Green startups are new companies that develop environmental technologies or eco-friendly services. Like most companies, they seek to establish a scalable business model. But they face greater challenges because they have also committed to delivering environmentally sustainable and socially responsible products or services.
This higher level of difficulty has real consequences. A combination of high operating costs, greater accountability to stakeholders, the general uncertainty surrounding any new business, and the failures of other preceding green startups can scare off wary investors.
Nevertheless, such challenges also bring opportunity. Green startups can win over the hearts and minds of investors by taking the following concrete steps:
Figure out what you need
Venture capitalists, angel investors, and financial institutions have all been known to invest in green startups. Governments, NGOs, and charities may also be willing to consider investments, grants, or loans. Beyond mere capital, some of these organizations have lent their expertise and networks to green enterprises.
Before you start courting investors, it helps to have clear answers to some fundamental questions.
How much money do you need? How long will you need it for? Are you looking for grants or just capital? Do you need any additional advice, technical know-how, or any other kind of non-financial assistance? By keeping your needs insight, you’ll be able to use all available resources to your advantage. Communicating a clear business vision to investors will also bolster their confidence.
Seek out investors and identify their priorities
Many investors are upfront about what kinds of businesses they want to invest in. Investor databases such as ImpactBase, AngelList, and Crunchbase are excellent places to start your search for financiers who align with your company’s values and can meet your funding needs.
Formulate your pitch
While eventual profitability will always be a primary concern of any investor, most green investors will also be interested in the environmental impacts of your business.
You will need to clearly showcase the environmental impacts of your business, along with its operating model, plans for longevity, and economic sustainability. Unlike an ordinary startup pitch, however, the environmental components will be just as important as the financial elements.
Before pitching to investors, you should find out as much as you can about them. What projects have they invested in previously? What are their ROI expectations? Have they publicly expressed opinions on environmental issues and related business practices?
Once you’ve done your research, reach out to them to set up a preliminary meeting. Be prepared to answer any questions in the first call, email or meeting. While the goal is to develop a working relationship, you need to be on the front foot with information and not waste their time. Moreover, pay close attention and be open-minded about any criticism they offer. Every bit of information will help when you make your official pitch.
If they agree to invest, great. But, even if they refuse, remember to remain cordial and professional. They could always reconsider at a later date – and in the meantime, they may be willing to introduce you to other investors.
Greener pastures for green startups
Increasingly, many consumers are looking to support companies that are legitimately sustainable. The ongoing COVID-19 pandemic will only accelerate this trend.
Among other important lessons, the current crisis is showing us that private sector innovation will be essential to solving future problems – climate change being foremost among them. Green startups are poised to play a major role here.
By following the steps outlined above, green startups can secure the investments they need to get off the ground. If they can establish themselves effectively, green startups stand to win massive financial and reputational rewards, while doing their part to help humanity secure a greener and more sustainable future.