The journey from a lab-based proof of concept to a functional prototype is a critical phase for any new deep tech, materials, energy and climate tech startup and is often fraught with challenges that can hinder development and market entry. For new innovators, understanding these hurdles—and how to overcome them—is key to a successful launch. This blog will explore the various bottlenecks in scaling and how Vetri Labs is helping bridge them by providing crucial resources and mentorship.
Understanding the Deep tech, materials, energy and climate tech Landscape
The deep tech, materials, energy and climate tech technology landscape is rapidly evolving, driven by the urgent need for innovative solutions to combat climate change and transition to sustainable energy sources. A sector that is often hardware-intensive, they face unique demands such as substantial capital investments, access to advanced fabrication and testing facilities, and the necessity for specialized expertise. With increasing global emphasis on sustainability, understanding the dynamics of this industry is crucial for innovators looking to make a mark in this sector.
High Capital Requirements: Developing deep tech, materials, energy and climate tech solutions often demands substantial upfront investment, which can be a barrier for early-stage startups. This isn’t helped by the fact that climate tech investments have seen a significant shift in funding dynamics; between Q4 2022 and Q3 2023, climate tech financing dropped to $56 billion, down 29% from $79 billion in the previous year.
Shifting Investment Focus: Investors are increasingly focused on mid-stage and late-stage deals, which accounted for 37% of all climate tech deals in the first three quarters of 2024, up from around 20% in 2019. This shift indicates a more cautious investment approach, making it harder for early-stage hardware startups to secure the funding necessary for prototyping and scaling.
Underfunded Sectors: Climate tech startups in the industrials sector (industry, manufacturing and resource management) saw their share of investment capital fall from 17% in 2023 to 7% (far below what’s needed) in the first three quarters of 2024, despite being responsible for 34% of global greenhouse gas emissions. This disparity highlights the urgent need for innovative hardware solutions in sectors that are not receiving proportional funding.
Impact of Policy Initiatives: On the positive side, U.S. climate tech startups received $24.8 billion between Q4 2022 and Q3 2023, and US$24.0 billion between Q4 2023 and Q3 2024 with policy initiatives like the Inflation Reduction Act (IRA) playing a crucial role in sustaining investment levels. Startups in deep tech, materials, energy and climate tech technologies can benefit from such policies that provide financial incentives for development and commercialization.
Growing Trends: Energy-related startups took a greater share of climate tech funding to nearly 35% during the first three quarters of 2024, up from 30% in 2023, suggesting a growing interest in alternative energy such as green hydrogen and others.
Common Deep tech, materials, energy and climate tech Startup Challenges
Deep tech, materials, energy and climate tech tech is evolving, but funding–as already established–is shifting toward mid-to-late-stage startups, leaving early-stage innovators struggling. Additionally, navigating complex regulatory landscapes to accessing essential resources and expertise, these and many hurdles significantly impact their ability to transition from lab proof of concept to market-ready solutions.
Early-stage startups in this space will often stumble on these common bottlenecks:
Capital Intensity: Hardware-intensive climate tech solutions require significantly higher capital investments compared to software ventures. The ticket sizes for major climate technologies in early-stage venture capital can be five to six times higher than those in sectors like fintech or quantum computing. For instance, sectors such as sustainable fuels and hydrogen often require early-stage funding exceeding $25 million.
This high capital requirement poses a challenge for startups transitioning from proof of concept to prototype, as they must secure substantial funding before they can even begin production.
Longer Development Timelines: The time required to scale hardware-intensive solutions is notably longer than that for software companies. The average time from Series A to Series D funding for digital marketplaces is about three years, whereas climate or deep tech, materials, energy and climate tech technologies may take around seven years to achieve scale. This extended timeline can create significant hurdles for startups looking to move quickly from prototype development to market entry.
Commercial Uncertainty: Climate tech startups face greater commercial uncertainty compared to traditional tech ventures. This uncertainty stems from the dependency on various stakeholders across the value chain, which can complicate adoption decisions and delay the transition from lab prototypes to commercially viable products.
Additionally, many capital-intensive climate technologies lack proven commercial models, making it difficult for startups to demonstrate a clear path to profitability.
Funding Access: Investors may be hesitant to commit funds due to the perceived risks associated with hardware-intensive climate technologies. Traditional project investors are accustomed to lower debt levels and may shy away from long-term investments that require substantial upfront capital without immediate returns. Rising borrowing costs and economic uncertainty have slowed climate tech investment. Venture capital and private equity funding also declined, falling from $799 billion to $673 billion, reducing climate tech’s share from 9.9% to 8.3%.
Startups must therefore work to de-risk their business models by clearly articulating the engineering feasibility of their technologies and demonstrating that many components have been proven in other applications.
Regulatory Hurdles: Hardware-intensive deep tech, materials, energy and climate tech startups encounter significant regulatory hurdles that can impede their transition. Lengthy permitting processes for establishing lab and manufacturing facilities often cause delays, while compliance with stringent safety and environmental regulations requires additional resources for testing and documentation. Securing patents can be time-consuming and costly, diverting focus from product development.
Investors are typically cautious about regulatory risks, necessitating a clear understanding of compliance requirements to attract funding.
Market Competition: Established big players in this sector often dominate the deep tech, materials, energy and climate tech landscape, making it difficult for new entrants to gain traction.
