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Bridging the Valley of Death for climate technologies

We need to get a better understanding of how we can support deep tech climate start-ups specifically in crossing the Valley of Death from research to market. Which challenges do they face? And how can an ecosystem support the bridging of the gap? In this article, we take a deep dive into how the start-up Fervo Energy manages to cross the Valley of Death with support from the Silicon Valley eco-system.
What
Research & Education Going Green Green Transition
The most well-known stories from Silicon Valley are often about tech entrepreneurs launching and rapidly growing digital VC-backed start-ups to become the next unicorns. However, in recent years, prominent profiles of the climate ecosystem in Silicon Valley have emerged, turning the attention to supporting a new generation of climate deep-tech start-ups, since developing and successfully bringing innovative deep-tech technology solutions such as Solar PV or electric vehicles to market is hard.

Unlike a digital start-up, which – as the saying goes – is possible to build with just a computer and a good internet connection, deep-tech start-ups, on the other hand, require a long-term commitment from research to implementation, which typically requires large investments in capital for hardware development – all of which carries higher uncertainty of success and discourage most investors. This can be described as the valley of death, Deep-tech climate entrepreneurs must first bridge the first valley of death: translating promising new research into a working product. Then, they must cross the second ‘valley of death’ to find a way to scale their product and bring it to market. All of which describes a journey that is fundamentally different from a software-tech start-up. As a result, many promising start-ups never get off the ground. This leads to the chicken-and-egg problem, where lack of success stories and funding discourages climate-tech researchers to take on the enormous risk of being a start-up entrepreneur.

To get these start-ups off the ground and support their ideas, there is a need for different kind of support than software companies require when going from idea to market – Luckily, the network of Silicon Valley offers all the right components to support the challenging journey of a hard tech climate entrepreneur may face. With a new wave of investors, accelerators, and fellowship programs, there is more help to find in making them succeed.
Valley of death drawing

The valley of death is anything but theoretical. Every start-up will face the challenges differently, and they will need to manage to navigate through it in their own way. One of the start-ups from the new generation of climate deep-tech start-ups is the renewable geothermal energy company, Fervo Energy. 

Fervo Energy managed to navigate through the Valley with help and support from various programs and stakeholders in the Silicon Valley ecosystem. Fervo Energy was founded by Tim Latimer and Jack Norbeck, who wanted to create a new type of horizontal geothermal drilling to support a 100 percent clean energy future. Tim came from a career as a drilling engineer in the oil industry and was inspired to transition his career into renewables.

“I was working as a drilling engineer poking big holes in the ground for oil companies, and I wanted to put that know-how into developing a climate-friendly energy source instead,” he explains.

Tim and Jack met during their graduate studies at Stanford. Tim was pursuing an M.B.A. and an M.S. in Environment and Resources at Stanford when he crossed paths with Jack, who was doing his Ph.D. in Energy Resources Engineering from Stanford University. Combined, they had the technical experience and business insight needed, and the question was how to make it across the valley of death and build a successful start-up. 

In the fall of 2017 while still at Stanford, Fervo Energy received a 50,000 USD grant by the Stanford TomKat program (read more about the program below) to validate the technical concept and test its commercial potential. Being a part of the TomKat family was a good stepping-stone to proving to TomKat’s phenomenal network in Silicon Valley that Fervo Energy was on to something.

TOMKAT

Stanford University - TomKat center for sustainable energy

The TomKat Center supports faculty, staff, and students in the process of commercializing breakthrough technologies in sustainability through a series of programs both educational and transfer to market. Such as the Innovation Transfer Program, which provides grants and mentors for the development of prototypes, business plans, and market research to solutions impact.

While at TomKat, Fervo Energy was simultaneously developing their next big break: applying to the Fellowship Program Cyclotron Road and talking to investors at Breakthrough Energy Ventures According to Tim, deep-tech and research and development intensive start-ups are constantly developing their next opportunity.

“The linear model of commercializing innovation where you go from public funding to venture funding does not fit – instead, you are constantly pursuing every lead available, using public funding to test new technology applications and private funding to get more mature technology to market,” he says.

In 2018 Fervo Energy won a spot in the highly competitive Cyclotron Road Fellowship Program. The program offers comprehensive support tailormade for scientists to translate promising research into working prototypes and attract funding. The program provides fellows with a basic salary as well as access to laboratory facilities at the Lawrence Berkeley National Lab- To help fellows with the business side of their start-ups, the program also involves a curriculum for entrepreneurial scientists and introduces them to a vast network of companies, partners, and investors in the Silicon Valley ecosystem.

CYCLOTRON ROAD

CYCLOTRON ROAD

Cyclotron Road supports leading entrepreneurial scientists and engineers as they advance technology projects with the potential for global impact and bringing it to scale. The program provides them with funding, access to work-class Berkeley Lab, mentorship support, and an entrance to the network of the entrepreneurial ecosystem.

“The team really knows the failure modes of entrepreneurial scientists – how you as a scientist prefer to stay in the lab, not engage with customers, just publish – they know all of that! They help you break your habits and push you outside your comfort zone, which enable you to successfully build your company,” Tim explains.

 

At the same time in 2018, Fervo Energy announced their Seed funding from Breakthrough Energy Ventures (BEV) leading a group of investors. BEV stands out among investors in Silicon Valley for its commitment to ‘patient capital.’ In contrast to other venture funds that typically need a return on their investment within a few years, BEV invests with longer time horizons (up to 20 years) to better fit the needs of R&D heavy and capital-cost intensive energy start-ups like Fervo Energy.

 

For Fervo Energy, patient capital is only half of the equation. Just as important is the unique understanding of how to help start-ups find a successful business model:

“Even with a longer time horizon, you still need to make a very high return on your start-up once you are market-ready. Achieving that requires a solid understanding of your market and how your business works, and BEV has been really helpful in pushing Fervo Energy forward,” Tim says.

 

Tim originally met David Danielson, the managing director at BEV and adjunct professor, Precourt Energy Scholar, at Stanford University, when Tim took the class Energy Ventures at Stanford. This early connection proved to become invaluable, giving David a unique insight into the journey of Fervo Energy.

bEV

BREAKTHROUGH ENERGY VENTURES

Breakthrough Energy Ventures is an investor-led fund focused on building new, cutting-edge companies that have the potential to significantly reduce greenhouse gas emissions. BEV focuses on supporting companies to scale which is already scientifically feasible and has a potential for at least half a gigaton of greenhouse gasses per year. Solutions with such potential can take decades to develop, BEV, therefore, need to take a new approach on long-term investment look at future needs and markets.

Fervo Energy is on a continuous journey, working towards launching its breakthrough technology. They have, like many other hard-tech climate entrepreneurs, experienced the Valley of Deaths, but managed to navigate through the challenges with great support from the eco-system and network. With the quick succession between Stanford TomKat, Cyclotron Road, and Breakthrough Energy Ventures all speak to the strength of the Silicon Valley ecosystem: These programs are just three of many, showing the strength and the availability of world-class universities, national laboratories, investors, and other important partners and the importance of networking in Silicon Valley.

As Tim puts it down: “Silicon Valley is one of the easiest places to pursue these parallel paths of developing your tech, securing government grants for new R&D and getting venture investment. Everything is nearby.”

Bridging the gap, from university to market is crucial to reach Denmark’s and the world’s ambitious climate goals, to do so we need to support the deep tech climate entrepreneurs. Looking at the Bay Area we might find inspiration for how to support ideas getting off the ground with programs. At Innovation Centre Denmark in Silicon Valley, we work to build collaboration and gather learning from Universities, feel free to contact us if you have any questions or want to know more.

 

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