoing challenges in the ‘valley of death’, impeding progress toward achieving net-zero goals through climate and energy technology.” 

Kavita Surana, Co-Author: The effects of corporate investment and public grants on climate and energy startup outcomes

“The primary challenge in scaling advanced solutions over the next decade does not lie in their technological feasibility - rather, it is a challenge of confidence.”

World Economic Forum: Why accelerating the deployment of advanced energy solutions is not a technology readiness challenge