The Critical Leap: From Proof of Concept to Prototype
As already established, deep tech, materials, energy and climate tech startups often encounter myriad challenges in transitioning from proof of concept to functional prototypes. This transition requires not only technical expertise but also access to specialized resources and facilities. Understanding how to bridge this gap is essential for accelerating deep tech, materials, energy and climate tech startup development. This understanding comes via exploratory phases involving:
Validation of Technology: Ensuring that the technology works as intended under real-world conditions.
Design and Engineering: Developing a prototype that meets market needs while adhering to regulatory standards.
Testing and Qualification: Rigorous testing to validate performance metrics and ensure reliability.
Despite its importance, many startups lack access to the necessary resources, expertise, and facilities to conduct prototyping phases. This is where Vetri Labs is of value by supporting these startups with the necessary infrastructure, mentorship, and guidance, enabling them to navigate this pivotal leap effectively.
Vetri Labs: Bridging the Gap
Our Lab
Vetri Labs provides fully permitted wet lab space totalling 1,650 square feet equipped with $200k critical testing and prototyping equipment essential for climate or deep tech, materials, energy and climate tech tech development. This includes Fume hood; Ink processing; coating, Fume hood; Electrochemical workstation, Electrochemical workstation, Electrode Fabrication 80 Channel Battery Tester, Glovebox and others.
This setup eliminates traditional barriers associated with lab setup, allowing startups to focus on developing their technologies from day one without the lengthy permitting processes typically required.
Additionally, Vetri Labs fosters an environment that is:
- IP Encumbrance Free: Startups retain ownership of their intellectual property (IP), encouraging innovation without concerns about IP sharing or licensing.
- Cost Efficient: By providing immediate access to lab facilities and equipment, Vetri Labs significantly reduces capital expenditures (CAPEX) and operational expenditures (OPEX), enabling startups to allocate funds more effectively toward R&D.
Research & Development Support
Vetri Labs offers end-to-end R&D support coming straight from industry veterans with decades of hands-on experience. Startups can leverage this expertise to navigate technical challenges effectively and accelerate their development timelines. Core services include:
- Electrochemical Characterization: Understanding material properties through advanced testing protocols.
- Techno-Economic Modeling: Assessing the feasibility and market potential of new technologies.
- Device Proof of Concept: Validating technology through practical applications.
- Materials Synthesis: Creating and optimizing novel materials with specific properties critical for deep tech, materials, energy and climate tech technologies
- Device Scale-Up: Scaling the production of prototype devices from lab-scale to commercially viable quantities
Personalized Training Programs
Vetri Labs also emphasizes the importance of skill development through customized training programs. These courses cover essential topics such as:
– Basics of Electrochemical Science and Technology
– Fundamentals of Electrochemical Engineering
– Fundamentals of Electrochemical Test Techniques
– Fundamentals of Electrochemical Impedance Spectroscopy
– Overview of Solid-State Batteries
– Overview of Fuel cell technology
– Overview of flow battery technologies
– Overview of Electrochemical Sensors
By enhancing team expertise, startups can improve their chances of success in developing market-ready solutions.
Vetri Labs Incubator Program: A Structured Approach to Growth
For deep tech, materials, energy and climate tech startups looking for complete hands-on mentorship, the Vetri Labs Incubator program is designed to accelerate development by providing essential resources and expertise often out of reach for early-stage ventures. The incubator is designed to guide startups through three critical phases:
Start Phase – Validate Your Big Idea:
- Collaborate with our technical experts to refine concepts and validate approaches through in-depth sessions.
- Focus on problem identification and definition, enabling startups to align their innovations with market needs.
Build Phase – Create What Matters:
- Access lab space and mentorship to develop prototypes that meet market needs.
- Support includes product development guidance and assistance in creating minimum viable products (MVPs).
- Startups benefit from immediate access to lab equipment without incurring high capital expenditures (CAPEX) or operational expenditures (OPEX).
Grow Phase – Scale Your Impact:
- Navigate market entry with guidance from our experienced mentors who have successfully scaled hard tech companies.
- Mentorship focuses on strategic partnerships and next-generation R&D efforts while helping startups achieve maturity in their current products.
The incubation program offers various engagement models tailored to support startups at different stages of their development and as per need.
Engagement Model
| Type of Service | Description |
| Incubation | In-person; Use of Lab Space and Office Space; 2 people per start-up; Basic Technical and Business Mentorship; |
| Technical and Business Mentorship | Can be In Person or Remote; Product development, Prototyping, Design and Engineering; Product Market Fit, Go To Market, Strategic Partnership and Scaling. |
| Venture Studio | Development of an idea into a viable startup with in depth involvement from Vetri Labs. |
Vetri Labs as part of its Incubator Program does not retain ownership of intellectual property (IP) of partnering startups, fostering an environment where innovation can thrive without encumbrances.
Time to Scale
The journey from a groundbreaking idea to a market-ready deep tech, materials, energy and climate tech technology comes with a lot of bottlenecks, but it’s also ripe with opportunity. By understanding and addressing common hurdles—from funding and regulatory compliance to accessing critical resources—startups can significantly increase their chances of success. Vetri Labs is committed to bridging these gaps, providing the essential infrastructure, mentorship, and expertise needed to accelerate innovation.
If you’re a deep tech, materials tech, climate tech or clean tech startup ready to take your vision to the next level, the time to act is now. Connect with Vetri Labs and let’s build a sustainable future, one prototype at a time.
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