Today, I’m going to show you how to found a climate startup in 5 actionable steps.
To build something that has the biggest possible impact on the world.
Especially when founding, it’s difficult to know what to focus on. This article will help you to stay on track.
Spoiler: You don’t even need to register a business before your first paying customers.
1) Find an industry or sector you are passionate about
The first and most crucial step is to find an industry or sector you are passionate about. This includes the companies, the products, their impact, but also the people inside it.
You might wonder why “impact potential” is not the first step, and there is a single reason:
Before impact comes motivation.
It’s better burn for the problem strong enough to keep going until the problem is solved, even if its impact is smaller, than aiming for massive impact by working in a field you don’t like and in which you will lose interest. And if you don’t lose interest, you might just burn out. After all, working on things we are passionate about, is easier than forcing ourselves to do things we don’t burn for.
2) Figure out which interesting niches exist in your picked sector
Niches are sub-sectors, which can be seen as clusters of potential customers. A niche is characterised by all the people in a niche doing the same things, having the same problems and struggles.
Try to produce a list of niches for your sector. To come up with them, you can think along the value chain of the industry you are looking at. You can also think about all the services and products which are already offered in the sector. From a climate perspective, looking at where the most emissions are created in the value chain might equally provide some interesting niches. Check out this previous newsletter, where I show how much different sectors and niches contribute to climate change: Why climate innovation remains key to solving climate change
For example, the electric vehicles sector contains these niches:
- car manufactures
- control software developers
- battery cell manufacturers
- battery cell designers/engineers
- raw material refineries
- raw material mining companies
- battery recycling companies
- disposal companies
Create a lengthy list of niches. Put some time aside and brainstorm – for example together with a friend or colleague. You can easily produce a list of 50 niches or more in less than an hour. Afterwards, you must find out which niches are the most interesting for you to start a business in.
There are 3 main criteria which make a niche interesting:
- They have interesting problems to solve (critical, urgent, painful – and interesting to you)
- They are willing to pay for a solution
- The market size can sustain your business
Choose your top 3 niches to continue. You can do that by giving each niche a score from 1 to 10 in the three criteria and then sorting them by the total sum of all three product.
3) Make a list of at least 50 potential customers – and call them
A niche does not consist of only a handful of potential customers. That would be too small to sustain your business. You want to sell your product to dozens, if not hundreds or thousands of customers eventually.
Therefore, to get a good overview over the actual problems your customers have, you should talk to at least 30 to 50 in 1-on-1 calls or even meet real life for a coffee.
Ask questions about their daily work, how they do it, what the processes look like, and how long or tedious individual steps are.
Most importantly: Don’t talk too much yourself.
You want to learn about their point of view and their struggles. Pose questions, don’t provide answers, or seek direct confirmation of your own assumptions through suggestive questions.
Try to find out what role sustainability plays in their daily work routine and where the biggest environmental impact is created in their business.
For most companies, their direct greenhouse gas emission will come from heating and mobility. Indirect emissions then come on top in form of electricity and everything they buy from someone else. If you are looking more at industrial companies, you might even have some processes where greenhouse gases are created directly in the core business process, e.g., in the steel or cement industry.
4) Understand what your customers critical problems are and develop a solution – not a product
After each talk take some time to make notes and reflect on what they told you. Try to figure out how the different stories of your potential customers fit together.
Finding common patterns in the different stories is key.
If you find multiple problems in their process, rank them by severity based on the time, effort, and nerves your customers lose because of these problems.
This is the business side of things, and it is a necessity for any solution to be successful.
Just if you find multiple critical problems, you could rank them by the environmental impact they have. But of course, no one would stop you from excluding problems which don’t have a positive impact if solved at all.
Now, try to find a solution to their most critical problem. But bear in mind: a solution is not a product yet. It is the general approach you would take to solve the problem.
If your customer for example had a manual process where they must repeat several steps a hundred times per week by hand, that is surely a regular pain point. Solutions to this problem could be:
- Automating the process
- Outsourcing the process to someone else
- Checking whether the process could be removed completely by changing a higher-level process
All these solutions are only approaches to solving your customer’s problem. A product would be the implementation of the solution. For example:
- Automation: A web app – or an Excel macro
- Outsourcing: A manual service where you take over the work – or a rental platform for specialised freelancers
- Process Optimisation: Offering consulting on a project base
But you don’t have to develop a product, yet, to offer your solution to a customer.
5) Market and sell your solution, before developing a product
You made it this far: Talked to first customers, learned about their problems, identified a critical problem of theirs, which would have a significant impact if solved, and you even have an idea on how to solve it!
But wait – are you already thinking about how the web app should look like that you now need to build? Or did you already start developing a prototype of your machine?
Take a step back. You haven’t even verified whether your customer wants to automate their process. Sure, they want a solution, but to know which solution they would prefer, you must ask them.
But you are beyond a survey now. You don’t want people saying that they would buy your solution. At this stage you need proof that they will buy your solution.
And the best way to get that proof is by trying to sell you solution to them.
Call your potential customers and offer them your solution. Write about it online – LinkedIn, Facebook, some web forum – wherever your potential customers can already be found.
Maybe, maaaaaybe, build a landing page, collect emails on a waiting list, or offer beta access at a discount.
Not only can you use these first tries to sell your solution to validate that people will buy it. But you can also test your assumptions regarding how much they are willing to pay for a solution which solves their problem well.
Find an industry you are passionate about, identify an interesting niche within and talk to a lot of people inside that niche.
Try to identify their most crucial problem and develop solutions for it.
Then validate your solution approach before developing a product by selling the solution first.
Just after having found people who will pay you for your solution-turned-product, start developing.
See you next week. 😉 (Haven’t subscribed to The Climate Innovator newsletter yet? Join here!)