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Cities know which neighborhoods flood. Water agencies know which ridgelines will burn. What they lack is a fast way to buy a fix and a clean way to prove it worked.

The proof is where founders get paid.

Most resilience money is built for bond issuers. A city can float 30-year paper and wait a decade for the payoff. A seed-stage company with 14 months of runway can’t. So founders chase pilots that never convert, and the procurement cycle eats the runway.

The way out is to sell a number. Gallons of stormwater captured, or acres of forest thinned. When the buyer pays for the outcome, your measurement becomes part of the product.

Atlanta priced a stormwater bond on gallons

In January 2019, Atlanta’s Department of Watershed Management closed a $14 million environmental impact bond to pay for green infrastructure in the Proctor Creek watershed.

Investors earn a base rate of about 3.55%. If the projects add 6.52 million gallons of new stormwater capture capacity by the end of year six, the city pays a $1 million performance bonus and the effective rate rises to about 4.67%. Quantified Ventures structured the deal, and a Rockefeller Foundation grant covered the cost of structuring it. Quantified Ventures put the odds of hitting the high-performance mark at 28%.

Every dollar of upside in that bond depends on a measured volume of water. Somebody has to install the monitoring and certify the gallons.

If your product measures or forecasts a physical outcome, every deal shaped like this one needs what you sell.

Blue Forest got a water agency to pay for wildfire work

Blue Forest’s first Forest Resilience Bond raised $4 million to restore 15,000 acres in the Yuba watershed of Tahoe National Forest. The case to payers ran downstream. Thinning the forest cuts the risk of catastrophic fire, and that protects the water supply below it.

Yuba Water Agency, the U.S. Forest Service and California’s climate investment program repaid the investors.

Look at who sat in the stack. The Gordon and Betty Moore Foundation and the Zero Gap Fund put in concessionary capital. That cushion brought in commercial money from CSAA Insurance Group and Calvert Impact Capital. A home insurer ended up as an investor in forest thinning.

Find the party that loses money if your outcome doesn’t happen. They may never have bought from a climate company before. They have a budget line for the damage.

Write contracts that pay a base fee plus a bonus

Atlanta’s two tiers translate directly into a services contract. Price a base fee that covers your costs. Add a performance payment tied to the metric your buyer already tracks.

Shared-savings deals with a utility or an insurer work the same way. You take a cut of the losses you prevent, so agree on the baseline before you install anything.

Stack capital in the order Blue Forest did

Concessionary money takes the first loss so commercial money can come in behind it.

For a startup, that means grant or catalytic capital for the pilot and an outcome contract for the rollout. Equity shouldn’t be paying for both.

Public programs can also be your customer. Strengthen Alabama Homes has paid out more than $70 million in grants of up to $10,000 per home since 2016, covering about 7,100 homes. The state pays contractors directly for the roof upgrades. If your product makes a building harder to break, a program like that is a sales channel.

Run your first pilot with a public buyer

Pick a school district or a water utility with a problem it already reports on. Fund the pilot with state money such as California’s Prop 4 climate bond. Measure the result in the units the buyer uses in its own budget.

A finished pilot with a clean number is the thing your next outcome contract will be priced on.

Sell into disclosure, and watch the courts

California’s SB 261 requires companies doing business in the state with more than $500 million in revenue to report climate-related financial risk. The Ninth Circuit paused enforcement in November 2025 while the appeal plays out. Large companies were already building those reports, and a merits ruling could switch the requirement back on quickly.

If your tool produces the physical-risk data those reports need, your buyer is the CFO’s office.

The city that floods every spring already pays for it. Show them a smaller number, and show them how you’ll prove it.

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Tax increment financing only works where property values rise. The neighborhoods facing the most climate risk are where they rise least.

Once you understand how cities currently finance public infrastructure and how constrained those tools are, you realize how overdue we are for innovation in public climate finance.

What Is Value Capture and Why It Matters

Value capture is the idea that public investment, like a new transit stop, increases nearby land values. Cities can then capture a portion of that increased value (often via property taxes) to pay for the project.

The most common model in the US is Tax Increment Financing (TIF). A city borrows money upfront and repays it using the increase in property tax revenues generated by the project. In California, a newer version called Enhanced Infrastructure Financing Districts (EIFDs) serves a similar role, but with more bureaucracy and fewer results.

The Problem: Outdated Tools for a New Era

Here’s the issue: most of these tools were built to fund traditional urban development, not climate resilience.

They depend on property values rising, which may not happen in the areas most vulnerable to climate risk. They take time to pay off, require complex approval processes, and often leave out lower-income communities. Worst of all, they reinforce a narrow idea of value: the kind that shows up in real estate prices.

Climate infrastructure creates value these models never count, like reduced flood risk and avoided emergency spending.

A New Model: Climate Resilience Districts

So what could a new value capture tool look like?

Let’s imagine Climate Resilience Districts: a form of value capture that treats climate benefits as real, measurable value. Instead of relying solely on rising property taxes, these districts could borrow against:

• Lower public insurance risk

• Avoided disaster recovery costs

• Reduced hospitalizations and public health burdens

• Federal or state “pay-for-performance” climate grants

• Local resilience fees (e.g., stormwater, flood protection, or utility surcharges)

The goal is a financial model that ties repayment to measurable public outcomes.

An Example: Wetlands That TIF Can’t Finance

Consider a wetlands restoration project near a low-income coastal neighborhood. In a traditional value capture model, the project might not be financeable because it’s unlikely to spark a property boom.

Under a Climate Resilience District, the project could be financed based on its public value: avoided flood damages, carbon sequestration, improved biodiversity, and public health protections. These are quantifiable. They’re bankable. And they’re exactly the kinds of investments we need more of.

From Retrofit to Redesign

Public funding programs often help “de-risk” climate projects. A modernized value capture framework could play a similar role by signaling long-term viability, reducing investor risk, and unlocking private co-investment.

The neighborhoods with the highest climate risk often have the lowest land values. If we keep using tools that rely on those values going up, we’ll keep investing in the wrong places, or not at all. Our buildings need retrofitting. So does our financial logic.

The Takeaway

Scaling public-private climate finance will take more than new plans or bigger grants. It requires new financial tools built for the realities of climate risk and resilience. We need to rethink how we define and monetize public value.

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Let’s discuss why many innovative climate technologies, such as carbon capture and low-carbon concrete production, face challenges in scaling up.

It’s not because the ideas don’t work. It’s not even because investors don’t care. The real problem is that the market doesn’t yet know how to value carbon properly.

Why Net Zero Feels Hollow

Companies make bold promises about reaching “net zero.” They publish reports. They join pledges. They buy cheap carbon credits.

But most of these credits don’t actually remove carbon from the atmosphere. Most of these credits are avoidance credits. Avoidance doesn’t pay down a ton already emitted.

That’s why so many climate pledges feel hollow. We have ambition on paper, but action in the real world lags far behind.

Think of Carbon Like a Liability

Alicia Seiger, who spoke in our class, put it beautifully: think of carbon like a liability. Every ton of carbon a company puts into the atmosphere is a liability. And to be “solvent,” that company must pay back that debt by removing carbon or cutting emissions for good.

This simple idea changes everything. Because once emissions are treated as real liabilities, companies can’t just rely on fancy reports. They actually need assets, like carbon removal technologies, to balance their books.

Turning Promises Into Markets

Now imagine what this means for startups working on ClimateTech.

Today, they face a “valley of death.” They build pilots. They prove their ideas. But they can’t get the big money to scale because investors worry there won’t be enough customers down the line.

But under an emissions-as-liabilities system, those customers are guaranteed. Companies must purchase solutions to offset their carbon footprint. That creates the kind of demand startups can take to banks and investors.

Corporate Balance Sheets as the Bridge

This is where corporate balance sheets come in. When a company like Microsoft or Stripe signs a long-term contract to buy carbon removal, it’s not just charity. It’s a financial decision. A hedge against future carbon debt.

For startups, these contracts are gold. They prove there’s a real market. They unlock loans. They attract investors. They make it possible to build the tenth facility, not just the first.

Proof It Can Work

Look at Climeworks in Iceland. Their deals with Microsoft and Shopify gave them the confidence to raise hundreds of millions to build giant carbon removal plants.

Or Charm Industrial. They turn biomass into a carbon-rich oil and inject it underground. Frontier, a buyer group backed by Stripe and Alphabet, signed early contracts with them. That funding pushed Charm from small pilots to large-scale operations.

And CarbonCure, which injects CO₂ into concrete. Amazon and Microsoft’s contracts didn’t just cut emissions. They also signaled to investors that CarbonCure was ready to scale, helping them raise big rounds of growth capital.

Each of these stories shows that corporate balance sheets can turn fragile climate tech ideas into commercial realities.

Building the Capital Stack for Scale

Here’s the bigger picture:

● Philanthropy gets the first prototypes off the ground.

● Corporate contracts create guaranteed demand.

● Banks and lenders step in once revenue looks certain.

● Institutional investors follow when the technology is proven and profitable.

Step by step, the capital stack builds. And with it, the pathway to mass deployment.

The Shift That Unlocks Real Progress

If we shift from “reporting,” which is about appearances, to proper accounting, which is about responsibility, then money will finally flow to the right places.

We’ll stop rewarding empty promises and start backing real solutions. And the startups working on the toughest, most important technologies won’t be stranded anymore.

We can already see the change taking shape. Companies are locking in real contracts. Markets are starting to stir. Bit by bit, we’re building the foundation of an actual carbon economy.

When we treat emissions like debt, every ton removed pays down the climate debt we’ve built up and moves us toward a safer planet.

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Monday

• 2026 Venture For ClimateTech Innovation Showcase

• Connect. Collaborate. Catalyze. With UC Berkeley Climate Solutionists at Solutions House (calling all UC Berkeley alumni!)

• Campus Deep Tech: NY Tech Meetup - Climate Tech Edition

• Sundown Soirée

Tuesday

• How Hardtech Companies Build Capital Stacks that Scale: An Invite-Only Breakfast with Tangible & Kineo Finance

• Innsure Climate Forum

• Beyond the Pilot: Securing Corporate Adoption

• Live from the Future: A Hard Tech Showcase at New York Climate Week

• NYCW Founder & Investor Happy Hour

Wednesday

• NYCW FOAK Summit

• Climate Founders & Funders Salon

Thursday

• Newlab: New Climate Futures

• Nuclear Symposium

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We all know VCs underwrite such that each startup needs to return the fund, with an understanding that there will only be 1-2 winners in the portfolio.

This class made me start thinking about who the best investors are for climate hardware startups, which usually take a longer time to commercialize.

Ørsted Case Study

The Danish state owns 50.1% of Ørsted. That ownership is a large part of why a North Sea oil and gas company could walk away from its own business model and come out the other side as the largest offshore wind developer in the world.

