You know it’s an exciting time when private market venture investors are like, ”wow, you know, the DOE really stepped up — like their loan program is amazing.” And this is coming from the largest private climate investors in the world. So... I’m very excited.

— Maddie Hall, Living Carbon

Last week Streamline co-hosted the NY Climate Week grants event with our friends at the DOE, Climate Finance Solutions, Enduring Planet, and Living Carbon. The room was filled with founders, investors, and operators hoping to better understand the complicated landscape of government funding. In case you missed it, join us for our webinar next week.

The TLDR: navigating government funding is complicated.

We had perspectives from across the ecosystem, from founders like Maddy who started Living Carbon (genetically engineered trees to sequester more carbon) to funders like Doug from the DOE. Below we’ll dive into four key take-aways that emerged — alternatively, skip to the bottom for quick tips.

1. The world is different now: it’s time to build your grant strategy

We held this panel a year after the passing of the Inflation Reduction Act (IRA), a landmark bill unlocking an estimated USD 800 billion for climate. Along with other policy in 2022 and 2023, there is suddenly more funding for climate than ever before. Combined with decreased venture capital investments, it’s created a wave of interest into grants.

The first thing is just acknowledging that we're in this historic time with a super abundance of grants. There has never been a better time secure grants for climate tech.

— Joel, CEO and Co-Founder at Climate Finance Solutions

We’re seeing this interest both from private companies as well as VCs who previously saw grants as a time-consuming distraction. Maddie, CEO and Co-Founder of Living Carbon, shared her personal experience:

When I started Living Carbon in 2019, I remember being told by some of our early investors, they’d directly tell me, don't bother, it's a waste of your time. In my last board meeting, one of our board members instead said, apply for all the grants you can get your hands on. And you know, as a founder, it's like, okay, wow, four years later, and it's a very different message.

This shift in mindset has meant we’re seeing a wave of first time applicants exploring grants. Many have misconceptions about the process— we spent the bulk of the event diving into these.

2. Start thinking about the government as a partner in the climate transition

The first misconception is in the approach to collaboration with the government.

If you spend time in the silicon valley startup ecosystem, you begin to believe private companies and the government are at constant battle. You hear stories of Uber and Airbnb, and how they succeeded because—not in spite of— of their scheming around policy.

The reality is, today, climate solutions can significantly benefit from the tailwinds of policy. In practice this means leaving the existing silicon valley startup ideology behind and directly collaborating with communities and public workers. This requires a cultural shift: deciding to build with community benefit plans in mind is almost the antithesis of moving fast and breaking things.

What does this mean in practice? Build relationships! Start to see grants as long term partnerships. The process begins with smaller grants like SBIRs, and continues as you grow. When applying for a grant, talk to the program officers early and often. To shape what grants will be available, respond to RFIs (requests for information), and engage with program administrators outside of the grant window.

Along with the perceived distance to people at the DOE, one of the frequently touted hesitations to engaging in grants is around grant reporting requirements.

3. Don’t let grant reporting requirements discourage you from applying to grants

Engaging in grants is filled with unnecessary red tape: one study found that principal researchers on Federally funded research studies spent 42 percent of their time on administrative work and grant compliance.

Rather than dismissing grants because of this red tape, we discussed solutions to reducing this reporting burden. Joel from Climate Finance Solutions (CFS) has helped hundreds of companies navigate this process and shared actionable tips:

There's things you can do on the front end when you're actually designing the project and putting the application in that make managing easier on the back end. For example, aligning the project with what your company priorities are and designing the scope of work correctly— if you have fewer tasks outlined, you have to report on less tasks. At a high level you should give yourself flexibility within the scope of work and the flexibility within your budget.

It was also helpful to hear from, Doug, Chief Operations officer at OCED (part of the DOE) who reminded us to think about the reporting requirements from the perspective of the grantmaker:

Just remember, put yourself in their shoes, right? So you imagine you're sitting at the other side of the table? What is their motivation?

The government is giving money not only to help you move your projects forward, but they're also gathering information to move the broader ecosystem forward. So that people can learn from what's going on.

If you’re looking for support on your grant writing, there’s two paths I recommend:

1. Outsource. If your team does not have bandwidth or the expertise to do it all in house, reach out to Joel from Climate Finance Solutions!

2. Use technology. Streamline helps you streamline your grant process by using AI to repurpose your past work. We work with people who already have expertise to help them work faster. We’re building tools to help you identify, write, and report.

