Davids and Goliaths Need Each Other More than Ever

As climate-focused investments experience record growth, corporate-startup partnerships may be our planet’s future.

History is littered with the corpses of corporations failing to innovate and future-proof their market share. But a recent piece in The Economist exploring the David-and-Goliath symbiosis between incumbents and startups got me thinking about these kinds of partnerships in climatetech specifically. Namely, without the agility and innovation of climate startups, corporates are disadvantaged and at a greater risk of atrophy—or, in the worst cases, even failure. Similarly, without corporates, many startups lack the infrastructure to commercialize and scale.

But why is this symbiosis so vital to startup success in the climate space?

A key reason is that corporates are entrenched in ways that make it challenging for startups to disintermediate. Not only are many climate startups B2B in the first place, but incumbents also have the capital, state-of-the-art research facilities, networks, and commercialization pathways that climate startups direly need.

Another reason: speed.

It’s often the case that a climate startup’s readiness to hyperscale is just as salient to its long-term success as its product. The need for decarbonization technologies isn’t going anywhere, and neither is the urgency to make disruptors viable, keep up with ever-evolving climate regulations and mandates, and take advantage of new government incentives for climate solutions. For startups to deliver results that matter, corporate alliances are often an essential, even nonelective, path.

Of course, I’m not saying that these partnerships are always rosy. The convergence of startups and corporates comes with a set of predictable risks. In climatetech, one area that commonly stymies corporates and startups is the question: What now? This comes after the courtship period, when both parties are excited to collaborate but realize that they don’t quite know how to proceed beyond the conceptual stage, or that there’s dissonance between their respective short-term needs, long-term goals, existing infrastructures, and ultimately what resources are available to actually get a vision off the ground.

That said, when startups and corporates push beyond these initial difficulties and find themselves engaged in productive, efficient, and aligned collaboration, the results speak for themselves.

Take United and Cemvita as an example. United, a Greentown Labs partner, was the first airline to commit to zero carbon emissions by 2050 and has its own venture fund dedicated to discovering and investing in novel technologies that can help it achieve this goal.

The biggest area of interest is sustainable aviation fuels (SAFs), since 98 percent of United’s emissions come from its use of kerosene. SAFs aren’t new, but there’s always been a problem: most are derived from cooking oils and waste fats, which are severely limited in supply and difficult to scale. However, Cemvita, a Greentown member based in Houston that was founded in 2017, discovered a way to create an SAF that uses specially engineered microbes that convert carbon dioxide into clean fuel, making it more reliable, sustainable, and (critically) scalable than traditional alternatives.

Cemvita always needed a corporate partner in the end (who else but an airline to sell clean jet fuel to?), and United needs disruptive technologies like Cemvita’s process that can be commercialized to meet its robust decarbonization goals. The result? After an initial investment from United last year, David and Goliath signed a future purchase agreement for up to 1 billion gallons of Cemvita’s SAF, distributed over the next 20 years.

Another example is the recent partnership between German behemoth BASF (the largest chemical producer in the world) and American Battery Technology Company (ABTC). BASF, another Greentown partner, is currently the only manufacturer that produces cathode active materials (a precursor to lithium-ion batteries) in North America, Europe, and Asia. However, before the partnership, BASF hadn’t established a circular supply chain in North America that would allow it to take the lead in renewable battery solutions across the continent (it had already established circular economies in Europe and Asia).

ABTC, a Nevada-based company and longtime Greentown member, was the last partner BASF needed (alongside other key players like Toda and Nanotech) to close the loop and reduce carbon emissions from battery production by up to 25 percent. ABTC’s role will be to take waste/scrap materials from Nanotech’s California facility and purify them into nickel, cobalt, and manganese, which Toda and BASF can then use to create cathode active materials. These materials will then be sent back to Nanotech for battery production.

I can certainly go on and on about other examples of successful startup-corporate partnerships: Enel and Raptor Maps; Syzygy Plasmonics and Sumitomo Corporation of Americas, or Sol Clarity and Equinor, to name a few. However, despite these terrific strides and climatetech’s defiance of recent headwinds, we can’t expect to see continued growth ad infinitum. Being proactive now is key—we need all hands on deck to help these startups succeed.

Which leaves us with the question: how can we foster more successful corporate-startup collaborations in the climatetech and energy transition space? What barriers must we overcome—and what programs are needed—to accelerate the forging of successful partnerships, à la United/Cemvita and BASF/ABTC? Goliaths have been taking steps for years to reform themselves in light of the climate crisis. They’re waiting for their Davids, and need to know how to seamlessly move forward once they find them.

References:

Davids and Goliaths Need Each Other More than Ever

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