The transition was not painless, and it was not absorbed by the state alone. Ørsted then lost DKK 4.0B in 2012 and DKK 1.0B in 2013. The company needed a DKK 13B equity injection to stabilize its credit rating, and the Danish state got there by selling a small stake.

With the state as the largest shareholder, Ørsted had someone at the top of its cap table measuring in decades rather than quarters. It has been publicly listed since 2016 and reports like any other public company, so pressure still arrives. The difference shows up in who is standing there when it does.

Most people cite Ørsted as a success story and stop there. The harder test came in 2025.

In 2025 Ørsted failed to sell down a stake in Sunrise Wind. Construction on Revolution Wind was halted mid-build by a federal stop-work order in August, at roughly 80% complete, and resumed only after a court ruling a month later. The shares fell hard. In August the company announced a DKK 60B (~$9.4B) rights issue, and the Danish state committed to subscribe its full 50.1%. The raise closed in October at DKK 59.6B.

Patient capital did not prevent that crisis. Patient capital decided who absorbed it.

When that same shock happens in year 8 of a 10-year fund, there is a distressed sale of a half-built asset. In contrast, Denmark wrote the check and kept the asset.

That is the whole insight, and it scales down to your seed round. Governance determines what happens to you on the worst day.

Diligence The Fund

Diligence works both ways. As a Founder, you get to decide who you want on your cap table.

Asking about how investors operate on boards is a starting point, but you may not get useful info, as everyone describes themselves as supportive and long-term. Ask about structure instead, because structure is what holds when the relationship gets hard.

Start with the fund’s clock:

• What vintage is the fund, and how much life is left? A partner in year seven of a ten-year fund is a short-horizon investor whatever they call themselves.

• What reserves are held for follow-on? A lead who cannot follow you into a slow round is a governance risk disguised as a believer.

• What do the LPs require, and when? Liquidity obligations upstream arrive downstream as pressure on your timeline.

• Have they held a company through a bad year? Get the name and call that founder yourself.

Then move to the board, because the board is where the fund’s clock reaches into your decisions:

• Who actually holds the seat. The partner in the room, the firm, or whoever the firm assigns later? Partners leave. Funds wind down and sell positions to secondary buyers or roll them into continuation vehicles. That seat outlives the relationship you are building right now, and whoever inherits it never fell in love with your technology.

• What requires board approval and what requires shareholder approval? Get the list before you sign a term sheet because protective provisions are where governance actually lives.

• What happens between meetings? Reporting cadence, information rights, standing check-ins. That is how you learn how much of every month goes to managing investors instead of building.

Then ask this behavioral question: Name the last portfolio company where you disagreed with the founder about timing, and tell me what you did.

None of this is hostile. Investors who have thought it through answer immediately. The ones who get uncomfortable have told you something useful for free.

And always ask to talk to portfolio companies, or reach out to them yourself.

Non-Dilutive Capital Has Its Own Failure Mode

Grants, concessional debt, and catalytic capital give you a longer timeline without handing over a board seat or giving away equity. A three-month grant application looks slow right up until you compare it against three years of governance pressure from a round you did not need to raise.

However, government grants carry their own risk. The EPA moved to terminate the Greenhouse Gas Reduction Fund in March 2025. Seventeen months later, the awardees have a preliminary injunction that the D.C. Circuit upheld en banc in August 2026, and money is moving again under that order.

What they do not have is a final ruling. The government moved to stay the mandate while it petitions the Supreme Court. The case returns to district court on the merits. And nobody has yet resolved what the One Big Beautiful Bill Act did to the unobligated funds. Seventeen months of litigation, and the outcome is still provisional.

The lesson: treat governance sources the way you treat capital sources. Do not let one policy instrument carry your entire time horizon. Build the version of your model that removes your largest policy assumption and see what is left.

Nobody Is Going To Hand You A Patient Owner

Companies controlled by industrial foundations represent roughly two-thirds of the market capitalization of the Copenhagen exchange. That includes much of the C25, Denmark’s index of its twenty-five most-traded shares. A Danish industrial foundation is a self-governing entity with no owners, chartered to hold its company across decades instead of selling into a good quarter.

The Novo Nordisk Foundation, through its wholly owned Novo Holdings, holds about 28% of the shares and about 77% of the voting rights, because it owns the class A shares, which carry ten times the votes of the ordinary B shares. Economic ownership and voting control were separated on purpose, and the foundation’s charter obligates it to keep control. That was a cap table decision that everything downstream has had to work around.

In the US, patient capital is something founders assemble by hand, one layer at a time, out of grants and concessional debt and first-loss tranches and whatever strategic partner will think in five-year increments. What a Danish company gets from its ownership structure, you build clause by clause.

Before you sign

The three questions you should think about before signing a term sheet are:

• Does anyone on my cap table have a structure that permits them to hold me for as long as my technology actually needs?

• If my largest policy instrument disappears tomorrow, what is left?

• Am I optimizing for the governance structure my technology needs, or the one that closes fastest?

Every term sheet comes with a clock attached. Read it before you sign, and ask the investor directly what happens when it runs out. That conversation is cheap now and expensive later.

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Naturally, I reached out to learn more. The result is an article on what he’s working on.

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There’s a moment in a hardware company’s life that nobody puts on the roadmap. The demonstration plant runs, the data comes back clean, and the company that got good at building technology now has to be good at something else entirely.

Ben describes it as an overnight identity change.

“When a company in this category successfully creates and demonstrates their technology, they need to wake up the next day and become a totally different company that’s focused on project deployment rather than product-focused R&D. This can be really challenging, in part because project finance and development requires a totally different skillset and stakeholder set.”

Wolkon has spent his career in clean energy and industrial technology, including as a Founding Partner at MUUS Climate Partners. He now runs Avarna, which acts as an embedded project finance team.

I asked why that has to be a company rather than something founders work out with the advisors they already have.

Post-Pilot, Pre-Institutional

His answer starts with a stage definition, and it does more work than any TRL number.

“Pilot stage is when a company is proving the technology works. Institutional stage is when the company and technology are seen as largely de-risked in the eyes of the world’s infrastructure investors. We work with companies sitting in that chasm between the two.”

Nobody crosses the chasm with one check. Grants, tax credits, project equity, a specialty lender if you’re lucky, and your own balance sheet, all in one stack. Five counterparties for one project, each with a different idea of what a complete diligence package looks like.

“Pulling that off is immensely complex, but immensely valuable if done correctly, because it leads to the company’s management and early investors seeing substantially less dilution, and the company setting itself up for long-term success with institutional partners.”

Corporate equity is the most expensive capital you will ever put into a project.

“If your startup’s first demonstration project is under $10M, you might be able to convince your existing cap table that it should be venture funded just to get going, and that’s a rational choice .”

Then comes project two. $50M, Series A or B stage, too big for the cap table and nowhere near big enough for the institutions.

“But the larger infrastructure investors are typically focused on much larger projects than that, most of the time projects that are at least in the mid-hundreds of millions in capital costs.”

Most of the writing on the missing middle describes a gap that opens around $50M and closes somewhere near $500M.

The Capital Isn’t Missing

“The capital exists, but it’s just spread across multiple counterparties, each with their own process, standards, and timeline. Somebody has to do the work of assembling and optimizing that capital stack, ensuring that the projected outcome is positive for all parties, particularly the underlying company, and making sure that when one parameter changes, it flows through across the entire project.”

Move the tax credit assumption and your debt sizing moves. Move the debt sizing and your sponsor equity moves. Every counterparty is holding a model that just went stale, and somebody has to notice before the next call.

“I talked to a non-insignificant number of founders who had raised north of $10M, had a working demonstration project, but by their own admission hadn’t figured out their long-term business model or economics. Then I went and talked to financial institutions who said they would love to be funding more new technology, but many startups are unable to clearly communicate their projects’ economic story with the level of granularity that institutional investment committees require.”

That inverts the complaint you hear on every conference panel, where the lenders are the villains who won’t touch first-of-a-kind risk. Institutions want to write the checks, but what lands on their desk can’t be underwritten.

“We’ve never had a greater number of technologically de-risked sustainable energy and industrial technologies, but they won’t get deployed as quickly without an added translation layer that lets them speak to institutions.”

Companies that never build that layer end up in one of two places.

“One is just never being able to get projects funded, and the other is funding projects using VC dollars that shouldn’t be going into infrastructure projects. Venture is great for building technology, but is the wrong instrument for building a power plant or manufacturing facility.”

Tax Credits Are Not Robinhood

The credits are where Wolkon gets concrete.

“Energy and industrial tax credits have seen some major shifts in the last four years, first with IRA and then with OBBBA. If you went to sleep in 2021 and woke up today, the landscape would appear unintelligible.”

The mistake he keeps seeing is a pricing assumption.

“One thing we see companies get wrong sometimes is that they believe a direct transfer, listing their tax credits for sale at a discount on a platform, will be as easy as selling their Apple stock on Robinhood. Not so. Tax credit monetization, particularly for smaller projects, takes effort and totally changes the economic profile of the project.”

Small projects monetize worse, so the credit is worth less than the headline rate suggests, and that discount belongs inside your startup’s model before you build the stack rather than after somebody hands you a term sheet.

Credits aren’t the only tax attribute worth money either. “Finding a way to monetize depreciation via a project equity investor is another major unlock for some projects,” Wolkon said. Depreciation is a deduction rather than a credit, so capturing it means finding an investor who can use it, which is a different conversation from listing something for sale.

Financing Can’t Find You A Customer

I asked what Avarna doesn’t solve.

“Some companies have asked for support on the commercial side as well, for example, identifying an offtaker for a project. We’re typically more effective when the project offtaker, or roster of prospective offtakers, has been identified, and so the challenge ahead isn’t signing up a customer but rather figuring out the best way to finance and develop the project.”

No amount of financial engineering fixes a project without a buyer. Know who’s buying before you go looking for who’s funding.

Wolkon’s version of winning is a market where none of this needs explaining. No more solving infrastructure problems with venture capital, and, as he puts it, no more having to “read missing middle thought pieces.”

We’re not there yet. Most of the technology needed to cut emissions already works, and much of it sits inside companies that are one financing capability away from building at scale.

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• 2026 Venture For ClimateTech Innovation Showcase

• Sundown Soirée

• Beyond the Pilot: Securing Corporate Adoption

• Live from the Future: A Hard Tech Showcase at New York Climate Week

• NYCW Founder & Investor Happy Hour

• NYCW FOAK Summit

What’s going on the back half of the week that’s worth going to? Let me know and get your event on my next newsletter.

Today’s piece was written by Max Wooten. Max is a Project Developer at Madison Energy Infrastructure focused on delivering distributed renewable infrastructure across North America for communities and the industries that serve them.

