Climate Finance | January 4, 2023

Investing in climate entrepreneurs who think like project developers

Nate Lowbeer-Lewis

Get a weekly pulse on news and trends in impact investing with our free newsletter.

*I agree to receive marketing emails from ImpactAlpha, its affiliates, and accept our terms of use and privacy policy.
By signing up you agree to receive marketing emails from ImpactAlpha Inc. and accept our Terms of Service and Privacy Policy.
Guest Author

Nate Lowbeer-Lewis

Progress is as much about implementation as it is about invention.

I wish I could lay claim to these profound words. They were written by talented journalist Derek Thompson in The Atlantic. His point was that whether it’s subway cars or nuclear reactors, the microchip or, yes, the solar cell – something near and dear to my heart and to my career – the US and Canada have an incredible track record of innovating remarkable solutions only to have them perfected and produced at scale somewhere else.

While Thompson’s point on American innovation is unduly critical in my mind (“Why the Age of American Progress Ended” – ouch!) his larger point is spot on: as hard as innovation is, taking something from one to one billion is truly hard to do. Innovation can be amazing, but scale drives impact.

Making one of something is innovation; making it at scale is deployment. And for any investor looking for attractive opportunities in some of today’s fastest growing sectors (energy, food, water, waste and transportation sectors, for example) deployment at scale is where the money is at.

Innovation to deployment

And yet.

There are dozens of accelerators, incubators and training programs out there to help entrepreneurs succeed with their sustainability innovation startups. What happens after the company has launched and its idea has been proven?

The gap from startup to scaled business – from innovation to deployment – is often incredibly wide and hard to navigate. The problem is that there is no playbook to help these entrepreneurs scale and attract institutional capital, especially in the energy, food, water, waste and transportation sectors, sectors that require the deployment of physical systems – infrastructure – to create meaningful change. This gap in know-how is one of the critical obstacles to rolling out sustainability and climate solutions at scale.

For entrepreneurs innovating in these industries, the missing piece of the puzzle is what we call “project development.” Project development is a specialized skillset that is not often taught in the accelerators and incubators focused on this space. Instead of learning how to protect your IP, project development entrepreneurs must learn how to protect against cost overruns. Instead of learning how to “listen to the voice of the customer,” project development entrepreneurs must learn how to draft financeable supply and offtake contracts. Instead of solving product market fit, these entrepreneurs must learn how to efficiently navigate complex permitting pathways with multiple stakeholders. And a million other details besides.

For years, there seems to have been an assumption in the sustainable investing sector that project development would arrive as needed. Established project developers will take up new solutions and seek capital from infrastructure investors that are chomping at the bit to finance new solutions. That’s not how it works. Existing project developers are mostly focused on the types of projects they already know well. Traditional infrastructure investors never want to back the first deployment of any new solution… nor the second, third or fourth.

To move the needle on climate we need a new crop of entrepreneurs who think of themselves first and foremost as project developers. This could mean an entrepreneur who has developed that innovative new solution and knows that it’s up to them to get the first dozen deployments successfully out there in the world, before infrastructure investors will invest.

Or it could mean entrepreneurs who simply want to take some existing low-tech ideas and implement them in their own community, for instance to provide clean and resilient backup power, or electric vehicle charging hubs, or localized clean water supplies. In either case these entrepreneurs need to understand how to develop projects.

Developing developers 

At my firm, Spring Lane Capital, we operate at the intersection of project finance and growth capital. We help project developers get through their first wave of successful projects, with the explicit intention of then being supplanted by mainstream infrastructure investors once the platform is ready.

We long ago realized that many of the companies we talk with don’t really understand what it MEANS to be a project developer.

Last month in Boston, my firm (alongside our partners Northeast Clean Energy Council, Live Oak Bank, the Milken Institute, and law firm Mintz) hosted our second two-day seminar for a collection of entrepreneurs on exactly this topic: a massively informative cram-session we informally call “Developer U.” We had over two dozen entrepreneurs in attendance, from industries such as microgrids to fabric recycling to aquaculture to anaerobic digestion. We covered sessions like “Project Development Fundamentals” and “Navigating Project Agreements.” Dry, yet crucial topics. Presented by successful practitioners. It was a long two days!

And a really valuable two days, by all reports. No one walks out of a two-day seminar suddenly an expert on a topic. These entrepreneurs seemed to really value the introduction to the topic. And now they know how important it will be for their organization to develop these skillsets internally, what successful project development and construction actually looks like, and what project investors are looking for.

We will continue to hold Developer U events across North America because we’ve seen firsthand how valuable it can be. This session in Boston reinforced for me how critical and yet mostly missing this knowledge has been among sustainability entrepreneurs of all stripes. If we don’t have thousands of sustainability entrepreneurs out there with this knowledge and training, how will we ever scale up climate solutions to match the magnitude of the challenge? How will underserved communities ever NOT be last in line to actually get clean and resilient infrastructure implemented in their neighborhoods? How will all the millions if not billions of dollars spent on sustainability innovations ever actually amount to large-scale impact?

Our firm loves doing what we can to spread the word and share this knowledge – it’s core to our mission. We love the hard work that we take on, and we love working with entrepreneurs who share that passion! It needs to happen much more broadly than just what few events we can host ourselves. Our event last month was incredibly gratifying and encouraging, just to be able to help those two dozen entrepreneurs. But for impact, this topic needs to scale.

Nate Lowbeer-Lewis is vice president, Canada, for Spring Lane Capital Partners.