Last week, I hosted a breakfast with founders and investors from across the climate tech ecosystem. The conversation was candid and, at times, uncomfortable. But it was ultimately optimistic: a perfect encapsulation of what it means to build new tech in one of the most complex sectors in the modern economy. 

Securing our planet’s future is perhaps the most worthwhile investment a VC can make. And beyond the obvious environmental upside, backing these game-changing solutions can also produce seriously impressive returns. The opportunities are endless, but the challenges can feel just as vast. Successfully building, funding, and sustaining progress is no small feat. With that in mind, here are 7 takeaways I left with, shaped by those building and backing the future of climate innovation:

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1. Mission isn’t enough

A recurring theme across the morning was that it’s simply not enough for startups to label themselves “climate tech”. Instead, investors want to hear founders make the same compelling commercial argument you’d expect from those in any other industry. Having an overarching mission is fantastic - and something we care deeply about at Ada - but it means nothing if it’s not backed up by clear business fundamentals. As one LP put it, “Just tell people what you do.” What is the specific problem you’re going to solve? Who are your customers? Why should we care? 

To put it bluntly, the sense in the room was that investors have had enough of hearing the storytelling without seeing the substance. They understand the problem. Now it’s time to provide tangible, workable and profitable solutions. Whether it’s decarbonising industry, rethinking materials, or reinventing mobility, startups’ success will come not from philosophy, but because they deliver truly innovative products their customers can’t live without. 

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2. Think beyond the next round

At the same time, investors expressed their growing frustration at founders who are so focused on building towards the next funding round that they neglect the need for any compelling narrative around the end goal. While reaching concrete milestones is of course crucial, this step-by-step approach can prevent teams from effectively communicating their overall vision and leave investors doubting a startup’s path to becoming a viable business. 

VCs understand that there are no guarantees when it comes to scaling a business, but being able to defend assumptions on production yield, future cost reductions and profit margins will make them far more willing to accept this risk. Teams who succeed are able to balance the immediate demands of the here-and-now with a clear grasp of the long-term fundamentals. 

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3. Commodities, China and a crowded market 

As exciting as our climate tech ecosystem is, much of the global decarbonisation battle is fought over heavily commoditised sectors like energy, transport and construction - where margins are thin and incumbents control existing markets. This doesn’t mean there’s no room for innovation, but it does make it harder to cut through. 

Another challenge for those looking to break in is fierce competition from overseas. Several attendees pointed to the rapid production speeds, brutal “996” working culture and high quality output of Chinese manufacturers as a major obstacle to investment in homegrown solutions. 

Faced with these challenges, investors stressed the need for UK/EU startups to differentiate themselves through exceptional quality and a commitment to relentless execution. That’s where teams like Low Carbon Materials, an Ada PortCo, come into their own. A Blue Earth 100 company, their multi-award winning environmentally friendly building materials are supercharging the race to Net Zero, offering a genuine alternative to traditional construction products. 

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4. Time to take the “hard” out of hardware

“VCs don’t know how to do hardware.” That was the assessment of one investor, when discussing the challenges early-stage founders face in raising capital for deeptech and hardware-heavy projects. She pointed to the disconnect that exists between traditional VC expectations and the Technology Readiness Level (TRL) milestones these teams are often working towards. The result is that potentially game-changing innovations are being stalled by an inability to translate vision into investor-friendly metrics. 

This is where the onus is on investors and ecosystem leaders to bridge the gap. How can we expect scientists coming straight from the lab to understand the practicalities of scaling a business, or pre-empt what VCs are looking for? If we’re serious about unearthing top talent, we have to support founders with clearer, more tailored pathways to securing capital. 

At Ada, our Inclusive Alpha investment strategy means we’re committed to funding exceptional founders that drive alpha results, making bold bets on the ideas and markets that will reshape how we live. And we’re open to doing whatever it takes to help this talent realise its potential. That could mean forming blended capital stacks alongside institutional investors and philanthropists, or helping teams overcome the various licensing hurdles that stand in their way. 

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5. Making sense of a shifting landscape

LPs around the table pointed out the changing nature of the climate investment landscape. With capital becoming concentrated in fewer hands and pressure increasing on fund managers to show performance, they highlighted the risk that some smaller funds may struggle to survive. 

With this in mind, it’s crucial that founders do their due diligence on investors. Understanding your backers’ fund cycles, capital reserves and follow-on capacity is vital to plotting your own scaling path. 

The good news is that there are people stepping in to plug investment gaps and support homegrown tech. The British Business Bank, for example (an Ada LP), is now investing directly into businesses at Series B, helping companies to scale and de-risking the “valley of death” between TRL 6 prototypes and full commercialisation. 

For climate innovation in particular, investors also stressed the potential for alternative capital sources like philanthropic and retail investors to bridge funding gaps. 

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6. The basics are still true

Despite these shifting dynamics, our guests were keen to point out that the fundamentals of fundraising haven’t changed. For climate-focused founders, there remains a set of universal truths that underpin success. 

Investors want to see talented, committed teams who have identified a problem their customers are willing and able to pay to solve. Once this is clear, it’s up to founding teams to prove as quickly as possible that they can execute their vision - efficiently producing a high quality, cost-effective product with clear margins. Couple this with strong customer traction, and you’re on the right path to showing investors you can offer serious, sustainable value. 

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7. Reasons to be cheerful 

Despite the enormous challenges identified, the overall mood last week was not one of doom and gloom. There is so much to be excited about when it comes to climate innovation. The energy transition is happening. Renewable generation and storage solutions are already cheaper than their fossil fuel counterparts, and the race to Net Zero is only going to intensify. 

Robotics, AI and digital workforce tools are revolutionising the way we produce new tech - offering huge opportunities for founders to build and scale innovative climate solutions in ways that simply weren’t possible before. 

While changing political tides and shifts in the way capital is allocated might add to the pressure,  there will always be space for founders offering durable, radical solutions to the challenges we face as a planet. 

At Ada, we’re committed to backing founders who are shaping the green revolution. If you’re building tech that will deliver genuine impact, transform consumer behaviour and help address the climate crisis, get in touch. We want to help you take your project from the lab bench to the world.

Finally, a huge thank you to all of our attendees for your fantastic, insightful contributions. We were delighted to have our incredible portfolio companies Greenworkx, Maiven and Low Carbon Materials represented by Mat Ilic, Larsen Mabika and Harry Hatchwell. Also around the table were Zachary Webb from M&G Investments, Kara Conway from Bootstrap Europe, Max Middleton from the British Business Bank, Rob Genieser from ETF Partners and Carmel Rafaeli from The Table. It was a pleasure to host you all, and we look forward to working alongside you to build a greener, more sustainable future. 

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