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This is a continuation on a piece from earlier this summer on how the VC risk appetite has transitioned to that of an infrastructure investor. This piece is focused on the mentality of founders, who are on the other side of the table sourcing capital.

But First, A History of “Mature” Climate Technology Financing

In our 2026 world where deal flow and innovation in the clean energy sector is sparkled with next-generation geothermal, the return of nuclear in the form of SMRs and MMRs, carbon-capture, long duration energy storage, super conductor transmission networks, and more, solar and wind often feel like the mature technologies in the market.

Although they may not be “next-gen” technology, the commercial and industrial wind and solar industry essentially wrote the playbook on how to temper investor scrutiny and technological skepticism. The greatest contribution these proven technologies might have on our future is advising the audacious founders of tomorrow in key capital-intensive industries like digital infrastructure, manufacturing, mining, and robotics on how to approach project finance.

The Power Purchase Agreement (PPA) has been instrumental over the last two decades in scaling solar and wind projects by establishing a repeatable roadmap for investor diligence. Eliminating merchant risk and bringing lenders twenty years of contracted revenues, ideally from creditworthy counterparties, makes a project significantly easier to finance and dramatically lowers the cost of capital for financiers and asset owners.

Shifting the narrative from exciting, but unproven, to innovative, yet predictable, is exactly what solar and wind managed to accomplish. The same will need to be true for asset-based technologies and hardware on the horizon to scale effectively.

The Playbook is Proven. How Do Founders Leverage It?

William Godfrey of Tangible, a company that helps hard-tech companies navigate debt operations, argues that founders should consider their revenue strategy and product-market fit as they relate to certain types of funding as early as possible.

In his recent appearance on the panel of The Non-Dilutive Capital Stack he explains that founders who structure their contracts, offtakes, operations, and processes with financeable intention, will be the ones who will be able to scale and survive, not those who are simply “bolting on a credit facility on top of the company”.

As evidence of this thesis, founder Saman Farid of Formic Technologies has taken this advice in full stride. Formic Technologies is deploying robotic assets into manufacturing facilities across the country, using contracted revenue and asset-backed finance as their pillars of investor confidence, enabling them to scale with a significantly less dilutive capital stack. On the same panel as Godfrey, he described this financial sophistication as a differentiator in the market of Robotics-as-a-Service. Formic had access to capital that their competitors didn’t because they made their operations complementary to their intended capital stack. They achieved this competitive advantage by hiring a “Chief Credit Officer” early in their process, self-structuring their contracts with carefully negotiated termination rights and commercial obligations palatable to lenders, and building the corporate structure that allows these assets to survive in a bankruptcy event.

On the contrary, his competitors have uniformly gone out of business “because they tried to use venture funding, or even worse venture debt, to go and buy a bunch of hardware and deploy it.” Venture debt in this case exacerbates financing issues not just by diluting equity when none should be required, but by dragging balance sheet debt into a project’s economics, erasing the line that project finance is built to maintain.

Financial engineering as a founding discipline

The founders that will win in asset-heavy climate tech will be the ones who de-risked their business by building a model that will be familiar to the project finance lender.

This might be uncomfortable for technical-founders who obsess over their product, but in order to align with the shifting sentiment of venture investment in this space, founders will have to adapt, or be left behind. The ones who shift paradigms will be those who get to scale on someone else’s balance sheet instead of burning their own equity buying raw materials.

The model is threefold:

1. Invest in human capital. Founders need experience in their corner to support elevating their financial sophistication.

2. Treat contracts as a bankable necessity, not just a commercial milestone. Contracts riddled with termination rights and an unrated counterparty without credit support will not pass lender scrutiny.

3. From day one, lay the foundation so that assets can survive independently of the company itself. Ensure financiers are betting on the hardware’s cash flows, not the startup’s survival.

Founders can stress-test whether their building towards this model by asking themselves: Can I push my contract terms longer with my counterparties? Can I negotiate letters of credit with my non-creditworthy offtakers? If an asset fails, am I insulated from risk?

Solar and wind didn’t prove that emerging hardware technology can be bankable, they proved that scale was achievable through a deployment model that matched the risk-tolerance of lenders, not what impressed flashy equity investors. That’s the real playbook founders are being handed: design the company the capital markets can underwrite, not just the one investors get excited about.

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Both this piece and last week’s was co-authored with Sandeep Naidu, Founder of LDS TerraGrid, an industrial financing intelligence platform that structures publicly disclosed project-development signals to identify financing-relevant opportunities before financing structures become fully visible.

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Announcing a project is not the same as funding it.

Tata Steel said in April 2024 it would proceed with a £1.25bn electric arc furnace at Port Talbot. Planning approval came the following February. Construction started in July 2025, fifteen months after the decision.

The money moved on its own schedule. Tata put in £750m, the UK Government signed a £500m grant that September, and the disclosed structure names no external debt. Whether a debt process ever ran isn’t in the record.

Then in June 2026 Tata told investors the furnace would be late. National Grid’s substation work slipped, and Tata’s CFO put commissioning six to eight months behind with a warning it could run longer.

Development and financing run on separate clocks

Your project runs two timelines. Development goes through permits, engineering, procurement, construction, drawdown. Financing goes through grants, tax credits, equity, offtake, debt.

The dependency runs one way. Construction can’t draw on debt that hasn’t closed, and debt doesn’t close until an underwriter can price locked scope and contracted revenue. Every week your scope stays open is a week the debt can’t be underwritten, whatever your construction schedule says.

Founders put development into a Gantt chart and treat financing as an event. That’s the error. The chart assumes you set the dates. Grant cycles, credit committees and investment committees set the financing clock, and none of them have seen your build schedule.

Lenders are already reading your milestones

Capital providers read your development milestones as financing signals. Each one tells them money will be needed here, and roughly when.

An EPC award tells them your scope is locked and your cost is bounded. A signed offtake tells them your revenue is contracted, not modeled. A permit tells them the site is real. An interconnection position tells them when you can energize. Environmental filings and procurement notices carry the rest, and origination teams read all of it.

Grants buy scope, and scope is what debt underwrites

Debt is the one hard rule. It comes last, because no lender underwrites an asset whose scope is open and whose revenue is uncontracted. Take non-dilutive money whenever the window opens, since it costs you no ownership and funds the engineering and permitting nothing else will. Raise equity from the position of strength that funded design gives you.

Electra’s stack formed in public. The clean iron company announced a $186m Series B in April 2025 co-led by Capricorn Investment Group and Temasek, then a Colorado tax credit worth up to $7.99m in May. In October came its 130,000 square foot demonstration plant in Jefferson County, Colorado, with signed purchase orders from Nucor, Toyota Tsusho America and INTERFER Edelstahl, an environmental attribute agreement with Meta, and a $50m Breakthrough Energy Catalyst grant. JPMorgan came four months later, with $30m of venture debt against the company, for planning work. Project debt against the asset hasn’t shown up at all.

The Series B landed before the tax credit and the grant, which is what happens when a state credit and a first-of-a-kind award run on calendars you don’t set. What held is the order you can plan for: contracted revenue and the grant together, then the bank.

Lenders will take your call early, which feels like progress and isn’t. You’ll lock scope and sign offtake anyway, months later, with less runway and less room on terms.

Going dark in the gap starts your raise cold

Between announcement and close, your project advances while your capital structure stays invisible. Most founders go quiet in that window, heads-down on engineering, treating fundraising as a phase that resumes later.

The raise then starts cold, with construction already burning cash.

Your job then is to keep the project visible. A steady sequence of disclosures, spaced weeks apart, so the capital side watches the thing advance instead of hearing nothing for a year. Publish the permit. Announce the EPC award. Put the interconnection position in the deck. Name the offtake counterparty when the contract lets you, and half the time it won’t, which is the real limit on this advice. Every disclosure moves a lender from watching to underwriting, before you ask for a term sheet.

Large corporates also sit in the gap

JSW laid a foundation stone at Dhinkia in Odisha in February 2024. Construction began in May 2026 under a different state government.

The financing ran on its own track throughout. BankTrack reports that JSW Utkal Steel, the subsidiary holding the project, is seeking a project finance loan of $4bn and hasn’t drawn one, and no lender group has been publicly named.

That absence isn’t evidence the financing doesn’t exist. Sponsors run debt processes privately for months, and the record shows what’s been disclosed, not what’s been arranged. What it does show is a $4bn requirement forming in the open, which is the same kind of signal a lender reads about you when you file a permit.

Run the money as a parallel track

Put the financing dates on the build schedule. Mark which milestone gets which tranche committed. Then work backward from the drawdown date.

Tata had fifteen months between deciding and digging, a signed government grant, and a balance sheet to cover the wait. The grid slipped anyway. You’ll get the same fifteen months without the balance sheet. What you get instead is the choice about what the capital side knows, and when.

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• Sept 21: Venture For ClimateTech Innovation Showcase

• Sept 23: Node FOAK Summit

The piece today (and next week) was co-authored with Sandeep Naidu, Founder of LDS TerraGrid, an industrial financing intelligence platform that structures publicly disclosed project-development signals to identify financing-relevant opportunities before financing structures become fully visible.

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Most origination teams meet a financing when it lands in a transaction database, arrangers named, allocations already set. The deal was decided long before that entry existed. Someone had been calling the sponsor since the site was being cleared, and by the time the rest of the market could see a mandate, there was nothing left to compete for.

The firm that missed it did nothing wrong. It logged the project the week it was announced, subscribed to the same deal databases everyone subscribes to, and moved as soon as a mandate appeared. It moved at the moment every other bidder could see the same opportunity.

Between a project’s announcement and the disclosure of its financing sits a window where the project is advancing, capital is being committed, and the structure is invisible to everyone outside it. Most teams treat that window as dead air. It’s where mandates get shaped.

The Financing Forms After the Announcement, and Mostly in Private

The first thing a project makes public is itself. Capex, location, technology, a construction timeline. Sometimes the sponsor’s own equity contribution, sometimes a government grant alongside it.

Everything after that runs slower and quieter. Scope gets defined, permits secured, incentives won, contractors selected, lenders engaged, terms negotiated. Few of those steps carry a disclosure obligation, so the capital structure reaches the public record in pieces, over months, long after the announcement that made the project look funded.

No one’s withholding anything. This is how large projects develop.

Transition Assets Stay Opaque the Longest

A conventional plant follows a financing pattern the market has seen many times. Once it’s announced, the missing pieces are widely anticipated, and they tend to surface quickly.

Climate and transition projects don’t resolve that way. Their capital assembles in sequence: grants first, sponsor equity next, then debt and export credit and catalytic capital arriving late or never arriving. Each layer surfaces on its own schedule, which stretches the window and leaves any single disclosure supporting fewer conclusions than it would elsewhere.