While the effort in finding, writing, and reporting on grants seems steep, when you take a step back and consider the cost of alternative sources of capital (ex equity), it would be foolish not to build a grant strategy into your business plan. This brought us into a conversation about aligning funding sources.

4. Align capital sources to the activity you’re financing

Venture funding is often seen as the metric for a successful startup and I’d argue that this warrants challenging. To build an impactful climate technology company, venture funding might even be getting in your way.

Everyone on the panel chimed in here, with Maddie’s example driving this point home — it’s imperative to align the capital source with the activity:

Being able to use the dollars that you get for the right activity is also really important. I don't want to be spending my equity dollars on, you know, planting trees.

People might say that it isn't that what your company does, well, actually, it's much better suited for project financing or venture debt, because that's supporting one Living Carbon deployment, and not necessarily the earlier stage R&D projects.

Dimitry, CEO and Co-Founder of Enduring Planet chimed in here to debunk a common misconception:

I would also poke at a really common narrative, that there are distinct types of capital that are staged specific, like “Oh, you're early, so you can't get debt”, or, “Oh, you're late, you can't get grants.” And that may have been true at some time. But to I think everybody's point here, the ecosystem has evolved so dramatically. I can personally speak to this as part of Enduring Planet— today we're literally lending to two person teams, who are winning NYSERDA grants.

Note that grant funding is often trailing/reimbursement based or milestone based. This means teams need to spend capital and do the work, before getting reimbursed by the government. Historically startups would need to raise expensive VC capital to expand their balance sheets, but that’s no longer necessary with offerings like Enduring Planet’s grant advance.

As much as you can try to align funding sources, this rests on there actually existing funding sources for different phases of R&D. There's unfortunately a known "valley of death" that describes the challenge of funding a first of a kind (FOAK) deployment. If you manage an impact fund or a philanthropy, consider targeting FOAK projects. CTVC’s article, the Bridge to Bankability goes into this in depth.

Quick Tips!

Hopefully this served to de-mystify some to the grant world for you. Here's a few final quick tips to help you get started.

1. Be Proactive. The grant process starts before you find a grant opportunity. Engage with those who may define the next topics/fields of funding; it helps to work with companies who have deep relationships with those orgs; tell them what your vision is and see if it works with their grants

2. Focus. DO NOT design your R&D roadmap around grants. Map out what the company needs first and instead of looking at what will win the grant. Startups often distract themselves with chasing grants that are not related to their larger R&D roadmap

3. Find Fit. Grants are typically very specific in scope. Don’t apply to grants where you need to bend your company’s narrative. You won’t win.

4. Ask for Clarity. Get used to asking for clarification; ask for guidance and you’ll get it.

5. Plan. How you design your grant milestones and budget, impacts your reporting workload. Leave room for flexibility.

6. Be Resourceful. Use tools or hire experts. Ex Streamline allow you to avoid the ‘tens of minutes’ that are wasted all the time - e.g. when you get to page 74 of a grant and realize you don’t qualify.

7. Understand Motives. Put yourself in the shoes of the reviewers to understand their motives. Government grantmakers need to gather information that they can share out to the world. They want to showcase commercial lift off

8. Strategize capital sources. Be intentional with how you choose capital sources for company ‘activities’. e.g. don’t spend equity on predictable returns, like ‘planting trees’. Use other types of money like venture debt for these.

9. Understand Motives Pt 2. Venture, grants, project financing all speak different languages and care about different things. Grasping your head around each will help headaches down the road. Put yourself in their shoes, think ‘what are their motivations?’ and ‘are you at the appropriate stage?’

10. De-Risk Early. Development money (for projects) is the hardest and riskiest. You could have permitting, pricing failure, market dynamics changes, and/or partnerships backing out. As much as possible, de-risk what you’re building through smaller deployments.

11. Apply Creatively. Many companies have never led a grant yet have won tens of millions by partnering with primary applicants as sub-contractors.

12. Finance Creatively. Many grants require “matching” where you need to come up with capital to match the grant funds. Typical thinking says that early stage companies match with grants and late stage companies match with debt. this is changing and the opposite does happen! Matching can be done in interesting ways you may not be aware of: ‘in kind’ matching (your labor), VC funding (contingent levels of commitment), developers in some instances.

👉 If this looks interesting, join us later this month when we host a virtual event and dive even further: Register Here.