The Tyranny of Choice
I've recently completed ten market research assignments for a corporate investor looking to dive into green technologies. We explored hydrogen, carbon capture, circular materials, renewable energy, batteries, EVs, waste management, and more. Each sector had numerous technologies, all at different stages of market readiness. Which ones should the investor pick, and why?
The IEA database lists over 550 different technologies for the energy transition. These include renewable energy technologies, abatement technologies like CCS, energy efficiency technologies, and industry-specific innovations like electric vehicles and industrial heat pumps. How do corporations decide which ones to invest in?
Greed and Fear in The Towers of Steel and Glass
In 2020, I pitched an investment in lithium-ion batteries to Rosatom’s investment and scientific committees. At that time, the cost of cells was over $300 per kWh, three times what it is today. My task was to secure $100M to start the project, with an additional $500M of equity investment to come later. Despite the growing EV market worldwide, my superiors were concerned about two things: lack of demand for batteries in Russia and the risk of choosing a technology that might become uncompetitive and fast. This scenario showcases the two main motivators in corporate ecology: fear and greed.
Overcoming Fear
The fear factor was overcome by demonstrating that our NMC technology was gaining market share worldwide and that we were acquiring a company with robust R&D capabilities. We also had to to a 100+ page report detailing all other chemistries of anodes and cathodes, and demonstrating that the NMC technology would survive for the next decade at least. Also, owning a battery technology could in theory make it possible to use them at nuclear power plants, making them more flexible energy generators. A sort of insurance against an overabundant grid (which was and still is the case in Russia). This reassured my superiors that our investment was sound.
Leveraging Greed
The company had a strategic goal of doubling its non-nuclear revenue by 2030, under a strategy dubbed “let a thousand flowers bloom,” which is a shorthand for «we have no idea how to get there». My project promised significant revenues by 2030, and the company we were acquiring was already generating revenue. The manageable risks, combined with the strategic fit, made the investment appealing.
The Insider
The balance between fear and greed determines whether your technology gets funding. Many startup founders mistakenly believe that corporations are eager to invest in new ventures, as they are supposed to maximize profits in the interests of their shareholders. In reality, 98% of corporate executives are terrified of investing outside their core business. Their salaries and bonuses are tied to the core business’s success, with any new venture KPI added as an afterthought.
To tip this balance in your favor, you need inside help. Most successful corporate investments in new tech have a corporate insider, who champions the tech before various corporate committees and decision makers. When a fellow corporate sees such a champion, he or she is happy to let this champion handle the startup, as this champion will bear all the blame.
This person usually works in the strategy department, and that is no coincidence. You need to show that your strategy is working, by matching it with potential startups. Other places, such as corporate accelerators or R&D hubs could be a good place to look for.
Getting your foot in the door
To get your technology deployed at scale by a corporation, consider these strategies:
1. De-risk Your Technology: Provide robust case studies to demonstrate success. Show that technological risk is non-existent and that market risks is solved by having real customers. If those customers are currently your target corporation customers - so much the better.
2. Understand their KPIs: Know the key performance indicators of your corporate counterparts. While none of them are likely to share theirs with you, ask leading questions like, “How can this project/technology help your department’s goals this or next year?”. Focus on the now, as KPI’s are usually quarterly or year-based. After that nobody really cares, even the guys in the strategy department.
3. Position as Insurance: Frame your technology as a way to protect the market share of existing products or ward off competitors, not just as a new venture.
4. Find an Insider: you’ll need a champion in the Tower. Someone, who will constantly bother other corporates about your startup, so much, that they will just give up.
If you want your technology to be deployed at scale, you’ll need a corporation. But remember, the more boring and de-risked your technology appears, the better the chance it will be invested in. Understand their KPIs, position your technology strategically, and address their fears and greed to get your foot in the door. And above all - find an Insider.