Tata Steel’s plant at Port Talbot, on the coast of south Wales, shows how much a disclosed stack can tell you, and where it stops. The September 2024 announcement confirmed three things without ambiguity: £750 million of sponsor equity from Tata’s own balance sheet, a £500 million non-repayable grant from the UK Government’s Department for Energy Security and Net Zero, and no external debt in the disclosed structure. The publicly disclosed capital stack was complete, every layer identified and sourced, without a commercial lender in it. For a £1.25 billion project, that is unusual.

What the announcement did not settle was how that outcome was reached. The record does not show whether Tata approached commercial banks and chose not to use them, or whether the grant and sponsor equity made external debt unnecessary from the start. It shows the result of the financing decision, not the decision itself. The construction start in July 2025 added one more fact, that the project had moved from commitment into execution.

An origination team reading Port Talbot through the public record could conclude that the disclosed structure had been resolved without external debt. It could not conclude whether a debt process had ever been considered, or whether lenders had been approached in private. The distance between those two statements is the whole discipline.

Read What the Disclosures Support

Port Talbot is a clean case, because every layer of its stack was disclosed and sourced. Most projects are messier, and an origination team works from a partial record.

A team that treats a guess about private negotiations as intelligence will misjudge both the timing and the competition, and will call the sponsor holding a view of the deal the sponsor knows to be wrong.

A construction start shows a project has moved from intention into execution, with capital going out the door. Sponsor and balance-sheet commitments indicate how much of the requirement may already be covered. Grants, export credit support, and other non-debt sources reveal which parts of the stack have formed and where concessional capital sits. An EPC award or a signed offtake means the project is becoming more defined, and definition is what makes it financeable.

And when no lender group has been named, that means the structure isn’t visible. It doesn’t mean nothing is happening. Sponsors run processes privately for months, and treating public silence as evidence of an unstarted process is the fastest way to misread a project.

No single disclosure reveals a capital structure. A construction start on its own says almost nothing. Watch one project for a year instead. Construction starts, sponsor equity is disclosed, a grant lands, an EPC contract is awarded, and still nothing in the public record about how the rest gets funded. The project may need substantial capital, and the record gives no sign of how that need will be met.

Two capital providers see the same disclosures. One makes the call.

JSW Steel broke ground in 2026 on a ₹65,000 crore integrated steel complex at Dhinkia in Odisha. The investment figure is public. The financing structure is not.

That is the mirror image of Port Talbot. The disclosed stack had already been resolved with sponsor equity and a government grant. Dhinkia is the opposite, where construction is advancing, but the public record still shows nothing about how it will be paid.

Two capital providers can watch the same Dhinkia disclosures and reach opposite decisions. The first logs the announcement and sets an alert for a financing disclosure. It engages when the mandate becomes public, alongside everyone else who set the same alert.

The second watches the disclosures accumulate: land transferred, capital committed, construction underway, contractual scope taking shape, and still nothing in the public record about how any of it gets financed. From that pattern one conclusion follows, and only one. A substantial financing requirement is likely emerging here, and the market cannot yet see how it will be met. That’s enough to justify a call.

Neither capital provider knows how this project gets financed. One of them is in the conversation.

So the question worth organizing a pipeline around is which projects have advanced far enough that a large financing requirement is forming while the capital structure remains publicly invisible. That question is answerable from public information. It produces a list of sponsors worth calling this quarter, which is a more useful output than a list of deals that have already closed.

The projects are moving and the disclosures are already out there. Whether anyone at your firm is reading them while the window is open decides which of those two you are.

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This is an unintentional part 2, spurred by Bruce Mehlman’s Age of Disruption and one question in it: how can businesses plan and invest for the long term when the rules keep flip-flopping?

Part 1 was about showing up to the process. This one is about designing so you depend less on how it turns out.

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Three weeks ago a deadline passed that the US solar and wind industry had spent two years running toward. Projects that began construction by July 4, 2026 keep the clean electricity credits under Sections 45Y and 48E. Miss it and you have to reach service by the end of 2027 or lose them.

Simple enough, except the definition of “began construction” moved four times while everyone was running.

The Inflation Reduction Act created 45Y and 48E in August 2022 with a runway into the 2030s. The One Big Beautiful Bill Act cut that runway on July 4, 2025 and set the 2026 deadline. Three days later Executive Order 14315 told Treasury to tighten what counted as beginning construction, and by August 15 the IRS had done it: Notice 2025-42 killed the 5% safe harbor for all wind and for solar above 1.5 MW. Then on June 6, four weeks out, a federal district court vacated that notice and sent it back. The appeal is pending. The deadline came and went with the rule still unsettled.

This was the tax code. The part of federal policy everyone treats as bedrock.

Altitude Isn’t Durability

Executive orders are fragile, regulations sturdier, appropriations sturdier still, and anything in the tax code is close to permanent. Call that ranking altitude. The assumption underneath it is that altitude buys durability.

45Y is the proof it doesn’t.

The statute was never the binding constraint. Congress wrote “beginning of construction” into law and left Treasury to define it. That definition decided whether tens of billions in projects qualified, and it arrived as an agency notice, written at the direction of an executive order, before a district judge threw it out. Altitude told you nothing. What mattered was that the statute handed the deciding phrase to somebody else.

Count the Hands Between the Rule and the Cash

Every party who can reinterpret a rule is a point of failure. The number of them is the risk.

So count the parties who can change the answer between the written rule and money hitting your account. A signed offtake with a creditworthy counterparty is one party, and they owe you damages if they walk. A tax credit with a statutory formula and no discretionary term is two, Congress and the IRS. Put the deciding phrase in guidance instead and you’re at four, one of whom is a judge. A competitive grant that’s been announced but not funded is one party who owes you nothing at all.

Two of those lines have a count of one. What separates them is whether anybody owes you money when they change their mind. In United States v. Winstar, the Supreme Court held that the government keeps its sovereign power to change the law and gives up the ability to change it for free. Break a government contract with a policy reversal and the government pays. A signature turns the whiplash into somebody else’s liability.

A Commitment Isn’t a Contract

Knowing which one you’re holding is harder than it should be, because the vocabulary blurs it. Selection, award, conditional commitment, financial close. Same letterhead, same press release, and only one of them binds the government.

A conditional commitment is DOE saying it intends to lend once you clear the conditions precedent. Financial close is the executed loan agreement. Everything before close is intent with homework attached.

DOE spent January demonstrating the difference. It announced it was canceling $30 billion in loan obligations from the prior administration and revising another $53.6 billion. Closed loans got honored. Conditional commitments didn’t. That distinction is the whole difference between recourse and a press release.

Grants sit in between, and it’s less comfortable there than it looks. A grant agreement obligates the money and still leaves the agency termination rights, which turns a reversal into litigation rather than a damages claim. EPA terminated the $20 billion Greenhouse Gas Reduction Fund in March 2025. Sixteen months later it’s still in the D.C. Circuit with no final decision.

Run the Same Test on States

The reflex when federal policy gets unstable is to go local. Run the count one level of government down first.

Altitude works the same inside a state, with statute on top and agency regulation below it. What changes is who can reach the top. A state legislature is smaller than Congress, often unified under one party, and can move in a single session.

Virginia joined the Regional Greenhouse Gas Initiative by regulation, a later governor pulled it back out by regulation, and the churn only stopped when the legislature put it back by statute in February. Pennsylvania ran the same lever the other way: in by regulation, out by statute last November. If a state compliance market sits in your revenue model, find out which instrument put that state in. A governor can move against a regulation without the legislature, and unwinding it afterward took Virginia years.

California shows the upside. Last September it extended cap-and-trade through 2045 by statute, which gives anyone selling into that compliance market a twenty-year horizon to underwrite against. No federal climate program offers that today.

Connecticut is the counterexample. Its green bank has mobilized $3.11 billion of clean energy investment since 2011, drawing roughly $2.65 billion of private capital in behind $463 million of public funds. However, in 2017 the legislature still swept roughly $175 million out of the funds it runs on. The bank’s authority sits in statute. Its money sits in ratepayer charges that run through the state budget every year. Check the altitude of the cash, not the institution.

Fewer parties doesn’t mean less risk.

What to Price

Start with the instruments. Pull every line of revenue and capital you’re counting on and name what each one is: an executed contract, a conditional commitment, a grant agreement, a credit whose definition lives in guidance. Then count the parties on each, and check where the money sits rather than where the program sits. The lines with high counts and no damages are the ones your investors will find in diligence, and it’s better if you find them first.

Investors have the harder problem. Climate diligence still treats policy as a binary input, where the credit is either in the model or it isn’t. That’s a 2019 habit running in a 2026 risk environment.

Infrastructure finance already prices uncertainty when it wants to. Merchant exposure carries a premium everyone applies without argument. There’s no equivalent for reversal risk, no accepted haircut for revenue that depends on a definition an agency can rewrite by memo, and I don’t have one to hand you. So it gets priced at zero, right until it gets priced at a hundred.

Six consecutive elections have flipped control of the House, the Senate or the White House, a streak Bruce Mehlman puts at a modern record. Nothing in that pattern is about to break, so durability has to come from your side of the table.

The companies that stay financeable through the next reversal will be the ones that can hand a lender a single page showing which revenue lines somebody can take away with a memo, and what that would cost. Most of your competitors can’t produce that page.

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Last week I handed you the diligence checklist and showed you how to answer it before your raise. The checklist works. That is the problem.

Read what those 18 questions ask for: justified baselines, offtake, feedstock, documented counterfactuals. That is project finance discipline. Allocators are importing it into the diligence they run on climate fund managers, and those managers turn around and run it on you.

Project finance discipline underwrites assets whose risk is already gone. Venture equity funds the years when nothing is proven. An Allocator Guide to Climate Solutions Investing, published by Tideline and Prime Coalition, puts both inside the same asset class and does not blink.

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Venture returns come from the power law. One company returns the fund. That math was built on software, where the winner scales into a market with almost no marginal cost and exits into public markets at a size that covers every loss in the portfolio. Climate hardware does not do that. Exits come earlier and smaller, mostly through M&A, usually before full commercialization.

I wrote the long version of this argument in Climate Venture Capital Is Quietly Becoming Project Finance. That piece showed climate VCs running infrastructure diligence on Seed and Series A rounds. This one names where the questions come from. They start a level up, in the room where allocators decide which fund managers get funded at all. The short version of the venture math: a fund that stops taking venture risk has no clean path to venture returns.

Project Finance, Filed Under Impact Investing

The report calls climate solutions and transition investing a smaller, opportunistic slice of allocator portfolios, strategies that are considered thematic or impact investing. Then it raises the diligence bar on that slice to a height project finance would recognize.

