of Climate Startups.
Hundreds of companies are racing to turn new technologies and investor cash into big businesses.
There is something more important going on in the Welsh city of Wrexham than two Hollywood stars making a feel-good TV show about a little-known soccer team.
At a swampy site just outside of town, Material Evolution is building a factory to make a low-carbon alternative to cement, a big contributor to global emissions. It is facing a tougher climb than the local soccer team’s highly publicized effort to get promoted.
Hundreds of young climate companies like Material Evolution are burning through cash and racing to turn new technologies into big businesses. The transition period is called the “valley of death” because so few startups survive it.
The success of at least some of these startups is crucial to the world’s efforts to limit climate change. But companies in their early stages are often derailed by blown budgets, engineering failures and any number of unexpected hazards.
“Everybody says there’s a playbook,” said Liz Gilligan, chief executive of Material Evolution. “There’s no playbook.” Had she known how hard it would be to develop industrial technology, she would have started a software company, Gilligan jokes.
At stake are tens of billions of investor dollars and technologies aimed at reshaping swaths of the economy, such as cleaner fuels for ships and planes and longer-lasting batteries for electric cars. That is all while executives navigate uncertainty about interest rates, trade policy and government subsidies.
A previous funding boom for clean technology ended badly. After pouring $25 billion into the sector between 2006 and 2011, venture capitalists lost more than half that by 2015 after many startups failed.
More recently, a wave of clean-energy startups that went public during a 2020 and 2021 fundraising peak collapsed. Electric-vehicle startups Fisker and Lordstown Motors are among those that filed for bankruptcy or are teetering on the edge.
Building any startup is “one long valley of death with occasional breaks,” said David Yeh, a climate-technology investor and former adviser in President Obama’s White House. For many companies, he said the most treacherous time is building the first factory.
In Wales, Material Evolution plans to produce its cement alternative by processing waste materials from steelmaking at the site of a customer’s concrete-products factory. The process uses a reactor that Gilligan likens to a giant blender. It runs on electricity at low temperatures, slashing the pollution generated when making regular cement by heating limestone with fossil fuels.
Construction has delivered many curveballs for the company’s first factory near Wrexham, which became famous when actors Ryan Reynolds and Rob McElhenney bought the soccer team in 2020.
There were worries the boggy ground wouldn’t support the factory, and that an amphibian—the great crested newt, known for foiling British building plans—would delay the project. The lowest moment came early this year, when Material Evolution wasn’t sure how to get enough electricity to the site.
“You feel really stupid, because everyone tells you you should have checked,” Gilligan said.
In the U.S., another climate start up ran into snarls trying to build one of the country’s first projects to make green hydrogen, a potential replacement for fossil fuels in steelmaking and chemical production. Plug Power CEO Andy Marsh said the biggest headache with the facility in southeast Georgia was installing the freezer-like chiller and liquefier system that is needed to transport and store liquid hydrogen. The system is bigger than a football field and keeps hydrogen at negative 423 degrees Fahrenheit. Plug Power thought preparation and installation would take a few weeks. It ended up taking five months to ensure the system wouldn’t be vulnerable to contamination. The delay escalated pressure on Plug Power, which was burning through cash. “It was much, much more painful than I ever thought it could be,” Marsh said. After repeated delays, production began in January, helping Plug secure a $1.66 billion federal loan commitment to build bigger plants. The program is part of the Biden administration’s billions of dollars in subsidies for earlier-stage climate technologies. Winning government support doesn’t guarantee success, and meeting the conditions for funds can take years.
Origin Materials, which aims to make plastics and other materials out of plants, went public in 2021 hoping to fund its own factories. But after the pandemic snarled supply chains, construction costs for its first commercial plant in Ontario, Canada, rose more than 10% and the factory’s completion was delayed for months before production began last year.
The speed bumps forced Origin to slash 30% of its roughly 200 employees.
Origin has postponed its goal of producing large amounts of plant-based chemicals at its own factories. Instead, it is finding partners that can help it build plants and products that can be mass-produced quickly, such as a recycled-plastic bottle cap. Its shares are down about 90% since its listing.
“It’s already difficult building first-of-a-kind plants and plants in general,” said John Bissell, Origin’s co-CEO. “You layer all of these other global shenanigans on top of everything else, and it just gets really difficult and really expensive.”
For Gilligan, the green-cement CEO, risks remain. There is always a chance, for example, that something causes the cement mixture to clog. Still, Gilligan expects the factory in Wales to start up on time and on budget this summer.
Thanks to the plant’s 30-feet-deep foundation, the boggy ground proved firm enough to bear hundreds of tons of cement silos and trucks. An ecological survey found newts—but safely down the road and now protected by a fence. Securing power required a new trench and a cable, not a bigger overhaul that could have taken over a year.
The factory will have an annual production capacity of 150,000 metric tons of cement—about 1% of the U.K.’s needs. Material Evolution, which last year raised 15 million pounds of venture capital, equivalent to roughly $19 million, is now considering site and funding options for future plants. Does it feel like Gilligan is escaping the valley?
“Depends on the day of the week,” she said.
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