Dec 13, 2021
Why Every Startup Must Address Climate Change
We are the first generation to feel the impact of climate change and the last generation that can do something about it. — Barack Obama
I’ve been a firm believer that AI will change the landscape of businesses within the next 3–5 years, at several orders of magnitude greater than even the Internet. However, there’s an even bigger driver that’ll dictate radical societal change, shifting the way we do business and live our lives: Climate Change.
In fact, as I’m writing this, global leaders from around the world are discussing ways to invest trillions of dollars into Net Zero initiatives, across all facets of society. The environment is no longer a side issue, its the core issue- and it’s a big deal for startups.
Firms like Kleiner Perkins have lead the way, taking big bets (and often big losses) on climate initiatives ranging from electricity to regenerative farming. Beyond Meat, once considered a white elephant, is now a fully integrated distribution company with the backing of the world’s largest fast food chains and Michelin-rated celebrity chefs. The climate change movement is here, but like all movements, it takes time.
The challenge is going to be getting startups to address climate change, regardless of the vertical or industry they are in. We all know that startups are at the forefront of business innovation. In the last few years, the environmental movement has grown stronger, louder, more vocal, and more effective. In large part, it’s been driven by the most passionate and committed of the Millennials. We grew up in an era of “change” and “making a difference,” and have a strong sense of right and wrong. We know that if we don’t act, then it’ll actually be too late.
The truth is, startups are uniquely positioned to address climate change. Because of their desperate need to survive, they are focused on real-time innovation, and have the agility to turn on a dime and address new needs. This exactly the kind of urgency we need when addressing climate change.
Startups are nimble, and can build solutions that address our current challenges, explore opportunities and create new solutions, and provide the basis for a new economy. The incentive structure for investing in startups needs to evolve, away from the traditional VC model, which primarily looks for companies focused on short term results and an exit strategy, towards one that looks for companies that are focused on lasting value and positive global impact.
Our current market dynamics don’t incentivize big risks to be made on behalf of the environment, so weeding out the startups that don’t believe in climate change won’t even be a thought. For example, if you’re an early stage company, and have raised $1M in total with $500K in revenue and are looking to raise your series A, to get traditional VC backing, you’d better be prepared to address an ROI, a plan for growth, and an exit strategy. Addressing scalability in a Net Zero pipeline isn’t even a consideration for most entrepreneurs at this stage. This could change through VC-subsidized funds that are focused on building networked solutions to climate change, as opposed to just investing in them.
Imagine if Amazon built into their first algorithm a mechanism to sort brands by carbon footprint? Imagine Amazon trying to apply climate thinking now against shareholder best interest? It would never happen, not because of lack of desire, but simply because it is impossible to redesign a cruise ship fundamentally, once it’s filled with people. This makes the need for startups to address climate change the linchpin to the long-term survival of humanity — in all ways, the entrepreneur is our last, best hope at saving the world.
This brings to mind the question of talent vs. intent; the incentives for entrepreneurship are almost always money first. Are there enough people with the right expertise and the actual intent to address climate change?
If we’re not working on making sure that startups get addressed by people with a passion for climate change, then we’re just building further pipelines into a bleak future for the same people to make the same mistakes again. We don’t have that kind of time left, which makes it a core necessity to take a very different approach to startup evaluation and investing.
Climate change is a massive opportunity to reimagine everything — our cities, our infrastructure, our economies — and realize the kind of world we want to live in (one that isn’t literally on fire). Global Warming is accelerating, and the Arctic ice is melting. The cost of natural disasters has grown exponentially over the past decade, with no bridge in sight.
What we do with our time and resources, whether it’s a dollar, a vote, or our actions, will have a profound impact on the longevity of life on this planet. Entrepreneurship is a powerful force, and the rise of the Net Zero Economy can come from the entrepreneurs of today. Together, we can solve climate change once and for all. We can still be the last generation to benefit from the bounty that nature has provided us in carbon, but we can’t be the last generation to turn a blind eye. The time is now, the need is clear. Let’s get to work!