The report asks managers to underwrite avoided emissions as net unit impact times deployment volume, and warns that avoided emissions calculations are highly sensitive to baseline assumptions. It expects documented methodologies, justified counterfactuals, and credible data sources. It leans on a four-part diligence framework covering strategy, governance, management, and reporting, synthesized from BlueMark, the GIIN, ILPA, Project Frame, and OPIM.

CalSTRS makes the point sharper. Its transition portfolio uses a framework built by Rhodium that runs thousands of Monte Carlo simulations across GDP, demographics, fuel prices, and cost curves to score a technology’s capital efficiency against a deep-decarbonization scenario. The framework states plainly that the incremental impact of climate capital on mature technologies is lower, because the baseline already captures much of the deployment that was going to happen anyway. That is an allocator underwriting the marginal value of a dollar by where it lands on the maturity curve. The logic has a sharp edge. A dollar does the most work on the least proven technologies, the ones the baseline does not yet assume will deploy. Those are the companies with no realized data to show for it. The framework values them most and can measure them least. It is rigorous. It is exactly how an infrastructure investor thinks.

Hold a GP to that standard and you have asked for project finance diligence on a venture-priced asset.

Judged on Potential, Graded on Proof

The report’s own measurement stack names three methods. Realized impact, measured backward from real data. Planned impact, the expected outcome from a business plan likely to deliver inside five years. Potential impact, forward-looking, assuming the solution captures its full obtainable market. The report is direct that potential impact is the only method available for early-stage solutions with long development timelines.

So the guide admits early companies can only be judged on potential. The diligence culture it builds rewards realized proof. That gap is the mispricing, and it does not stay at the fund level.

A fund graded on realized climate outcomes cannot write checks the way a seed fund is supposed to. It has to underwrite, monitor, and report on outcomes, and it pushes that weight down onto companies years away from producing a realized anything. You get asked for offtake before you have a product to sell. You get measured like an asset while you are still a science project. The capital is priced as equity. The expectations are priced as infrastructure. You cover the spread in dilution, and in milestones that arrive on someone else’s clock.

Where the Rigor is Right

There is a real argument on the other side. Climate spent a decade funded on story. Money went into companies with no counterfactual, no baseline discipline, and no way to tell a real ton of avoided emissions from a modeled one. The rigor in this report is the correction. Allocators who can underwrite outcomes will commit larger pools of patient capital, and that is the capital climate needs to scale. QIC’s A$400 million climate mandate, sitting inside private equity and scoring every deal on intentionality, integration, measurement, and governance, is what serious institutional money looks like when it finally shows up. Rigor is what makes climate investable at scale.

The rigor is not the error. The pricing is. Underwrite a company to infrastructure standards, then pay for it with venture equity, and you have built a mismatch neither side can close. The allocator wants proof the asset class cannot yet produce. The founder wants risk capital and gets an infrastructure interrogation. Rigor priced as venture equity is the mistake.

Buy Your Way from Potential to Proof

You cannot change how allocators underwrite. You can change what you have proven before you ask them to.

The gap that prices you wrong sits between potential and realized. The diligence rewards proof you cannot produce at the stage you are raising. Non-dilutive capital was built to close that exact gap. Grants, catalytic capital, and development debt fund the counterfactual, the baseline, the pilot data, and the first offtake. That is the work that moves a potential-impact story toward something a rigor-driven allocator can underwrite. The full sequencing playbook is in the earlier piece.

Each milestone you clear on non-dilutive capital is proof in hand before the diligence asks for it, and you gave up no equity to get there. Clear enough of them and the diligence changes shape. The investor who came to demand proof has to compete for a company that already has it.

The report says early-stage can only be judged on potential. Nothing stops you from showing up with more than that.

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Tideline and Prime Coalition just published a guide teaching pension funds, endowments, and foundations how to vet climate solutions managers. It includes an 18-question due diligence checklist.

That checklist was not written for you. Which is exactly why you should read it.

The questions a fund’s investors train it to answer are the questions that eventually land on the company. When an LP asks a GP to prove it can measure climate outcomes, that GP turns around and asks its portfolio companies the same thing. You are the last stop. So the smart move is to get the checklist before it gets you.

Here is what it asks, and what to have ready.

Diligence Framework Convergence

The guide did not invent its diligence framework. It synthesized four that allocators already use: BlueMark’s Fund ID, the GIIN’s Climate Solutions Investing Framework, ILPA’s ESG assessment tool, and Project Frame’s pre-investment guidance. That matters because it tells you this is not one advisor’s opinion. It is where the market is converging.

BlueMark alone has run its Fund ID assessment on more than 50 fund managers, scoring each across four pillars. The GIIN launched its framework at London Climate Action Week in June 2025 and now runs a working group to standardize it. The direction of travel is clear: climate diligence is professionalizing, and it is getting more structured every quarter.

For a founder, that means the days of a warm intro and a good story are ending. The funds you want are being graded, and they will grade you the same way.

Get a Head Start

The checklist breaks into four buckets. Each one maps to a question you should be able to answer cold.

Strategy. Do you have a written climate thesis, and does your business actually match it? The guide calls this a “theory of change,” which is jargon for a simple chain: this is the problem, this is what we do, this is the measurable climate result. Investors also look for eligibility thresholds, meaning a clear line for what counts as a climate solution and what does not. If your deck says climate but your revenue comes from something adjacent, this is where it shows.

Governance. For a startup, this is simpler than it looks. Investors want to know climate outcomes are somebody's job, and at an early company that somebody is usually you. The fund-level version of this question, tying compensation to climate milestones, is an advanced practice the report doesn't expect from early companies, so don't manufacture it. What you do need: a clear answer on who is accountable, and honesty that at your stage, accountability sits with the founder.

Management. Do you have a repeatable process for measuring outcomes, or do you improvise a number for each pitch? This is the one founders underestimate. Investors can tell the difference between a company that tracks emissions avoided the same way every quarter and one that reverse-engineers a figure the night before a meeting.

Reporting. Can you show results, including the misses? The guide rewards managers who disclose when they fall short of projections. Counterintuitive, but it tracks. A founder who reports a missed milestone honestly reads as more credible than one whose numbers are always perfect.

Where the Bar Actually Sits

The most useful thing in the framework is a distinction it makes inside each bucket. Every practice is sorted into foundational or advanced.

Foundational practices are table stakes. A documented thesis. A named owner for climate outcomes. A consistent measurement method. These are the things a fund expects every serious company to have.

Advanced practices are the extras that separate the top managers: compensation tied to climate KPIs, third-party verification of results, tracking long-term system change beyond your own metrics.

You do not need the advanced list to raise. You need the foundational list documented before diligence starts.

What to do This Week

You can build most of this into a data room right now, before you need it.

Write the one-paragraph version of your climate thesis: the problem, what you do, the measurable result. Pick the two or three metrics you will report every quarter, and write down how you calculate them, including the counterfactual, meaning what would have happened without you. Then draft the honest version of your last progress update, misses included.

The funds writing climate checks are being held to a higher standard than they were two years ago, and they are passing it straight through to the companies they back. You can treat that as a hurdle that ambushes you mid-raise. Or you can treat it as homework, do it early, and walk into the room already sounding like the fund you want on your cap table.

Next week: why this same rigor, the discipline that makes climate finally investable, is also the thing quietly breaking venture math for hardware.

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For years the standard read was that climatetech needed more capital. But the capital was already here, it just had nowhere to go. $90B in dry powder sits uninvested alongside a $150 billion scale-up gap.

BCG and HSBC’s whitepaper calls out this architecture problem. FOAK projects are too capital-intensive for venture equity and too novel for infrastructure capital. They fall into a gap no single check writer is built to cross.

The fix proposed is a dedicated FOAK Finance Facility. One privately managed vehicle, capitalized by catalytic investors, banks, infrastructure funds, sovereign wealth funds, and development finance institutions, that sequences capital from first project through early replication until the risk is low enough for infrastructure money to take over.

The strongest idea in it is buried on the capital provider side: A bank will not eat the diligence cost and novel-technology risk of one transaction that goes nowhere. The incentive is the pipeline. Underwrite the first plant and you buy visibility into the second, third, and nth, where risk is lower and checks are bigger. That reframes FOAK financing from charity into positioning. It is the reason the facility could work.

Over a 5-10-year horizon, this is probably the right destination. My quarrel is with when it gets there, and what happens to the businesses crossing the gap right now.

A Bridge That Opens in 2030

Standing up a $5B blended-finance vehicle takes years. But founders raise in a matter of months, against a runway already shorter than they would like.

While the facility gets built, the private FOAK layer that exists today is thinning. Breakthrough Energy Catalyst, the Gates-backed fund that was the marquee private financier of FOAK climate projects, halted new investments in early 2026. The Department of Energy canceled billions in loans and grants. The capital actually crossing companies through the FOAK stage is drying up while the vehicle meant to replace it is still a slide in a deck. A company stuck at its first commercial plant does not get to pause and wait. None of this kills the facility as an idea. It just makes it a 2030 answer to a 2026 emergency.

The Problem Upstream of FOAK

Even fully built, the facility leaves a deeper problem standing. It sits downstream of FOAK. It coordinates the capital that shows up once a company is ready to build its first plant. It does nothing about the capital that feeds these companies on the way there. And venture capital is still pricing hardware on math the hardware cannot deliver. Venture returns run on the power law, where a few outlier bets carry the fund, and you do not get outliers from companies that already locked their offtake and unit economics. In climate the exits are mostly acquisitions, not the fund-returning IPOs that math depends on.

Europe shows the architecture problem in its purest form. European funds raised more than half of all new climate capital in the world last year. In the same year, investment into European climate startups fell thirteen percent to its lowest level since 2020, and Series C deal counts hit an all-time low. The money was raised, but did not reach companies. The deployment machinery is the bottleneck: the EU’s flagship Innovation Fund holds a €40B budget and had disbursed under 1% of it by mid-2025. This is the same architecture failure the paper describes, sitting one stage upstream of anything a FOAK facility would touch.

The Capital Is Already Here

The capital to scale a climate company exists right now. It is not sitting where most pitch decks point.

Stop building the stack out of one instrument. Venture equity is the most expensive money you can use to clear a milestone, and the milestones VCs now demand are the exact ones non-dilutive capital was built to fund. Match each use of proceeds to the capital priced for it. Grants and catalytic capital for the early de-risking. A development loan to finance the work that produces a signed offtake. Equipment financing against hardware that holds resale value. Each one clears a milestone without selling a piece of the company at a hardware discount. Now, the investor who wanted to see traction has to compete for a company that no longer needs them as badly.

The single biggest unlock in that sequence is an offtake. A blue-chip commercial contract, increasingly a hyperscaler power deal, pulls everything else behind it. Project debt follows contracted revenue. Infrastructure equity follows project debt. Your first plant does not open the public markets. Contracted demand does. Sign a creditworthy buyer before you break ground and you have done more for your bankability than any round will.

