cleantech funding valley of deathMany cleantech entrepreneurs are in the tough place we commonly call the Valley of Death.  Stable, but underfunded, which they need for growth.  If this describes your company, find out what you should do.

by Michele Ashby, CEO of MiNE LLC, which is hosting the Modern Energy Investor Forum (MEIF) in September 2011 in Denver, Colorado. Connect with Michele on Linkedin or call (303) 377-6463.

Is your cleantech startup falling short of your 2011 funding goals? The answer is most likely “yes.” But the reality is this doesn’t make you different from the vast majority of startups, both in the cleantech sector and beyond. Many cleantech entrepreneurs I speak with are in the tough place we commonly call the Valley of Death.  [See Why Can’t Cleantech Companies Get Funded When There is Plenty of Capital for Them]

What is the Valley of Death? On the near side of the valley of death is safety: Your company is small, but relatively stable. You haven’t taken on a lot of debt, so there’s less risk. You’ve probably invested some of your own money into the project, but most of your savings are still safe. Of course, there’s a downside to this safety: Your prospects for growth are much smaller because you need funding to reach a critical mass and gain some momentum.

When you look across the Valley of Death, what do you see? Stability is there, also.
This is the oasis that companies find after they’ve hit their funding goals, and they can focus on the blocking-and-tackling execution of creating a successful business. I can’t tell you how many cleantech entrepreneurs have told me that if they could just get funding, there’s no doubt in their mind they have a product that will find a market, scale, and turn a profit.

The Valley of Death lies between these two comfortable places, and it’s a place where you’re exposed and at risk. You can’t stay on the safe side of the valley forever: You’ll need to grow to survive. And to achieve this growth, you’ll need funding. In this economic climate, very few startup companies get sufficient funding while they’re still on the safe side of the valley. Investors want to see that the company can scale, that there’s a market for the product, and that the company has the ability to execute its business plan. It’s hard to prove that when you’re playing it safe.

Here’s the Catch-22 of the Valley of Death: You need funding to grow, but you need to grow to get funding. Once you’re across the Valley, you’ll be far less risky to investors, because you’ve provided them with evidence you can deliver what they need to see. But can you get there? Can you make it across? And if you don’t get funded in the second half of this year, what should you be doing?

You should invest the rest of 2011 in relationships. When the money comes back into the market in a bigger way, you’re going to want investors to know who you are, and what you do. Go to conferences. Network. Understand that it’s a long game and make sure you can last.

Proterra, a Colorado-based electric bus manufacturer, announced this month a $30 million venture capital investment. The money is starting to loosen up for good companies, even if you think you’ve heard that before in the last couple of years. In Colorado, the cleantech industry grew 33 percent in the last five years, and it was the only sector that showed growth last year.

The Valley of Death is a dark, lonely place. But it can be crossed. Realize that it won’t happen all at once, and start planning your crossing today.

Related:

Cleantech Financing Strategies in the Global Economy

© 2011, Michele Ashby. All rights reserved. Do not republish.

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Author: Michele Ashby (4 Articles)

Michele Ashby, CEO of MiNE LLC, started her career as a mining analyst and stock broker in 1983. She graduated from Regis University in Denver, Colorado with a magna cum laude degree in Finance. From 1988 to 2005 Michele was CEO and founder of the Denver Gold Group, a trade association for the gold mining industry. In 2005, Ms. Ashby left Denver Gold Group and started her own company, MiNE LLC, which organizes investor meetings for the natural resources, mining, and modern energy. Michele Ashby is a member of the Board of Directors of US Gold, American Stock Exchange listed (UXG).

  • http://www.emergingtechinsights.com Gary M. Oosta

    Some start-ups that are in the valley of death should be there. Others deserve an investment. Where the decision is between multiple technological approaches, technology mapping can aid the decision. To answer my own questions about algae biofuel, I have made a technology landscape freely available at http://www.emergingtechinsights.com/rpt_algal-biofuels.html. I hope this will help stimulate the discussion AND stimulate the best investments in a new clean-tech industry segment.