In a recent meeting in Berlin, German politicians, foundations, startup founders, and even American billionaire Bill Gates gathered to discuss an important topic for the future competitiveness of Germany: financing climate tech. While Gates shared his insights on funding capital-intensive climate technologies in the US, another intriguing idea surfaced during the conference.
The proposal was to establish a fund that would combine public and private capital to support climate tech startups in building their first-of-a-kind facilities (FOAKs). These startups often face difficulties in securing financing for infrastructure projects such as direct air capture or energy storage systems. With limited revenue and perceived high-risk profiles, they struggle to attract investments from traditional venture capital funds. Additionally, banks are hesitant to provide debt financing without proof of the technology’s scalability – leading to what is known as the “first-of-a-kind valley of death.”
The introduction of a FOAK-specific fund, a concept yet to be implemented in Europe, could have a profound impact on Germany’s climate tech sector. By bringing together the government, institutional investors, and philanthropic organizations, this collaborative effort could provide the necessary support for these innovative startups.
The climate crisis demands accelerated advancements in climate technology, and this new funding approach could be pivotal in driving progress. Germany, with its commitment to sustainability and technological innovation, has the potential to become a leader in this field. By nurturing and financing climate tech startups through initiatives like a FOAK fund, the country can contribute significantly to global efforts in mitigating climate change.