The institutions will build their facility, and founders should want it to exist. But no one crossing the gap this year can wait for a bridge that opens in 2030. The money is already here. Go find the part of it built for you.

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Sit in enough climate diligence calls and you hear the same questions: What are your unit economics at scale? Have you secured feedstock? Where is the offtake agreement? Who is your EPC partner?

These are good questions. They are also the wrong questions to ask a company raising a Seed or Series A.

Those questions come from project finance. They are what an infrastructure investor asks before writing a check against a physical asset with predictable cashflows. The point of that diligence is to confirm the risk is already gone, when binary risk is off the table.

Venture capital exists to do the opposite. It funds the part of a company’s life when nothing is proven and most of it might not work. The returns were always meant to come from taking that risk.

Something changed. Climate investors started importing the infrastructure checklist into the earliest rounds. They want to see unit economics and commercial traction. They are asking founders to look de-risked at the exact moment risk is the whole point.

Where the Capital Went

The numbers show it. US climate tech VC reached about $29 billion in 2025, the third-highest year on record, but ten late-stage deals captured 28% of all investment. Underneath that headline, deal count fell to 1,545, down 18% and the lowest since 2020, with Seed down 19% and Series A down 22% as investors backed away from new entrants. At the same time, Series C hit an all-time low while Series D and later rose 41%.

The money did not shrink. It walked up the stage ladder to where the risk was already gone. The industry called this a flight to quality. It looks more like a flight from the job.

Venture Capital Was Built on the Power Law

Venture returns follow a power law. A tiny number of investments carry the entire fund. Horsley Bridge found that 6% of US venture deals between 1985 and 2014 generated 60% of the asset class’s returns. You do not get those outcomes from companies that already locked their offtake and their unit economics. You get them from the bets that looked too early to make.

So if you wait for the de-risking, the math stops working. You pay a near growth-equity entry price for a venture-stage company, you inherit a ten-year lockup, and you give up the one thing that justified the illiquidity to your LPs: the shot at an outlier. A fund full of safe entries is just a worse-priced infrastructure fund. It cannot return the multiple it promised.

Which leaves every climate GP with one question. If you are no longer taking venture risk, how do you plan to deliver venture returns?

The Noise is Real

There is a defense, and half of it is true. The market got loud. It is easier to start a company than it has ever been. AI collapsed the cost of building, with developers moving 55% faster on work they used to do by hand. National labs will license IP and partner with startups that could never have funded the research themselves. And talent is everywhere.

When everything looks like a company, investors reach for the cleanest filter they can find, as milestones cut through the noise. A signed offtake is easy to see. Proven unit economics are easy to verify.

But milestones are the laziest filter on the table. Everyone can see the same signed contract. There is no edge in spotting a company that already de-risked itself, and no premium left to capture by the time it has. The real edge in a crowded market is the oldest one in venture: knowing the people. Conviction built before the proof exists, from time spent with founders, is the only thing that never shows up on someone else’s term sheet.

What Founders Should Do About It

If investors are going to underwrite like bankers, founders should stop performing for them.

The milestones VCs now demand are the exact milestones non-dilutive capital was built to fund. Grants, catalytic capital, and project debt all exist to pay for the de-risking that equity should never have funded. A development loan can finance the work that produces a signed offtake. That offtake is the same one the VC wanted to see. The difference is you got there without selling a third of your company.

Flip the order. Use the cheapest capital to clear the milestones, then walk into the equity conversation already de-risked, holding the stronger hand instead of asking for one. The investor who wanted proof now has to compete for a company that no longer needs them as badly.

If the business can reach cashflow, the exit problem that haunts climate venture stops being your problem. You do not need a fund-returning IPO to justify your existence. You need customers. A company that pays for itself owes its future to no one’s ten-year clock.

That is the part worth holding onto. The investors who win the next decade will be the ones willing to look stupid early, to back a founder before the contracts exist, because that was always the assignment. The founders who win will be the ones who stopped waiting to be picked.

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In 2026, the federal government halted Revolution Wind when it was 69% complete. That kind of direct executive action grabs headlines and impairs balance sheets. But it isn’t the risk most climate founders should be planning for.

The bigger risk is quieter. It looks like a FERC interconnection ruling that didn’t go your way because you didn’t file comments, or a permit that sits at an agency for eighteen months because no one in the building knows who you are. Each one is a slow erosion of your business that no headline will capture.

These outcomes are the product of a regulatory process that rewards companies that show up and punishes companies that don’t.

The companies that will survive the next four years are the ones whose founders treat regulation the way they treat financial reporting: with the same rigor, the same documentation, and the same understanding that it is governance.

Where Leverage Exists

The default founder pattern is reactive. Engage regulators when a permit gets delayed. When an investor flags risk in diligence. When something has already gone wrong.

By then, options are gone. The administrative record has already been written by other people.

Founders fixate on legislation because it generates headlines. But by the time a statute passes, the range of outcomes is already constrained. The real business impact happens during regulatory implementation, when agencies translate legislation into rules, guidance, and enforcement priorities. That is where leverage exists.

A grid-connected battery startup that waits until interconnection standards are finalized has almost no leverage. A similar company that participates earlier can influence assumptions about safety margins, operating profiles, or testing requirements that become industry standards.

Regulatory Engagement is a Governance Practice

The reframe that matters: regulatory engagement is governance.

By governance, I mean two things done together: 1) Show up to engage with regulators while rules are still being shaped, and 2) Document that engagement in a form that becomes part of the official administrative record (e.g., comment letters, technical submissions). Engagement without documentation is just a meeting. Documentation without engagement is a paper trail with no substance. The pair is what creates the asset.

Courts do not evaluate whether regulations are good or bad. They evaluate whether agencies stayed within statutory authority, followed proper process, and grounded their decisions in evidence. The administrative record is what regulators must defend and courts later review.

If your perspective is not in the record, it does not exist. Companies that ignore rulemakings often lack standing or evidentiary footing when outcomes go against them. Litigation becomes the only option left. It is expensive, slow, and unpredictable.

A thoughtful record is the opposite: strategic insurance, leverage in disputes, credibility with investors. Incumbents have spent decades building this.

What This Looks Like Operationally

The companies doing this well share a few habits:

• Map every federal agency that will touch your business at scale. Distinguish independent agencies (FERC, FTC) from political ones (DOE, EPA, DOT). They respond to different inputs.

• Engage in rulemakings early. The administrative record you build now protects you in disputes, litigation, and investor diligence later.

• Bring data, not narratives. Agencies remember who helped them think clearly.

• Build relationships with career staff. They outlast administrations.

• Treat regulation as governance. You’re building a balance sheet asset your competitors won’t have.

Investors used to ask what regulations apply. Now they're asking whether you've engaged with them and documented your position. A thin administrative record signals unmanaged risk. A thoughtful one signals foresight.

GE built a business on this principle. When new emissions standards for power generation equipment were being developed, GE engaged early, provided technical input, and aligned product development with policy direction. When the rules took effect, GE’s turbine was the only one on the market that fully complied. Competitors were shut out by standards GE had helped shape. That is what regulation looks like when companies treat it as a competitive variable.

Standards are market structure. The companies that show up early help define it. Everyone else inherits it.

The Capital Implication

The next round of climate diligence is going to look very different from the last one.

Sophisticated investors are already starting to ask what the administrative record looks like on the rulemakings that affect your business, who has standing in pending proceedings, and if your government affairs capacity matches the scale of your regulatory exposure. Most founders are not prepared to answer. Those who are will fundraise better. Those who are not will look like they are carrying unpriced risk, because they are.

The cost of starting is always lower than the cost of waiting.

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It’s that time of year again where I’m traveling and organizing events.

• 5/20 in SF: https://luma.com/8jh1m6il

• 6/3 in LA: https://luma.com/98ncofx9

And then you can also catch me at the Luminate Investor Summit 2026 on 6/12 in NY, learning about 10 breakthrough companies advancing optics, photonics, and imaging across AgTech, Energy, Materials, Transportation, Quantum, and more. RSVP Here.

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In the last piece, I argued that climate deeptech exits are systematically underpriced. The models we use to value these companies ignore the part of the outcome that markets can’t capture: the societal return, the avoided harm, the futures that look materially different if the technology works. The exit multiple gets set by comparable transactions. The comparable transactions have no existential upside baked in. So the multiple is wrong, and it’s wrong by design. The same logic surfaces further down the capital stack. This time, the asset is nature itself.

The Number Nobody Questions

There is a number embedded in almost every financial model for a nature-based project. It determines whether restoring a mangrove forest or protecting a fish stock looks like a viable investment or a charitable endeavor.

That number is the discount rate.

Dr. Roger Iles, who advises on nature-centric economy risks and opportunities, wrote that the discount rate is not a technical detail. It is a value judgment about how much the future matters and whose future counts.

Standard corporate discount rates encode a prediction: benefits arriving in 30 or 40 years are worth very little today. For depreciating assets competing in eroding markets, that logic holds. But mangrove forests, fish stocks, and restored wetlands are living systems whose value rises as climate risk increases and ecosystem services become harder to replace. Applying a depreciation framework to appreciating assets changes the outcome before the analysis has begun.

The consequences are concrete. Fish stock recovery barely registers in a standard financial model until it is too late. The 80-year coastal protection value of a restored estuary approaches zero in a discounted cash flow.

Blended Finance as Symptom

The investment world found a workaround: blended finance.

Public institutions absorb the first loss. Philanthropy accepts below-market returns and governments provide guarantees, so that private investors can meet hurdle rates designed for a different kind of asset. As a short-term mechanism, it works.

The deeper problem is that the ecological foundation underpinning these projects rarely appears in the model at all. The reef, the fishery, the forest is assumed to be constant, stable, and available in perpetuity. What looks like a viable revenue stream may be, a drawdown of natural capital stock dressed up as income. Blended finance is a patch on a valuation error, not a fix.

When a model consistently requires this much public subsidy to function, the model is telling you something. If natural capital and emerging market renewables consistently need public first-loss positions and concessional tranches just to produce acceptable private returns, there is no business model that works on its own terms yet. The economist, Mariana Mazzucato, has argued that blended finance should be used to change market structure, not to permanently prop up returns for investors who have not updated their frameworks. Right now, it is doing the second thing.

Following the Value

Governments are the primary beneficiaries of nature-based projects. The return is diffuse and long-dated: GDP, reduced disaster costs, sustained tax base, long-run productivity. It lands on the public balance sheet, not a private one.

Now look at the capital structure. Government takes first-loss position, provides concessional capital, and backstops the risk private capital will not accept. If government captures the largest return, it is not just a subsidizer. It is the anchor investor. The misalignment is not that government bears the risk. It is that the instruments treat that position as charity rather than as capital with a measurable return.

This is most visible in emerging market renewables, where blended finance is most active. Development finance institutions stack concessional tranches beneath private debt to manufacture a return profile institutional investors will accept. The local government gets the energy transition and the long-term GDP contribution. The private investor gets a clean IRR and exits. Pointed at the wrong beneficiary.

What the Right Business Model Looks Like

Blended finance is a transitional tool. Transitional tools become permanent when nobody builds the alternative.

If the government is the residual beneficiary, the capital structure should be designed around that. Some early instruments point in the right direction: debt-for-nature swaps that quantify sovereign savings and redirect debt service toward conservation, green bonds tied to measurable ecosystem outputs, outcome-linked sovereign structures that let governments monetize future returns today. The logic is correct. The execution is early and the scale is insufficient.

Correctly priced nature does not need charity. The value preserved through intervention is the return on the conservation investment. It is quantifiable and financeable. The asset just needs to be treated as one.

The discount rate problem sits underneath all of it. The UK launched a formal review of its Green Book discount rate in 2026, partly because the current rate systematically penalizes long-horizon investments in climate and nature. Most markets are not moving at all.

The Question the Capital Stack Has Not Answered

We have been trying to make natural capital legible to private equity on private equity’s terms. Blended finance makes that translation possible. The long-dated public return, the appreciated ecosystem value, the sovereign savings that never make it onto a term sheet: private capital gets a clean instrument and the public absorbs the remainder.

The capital stack needs to be rebuilt around the government. The business model should start there.

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A conversation with an investor changed that. He evaluates every deal through a single lens: quality-adjusted life years. A framework from healthcare economics, applied to climate finance. The moment he described it, the pieces connected.

If climate deeptech functionally alters an existential outcome, the models we use to value it aren’t just imprecise. They’re missing the point entirely.

That’s what this piece is about. I wrote it with Darren Clifford, the Founder and Managing Director of Adapt [us] Capital., whose framework is the intellectual core of the argument.

Deeptech startups need roughly twice the capital of software companies to get to the same stage. The exits, when they come, tend to arrive early, with acquisitions at Series B or C rather than IPOs, and at multiples that make the return math barely work for traditional VC. We’re applying a valuation methodology built for software to companies that do something software never could: alter existential outcomes.

I had a conversation recently with an investor who evaluates deals through a different lens: quality-adjusted life years (QALYs). It’s a framework borrowed from healthcare economics. A QALY assigns a value to a year of human life lived in full health. It’s used to assess whether a medical intervention is worth the cost.

The logic is uncomfortable in a finance context, because it puts a number on something markets haven’t priced.

If a drug extends life by two quality-adjusted years across a million patients, that has a quantifiable value. Healthcare systems use this to decide what to fund. Investors in certain biotech funds use it to assess impact.

Climate deeptech is doing something structurally similar. The interventions aren’t pharmaceutical, but the mechanism is the same: a company succeeds, and the future is materially different for a large number of people, whether it’s carbon emissions, air quality, flood events, heat mortality, or agricultural disruption at scale.

The QALY framework is one attempt to make that visible. It doesn’t translate directly to a DCF model, but it surfaces a question worth asking: if the product actually works, how much human welfare is preserved or created? And if that number is real, why isn’t it showing up anywhere in the valuation?

The standard answer is that markets price what they can capture.

A climate company can charge for improved QALYs to an individual: that’s embedded in the value proposition customers pay for. What it can’t capture is the societal QALY: the avoided flood death, the improved health outcome for someone its product never directly reaches. The market prices the first. It ignores the second entirely.

So investors use the proxies available: revenue, EBITDA, comparable exits, IRR targets set by LP mandates that have nothing to do with climate at all. Those comparable exits are anchored to hardware comps that have no existential upside baked in. The multiple gets set by what similar-looking businesses have sold for, not by what a successful outcome actually does to the world.

“We use eQALY because impact measurement without a common unit is just storytelling. We need to be able to compare a cooling company in India to a soil sensor company in Canada on the same basis,” says Darren Clifford, Managing Partner at Adapt [us]. “QALYs are that basis: they translate very different types of harm avoided into a number we can hold ourselves accountable to.”

“The societal side of that equation isn’t something companies can price into their products,” adds Darren. “That’s a policy problem. Subsidies, penalties, procurement standards: those are the tools that exist to internalize what individuals won’t pay for on their own.”

Climate deeptech gets priced like a hardware business with uncertain exits. If the models systematically exclude the outcome from the valuation, the resulting exit multiples aren’t wrong by accident. They’re incomplete by design. Investors working from incomplete models will keep leaving returns on the table. That propagates backward through the whole capital structure.

The QALY lens, or something like it, offers a different starting point: what would the valuation look like if we priced the outcome, not just the revenue model?

Some capital is already moving this way: impact-linked instruments, outcome-based finance structures, grant capital stacked against commercial tranches. They’re imperfect workarounds for a problem that lives upstream, at the valuation level.

If a company functionally alters an existential outcome, the multiple attached to that exit is not just a financial calculation. It’s a statement about how much we think that outcome is worth.

The market hasn’t answered that question yet. But some investors are starting to ask it.

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This piece today was authored by Sterling Root, who is the founder of Cairn Climate Partners and a venture scout focused on early-stage climate and energy companies. Previously, he spent nearly nine years at EDF Renewables, where he originated 261 MW of solar and 565 MWh of battery storage across 19 sites. He holds an MBA from UC Berkeley Haas.

Why Project Development Timelines Break Venture Returns

Guest post by Sterling Root

There are two clocks running inside every infrastructure-focused climate tech startup. One is the venture clock: raise, build, prove, mark up, exit. The other is the infrastructure clock: permit, interconnect, contract, finance, construct, commission. The venture clock is set by fund structure and LP expectations. The infrastructure clock is set by regulators, grid operators, and utilities. They do not synchronize. And when they collide, returns break.

The problem is structural: in climate ventures focused on building, permitting, and financing physical infrastructure, enterprise value is created at bankability, not at product-market fit. Bankability requires contracted revenue, grid access, and permitted sites that take 5 to 7 years to assemble. In practice, companies spend 5 years proving the technology, then another 5 to 7 years in development before an asset is bankable. The venture fund that wrote the first check is now a decade in. A 3x return over ten years is a 12% IRR. That’s an outcome and timeline no venture fund was built to survive. This is a capital formation design problem, and it has consequences for everyone on both sides of the table.

I spent nearly nine years at EDF Renewables originating utility-scale solar and storage, screening over 3,000 projects and assessing 20 GW of interconnection across hundreds of development cycles. The examples here are drawn from the power sector because that’s where the data is richest, but the dynamics apply wherever climate companies must build, permit, and finance physical assets. Now on the investor side, I see the same pattern in every fundraising conversation across climate infrastructure.

Math Behind the Collision

Success for a venture fund is simple. Venture funds assume most companies will die, so they need their successes to be massive, Barry Bonds on steroids-style home runs that pay for the losers. Two metrics demonstrate this: multiple on invested capital (MOIC), how many dollars come back for each dollar invested, and internal rate of return (IRR), how quickly those dollars come back.

A 3x MOIC is a strong outcome. A 10x MOIC raises your next two funds. A 30x+ MOIC will put you in the hall of fame.

But multiples only tell half the story. MOIC and IRR are connected by a third variable: time. A 3x in five years (25% IRR) and a 3x in ten years (12% IRR) are fundamentally different results. One has you buying a mansion in Hawaii, while the other has you praying you raise your next fund. The relationship between time and return is exponential, not linear. Every year counts.

LPs expect top-performing early-stage funds to deliver 25%+ net IRR. Drop below 10% and your LPs have a problem. They didn’t lock up capital for a decade and accept a 60%+ loss rate to earn returns they could have gotten by buying the S&P 500 and going to the beach. Your individual winners need to clear 25% by a wide margin, because the assumption is the rest of the portfolio returned nothing.

These numbers get worse when you add a deadline. Venture funds are structured as 10-year partnerships. Deploy capital in years 1 through 5. Harvest in years 6 through 10. Return cash to LPs and raise the next fund. But even in software, fund lengths are slipping. Only 7% of funds actually liquidate within their stated 10-year term (Diane Mulcahy, Kauffman Foundation), and the Kauffman Foundation found the real median is 14 years. Hamilton Lane’s 2025 outlook said it directly: “This trend of longer holding periods will result in lower IRRs” (Hamilton Lane). If the model is already straining with software-speed exits, imagine what happens when the underlying asset needs a decade to reach bankability.

The median hold for exits above $500M has stretched from 6.5 years in 2010 to nearly 9 years by 2024 (Plante Moran, citing PitchBook Analyst). But the cause matters. In software, long holds happen because exit markets are slow. The company is valuable, it just can’t find liquidity. In climate infrastructure, the hold is long because the asset hasn’t reached its value inflection point. The project isn’t bankable. The fund didn’t pick a slow exit. It picked an asset class where value creation is gated by processes nobody in the cap table controls.

The Infrastructure Clock, Explained

The classic venture model assumes that a well-funded team can move faster than an underfunded one. In climate infrastructure, that assumption breaks. You can hire faster. You can build prototypes faster. You can close financing faster. But you cannot make FERC process an interconnection study faster. If the math is the problem, the timeline is the cause.

Many people new to infrastructure assume that design and construction cause the delays. They don’t. The phases that truly determine total project duration sit entirely outside the founder’s control: interconnection, permitting, and procurement.

Interconnection, the process by which a project applies to connect to the grid and undergoes sequential system impact studies, is the single longest constraint. According to LBNL’s Queued Up report, the median time from interconnection request to commercial operation has doubled from under 2 years (2000-2007) to over 4 years for projects built between 2018 and 2024. In California, the average stretches to 9.2 years. Roughly 2,300 GW of generation and storage capacity sits in queues across the country, more than the entire installed U.S. generating fleet. Only 13% of queued capacity from 2000 to 2019 ever reached commercial operation. 77% was withdrawn entirely.

Permitting is the second biggest bottleneck. Federal environmental review under NEPA takes a median of roughly 2.5 years for a full Environmental Impact Statement, with enormous variability at the state and local level.

Procurement, the process by which utilities solicit and select projects to supply energy, typically opens every 12 to 24 months. Miss the window and you wait for the next cycle.

Together, these form the infrastructure clock. It runs on regulatory and institutional time. It does not accelerate when you raise more capital. “Move fast and break things” is not a strategy that works on a federal regulator. And it is the reason a 3x becomes a 12% IRR.

Bankability Is the Value Inflection Point

The timeline problem would be manageable if value were created early but liquidity came later. But in climate infrastructure, value creation itself is delayed. In software, enterprise value is created at product-market fit. In climate infrastructure, enterprise value is created at bankability, and bankability only arrives once development is complete.

Bankability is the moment a project’s risk profile shifts from venture-grade to infrastructure-grade. The project can now attract debt financing at 5 to 8% cost of capital, instead of equity priced at 25 to 30%. That repricing is the single largest value creation event in a climate infrastructure company’s life. It requires four things: contracted revenue with a creditworthy counterparty, an executed interconnection agreement, permitted sites, and operating data that satisfies an independent engineer.

While venture investors are tracking product iteration, revenue traction, and Series B markups, infrastructure investors are waiting for bankability. Both groups are looking at the same company, but measuring completely different things. The venture scoreboard says you’re winning. The infrastructure scoreboard says you haven’t started.

Every serious climate investor is watching Fervo Energy. Not just because the technology works, but because Fervo is the test case for whether venture capital can survive the infrastructure clock and still produce returns. Founded in 2017, Fervo assembled at least six distinct types of capital over nine years to reach bankability: venture equity across multiple rounds, strategic corporate investment from Devon Energy and Google, project-level preferred equity, bridge debt, term loan facilities, and a $421 million non-recourse project finance package from a consortium led by RBC, Barclays, BBVA, HSBC, MUFG, and Société Générale. Non-recourse project finance means the lenders are betting on the project’s cash flows, not the company’s balance sheet. It is the clearest signal that an asset has crossed the bankability threshold. Fervo’s CFO David Ulrey acknowledged the significance: “Non-recourse financing has historically been considered out of reach for first-of-a-kind projects. Cape Station disrupts that narrative.”

Six types of capital. Nine years. Over $1.5 billion raised. That is what it took to get one of the most successful climate infrastructure companies from founding to bankability. The early venture investors bought the most expensive seat at the table and held it through the longest phase of the journey. Fervo may reward their patience. Most climate infrastructure companies won’t. Fervo is not interesting because it is unique. It is interesting because it is representative.

What This Means for Founders and Investors

If you’re a founder building climate infrastructure, the first question is whether your business model requires you to bear project development risk at all. If you can sell technology to entities that develop projects, you avoid the infrastructure clock entirely. If you can’t, protect your equity aggressively by exhausting non-dilutive sources (grants, SBIR, ARPA-E, DOE programs) before raising priced rounds. On a timeline this long, every dilutive dollar compounds against you. Pick investors who bring more than capital: offtake relationships, development expertise, or access to multiple types of capital across the risk spectrum. And build your fundraising cadence around structurally fixed timelines, not 18-month software cycles. If interconnection takes four years, your capital plan needs to survive five. These timelines slip. They never accelerate. And start talking to project finance lenders early. What they require for bankability should shape how you build from day one.

If you’re an investor, the single most important diligence question in climate infrastructure is whether the company must develop, permit, and finance its own projects, or whether it sells to entities that do. That answer determines the return profile. The markup events that matter are infrastructure milestones: offtake signed, interconnection secured, and permits in hand. If your fund requires liquidity within 5 to 7 years of deployment, you are structurally positioned to exit before value is created. That is a mandate mismatch, and no amount of better sourcing or portfolio construction solves it. Milestone-based tranches, extended fund terms, and project-level co-investment vehicles are emerging tools for this asset class. If your LPA doesn’t contemplate them, you’re bringing a software fund structure to an infrastructure problem.

A Design Problem

The venture clock and the infrastructure clock will never synchronize. The companies that survive do so by assembling capital stacks of extraordinary complexity. The companies that fail often have technology that works, but lack sufficient financial architecture to survive. The question that matters now is who funds the years before bankability, and on what terms?

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Founders were raising equity to buy equipment. Not because equity was the right tool. Because they didn’t know debt was an option.

The information existed. It was just scattered across investor intros, warm referrals, and the occasional conference conversation. If you didn’t already have the right relationships, you were stuck.

That bothered me.

So I started building a database of lenders, organized by instrument type, that any founder could actually use: equipment leasing, asset backed lending, project finance, and more.

Turns out, I wasn’t the only one building it.

Third Sphere and Planet A Ventures were doing the same thing, separately, in parallel, for the same reasons. Three organizations, three half-finished spreadsheets, all trying to solve the same gap. I brought everyone to the table. We combined the work, filled each other’s gaps, and brought in a few additional contributors to get the coverage right.

The result is the Climate Credit Database.

The static version lives on the Climate Capital Stack site: 300+ lenders and non-dilutive capital providers, filterable by instrument type. You can browse it, reference it, and contribute to it if you know lenders we’re missing.

The AI version lives at creditdb.ai. You can describe your company and what you’re looking for, and the chatbot will surface relevant providers. It’s a work in progress, but it’s live and usable today.

Both tools are free.

Here’s what I’d ask of you: use it, and share it with a founder who needs it. The database gets better as more people contribute. If you know a lender that isn't listed, add them. Or send it to them directly and let them fill it out. That’s how this compounds.

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We’ve traced how solar and wind went from curiosity to core infrastructure. Public money absorbed the first risks. VC proved the technology. Project finance brought in lenders. Tax equity made the economics work. Secondary markets gave investors a way out. And finally, pension funds and insurers showed up to hold these assets for decades.

Each stage was necessary. None happened automatically. The whole progression was the result of discipline, structure, and a willingness to build the conditions that the next type of capital required.

The question this series was always building toward is this: can today’s emerging climate technologies follow the same path?

The honest answer is yes. But only if they’re intentional about it.

The Gap Isn’t Technology

Most founders working on long-duration storage, green hydrogen, direct air capture, or enhanced geothermal understand their technology deeply. They’ve built prototypes. They’ve run pilots. Some have operating demo units.

What most of them haven’t built is the financial architecture that turns a working technology into a bankable asset.

Solar and wind didn’t become fundable because the panels got better or the turbines got taller. They became fundable because developers learned to structure projects in ways that lenders could underwrite, tax equity investors could monetize, and long-term owners could hold. The technology was necessary but not sufficient.

That’s the gap most emerging climate technologies are sitting in right now. Not a technology gap. A structure gap.

The good news is that the path out of it is documented. Solar and wind left a playbook.

The Playbook

Design your contracts around what lenders underwrite, not just what customers want.

The contract is the foundation of every bankable project. But a contract written to satisfy a customer and a contract written to satisfy a lender are not the same document. Lenders need to see predictable, assignable cash flows with clear remedies for non-performance. They need step-in rights, change-in-law protections, and creditworthy counterparties. If you’re designing offtake agreements based solely on what closes the commercial deal, you’re building on a foundation that won’t support project finance later. The time to think about lender requirements is before the contract is signed, not after.

Use public support as a catalyst, not a crutch.

Government grants, loan guarantees, and concessional capital are essential at the early stages. They absorb risks that private capital won’t touch and create the proof points that de-risk the next project. But public support has to be used strategically. The goal is to need less of it with each successive project. A technology that still requires heavy government support for its fifth commercial deployment hasn’t built the private-market credibility it needs to scale. Design your early projects to demonstrate that private capital can eventually stand on its own, and use public programs to shorten the timeline to that point, not to postpone it.

Capture operating data at lender grade from day one.

This is the one that most founders get wrong. Early project data is often collected for operational purposes rather than for capital markets. Availability metrics, degradation rates, O&M records, and performance against P50 projections are the exact inputs that lenders and institutional buyers use to underwrite risk. If that data isn’t being collected in a standardized, auditable format from the first operating project, you’re starting the clock over every time you go back to market. The independent engineering community builds its assessment frameworks on data. Give them something to work with.

Match capital to the risk at each stage, not just whatever is cheapest or most available.

One of the clearest lessons from Cleantech 1.0 is what happens when the wrong capital shows up at the wrong stage. Venture capital funding for construction. Project debt on technology that hasn’t been proven. Institutional equity in assets that still carry binary performance risk. Each mismatch creates problems that compound over time. The right capital for a demo unit is not the right capital for an early commercial project, and neither of those is the right capital for a programmatic fleet. Knowing the difference and being disciplined about it are among the things that separate teams that reach scale from those that stall out.

Build governance for the owner who will hold this asset in 20 years, not just the investor closing today’s deal.

Covenant frameworks, reserve accounts, cash waterfall mechanics, and reporting standards feel like paperwork at the early stages. They become the difference between an asset a pension fund can own and one it can’t. Institutional buyers managing 30-year holds need to know that the legal and financial architecture around a project will survive management changes, ownership transitions, and regulatory shifts. If the governance isn’t built to that standard from the beginning, retrofitting it later is expensive and often deal-breaking. The time to think about what the last investor in the room will need is long before that investor shows up.

Not Everything Transfers

The solar and wind playbook is real. But it would be dishonest to present it as a straight copy-paste for every emerging technology.

A few things are genuinely harder. Performance uncertainty in new technology categories doesn’t always resolve in the first two or three operating years the way solar generation variability does. Some technologies have offtake markets that don’t yet exist in any standardized form. Others face regulatory frameworks that are still being drafted, making contract durability harder to underwrite. And for most of them, the independent engineering and legal communities that built institutional-grade assessment frameworks for solar are still learning the asset class.

None of that is disqualifying. Solar faced versions of all of it. But it does mean the timeline is harder to compress, and the patience required from early capital providers is real. Founders who pretend otherwise lose credibility. Investors who don’t price it in get surprised.

Your Turn to Write the Playbook

For each new technology category, there is one project that changes the market.

Not the first funded project, or the first operating project. The first project that closes on plain, non-recourse project finance terms without exceptional public support, without bespoke structuring heroics, and with a standard lender syndicate that prices the deal like any other infrastructure credit.

That project is what solar’s early utility-scale deals were in the early 2010s. It signals to the market that the asset class is real. It gives the next developer a comparable. It gives lenders a pricing reference. It gives institutional buyers a proof point to bring to their investment committees.

Getting to that project is the work. Everything in this checklist is in service of that moment.

The Close

This is a tough journey. Anyone who tells you otherwise hasn’t tried to close a FOAK project or underwrite a technology that doesn’t have a decade of operating comparables behind it.

What I hope this series has shown is that the path is at least documented. Solar and wind didn’t have that. They had to build the financial markets from scratch, train a generation of lenders, and create the legal and engineering infrastructure that everyone now takes for granted. Today’s founders and investors don’t have to do that. The markets exist. The structures exist. The institutional appetite exists. They’re rigid, and they were built around a different asset class, but they’re there.

That’s the opportunity. Financial innovation is still needed, and so is patience. But more than either of those things, customers are needed. If you can get customers, the rest of the capital stack gets easier to unlock. Offtake is the proof point that moves everything else.

For founders building the next generation of climate infrastructure, and for the investors backing them: the playbook solar and wind left behind is yours to use. The work now is proving that your technology can meet the conditions it describes. That proof is how the next asset class gets built.

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