🚀 Buckle up, it’s time to scale: a CAPEX financing guide for hardware climate tech companies

Fernanda Bartels
Extantia Capital
Published in
8 min readJun 1, 2023


Think about funding your hardware climate tech startup like a Rubik’s cube. You will need to tweak it until you find the right mix that works for your business. Credits: Sigmund on Unsplash

This piece was written by Extantia and 1.5°Ventures (climate tech venture builder).

If you’re a climate tech founder who wants to reduce CO2 emissions at scale, you’ll most likely need to build hardware. To do that, you’ll need to secure funding to get your idea off the ground.

So how would you go about funding your startup? What are your options as a climate tech founder? How can you find the right investors for your first plant? What milestones do you need to achieve to reach your ultimate goal?

The entrepreneurial journey can be challenging. Fear not, we’re here to help. This article gives you guidance for thinking (and structuring) the process, and most importantly, provides resources you can use along the way. Here you will find a business model checklist, a collection of resources for getting your story right, a“Runway vs. Milestones” slide template, a FOAK Financing Toolbox, and an overview of funding options, including grant and debt directories.

Be sure to bookmark or save this article as these playbooks and templates that can be useful now and in the future (and we plan to update this article as we publish new resources for founders).

Plan your journey: know where you are in the process and where you are going

Your team has been working on this great technology and building your climate tech company for a while, and now it is time to finally start raising money. Before you start approaching investors or considering your funding options, you need to have answers to these questions:

Business Model Checklist

  1. What’s your revenue model? In other words, how are you going to make money?
  2. How does your technology compare to existing technologies?

💡Pro tip: It’s strongly recommended to come prepared with a comparison of costs and emissions. Investors will certainly ask to see these figures.

3. What is your end goal? How long will it take to achieve it? How much do you need to achieve this?

4. What milestones are you planning to reach? When are you planning to reach them?

💡Pro tip: A common mistake founders make is skipping the intermediate steps i.e. they have a big milestone in one year and not have thought of the “small wins” they can showcase along the way. Make sure to include these to show progress.

5. How do you plan on scaling your product up?

6. What are your potential funding sources?

Once you have good enough answers to the above questions, you can start to get your story right. Investors receive hundreds of decks every year and have very limited resources. Ensure that you have a clear and concise message to convey and a clear ask to make.

Get started with our storytelling playbook:

Storytelling Playbook

💡Pro tip: While many founders have no problems getting some of these slides right (i.e. team, problem, solution, market), other slides might be a bit more tricky to nail. We would like to zoom into one particular slide, often called “roadmap” or “milestones”. Let’s use our template as an example:

The key takeaway here is that it is crucial to align your financial analysis with your milestones. What is going to be achieved with the money raised in this round? This involves defining your roadmap while considering two key factors: understanding what needs to be accomplished and when and securing the appropriate capital at the right time.

Those choosing the VC game — accelerated growth, increased cash burn — must be prepared for the next funding round during the current one. After all, in typically 18 months your runway ends and you will need to have to close the next fundraising round.

So, we evaluate the sum you’re raising and its adequacy to generate sufficient value to pique the interest of the next VC in a future round. Occasionally, this means we need to raise more funds to have more resources or stretch the time till the next round. Following the investment, this slide becomes our touchstone slide, constantly referenced as we monitor the company’s progress.

Download our “runway vs milestones” template here:

Extantia runway vs. milestones template

Get into the details: understand your costs and your financing options

Once you have a clear roadmap, it’s time to get down to the details. This means building a robust business plan and outlining your costs and funding. Breaking down the inflow and outflow of cash is necessary for a comprehensive understanding of your business finances.

It’s safe to say that no two businesses are the same, and climate technology companies are no different. Understanding and optimising a company’s overall expenses is very specific to each startup and is a great topic for another article. For now, let’s assume you already know your burn rate and instead focus on setting your business up for success to get the funding you need to execute.

Different types of funding have different implications for your business. Let’s take a closer look at three types of funding available to early-stage climate tech startups: grants, debt and equity. It is important to understand all three because one of the main challenges you may face when it comes to funding is to find the right combination of funding options that work for your company, exactly when you need it.


Grants can be great for climate tech startups as they provide non-dilutive funding, enhance credibility, and offer additional resources for growth and success. Grant should be preferred over debt and debt over equity.

There are various state, national, and EU-level grants for climate tech startups at various stages, as well as several award programs established by technology companies and industry associations. For example, in Germany, there is a wide variety of public grants over the entire growth phase of a startup (case dependent); early entry grants are often at the state level. EU programs apply across the board — most countries have a similar logic but grant availability varies strongly from country to country.

💡Pro tip: Don’t forget to thoroughly check the prerequisites and side conditions of a grant. Some might come with specific milestones or additional capital. Most public grants require private money investment to unlock the grant. If equity capital is required, make sure to onboard the right investor, following the process you would use for any equity investment.

While grants can offer many advantages, grants can be time-consuming and rarely align with financing rounds. Most state and national grants in Germany take about 6–8 months, while EU grants can take twice as long. We strongly advise you to plan grants backwards with your future cash flow needs in mind.

đź’ˇPro tip: To manage the workload and avoid backlogs, it is recommended to apply for feasible grants every two months.

In addition, you should know that certain grant programs may be in high demand. Based on our experience, the probability of success can range from 1% to 30%, depending on the level of oversubscription for the specific grant program.

Ultimately, effective fundraising through grants requires solid preparation, a strategy, and a diligent process. Just like any other fundraising process. And just like any fundraising process, applying for grants requires a lot of resources. Most founders underestimate the effort/return ratio and often lag behind on progress on other core topics.

To get you started in the right direction in terms of resource allocation, decide whether you want to work with an agency or run the application in-house.

💡Pro tip: Knowing what grant agencies want to hear requires sensitive antennas, as it differs significantly from the VC narrative. If this is something you’d be interested in knowing more about, let us know in the comments. We’ll be happy to address the topic in another playbook or in-depth article.

Check grants both at a national and European level. In many cases, national capital follows a much more straightforward process

Roll up your sleeves and start searching for your match:

Grant Directory


Debt financing can enable founders to extend financial resources between rounds of equity and grant financing. It allows founders to maintain their ownership stake without dilution. It’s worth noting that debt financing typically becomes a viable option for startups only after they have achieved a certain level of revenue.

And why is that? For potential lenders, the keyword is bankability. Meaning, the ability of the startup to make money to pay back the loan. As an early-stage climate tech founder, this might be tricky. One way to approach it is to have a highly de-risked revenue flow guaranteed to get debt (i.e. offtake agreements) but many banks will still require proof of revenue. In Germany, a Patronatserklärung, a type of guarantee provided by the off-taker, might be helpful, but that’s not necessarily easy to get either. In addition to that, most startups will face additional scrutiny regarding loan guarantees since loans need to be asset-backed.

💡Pro tip: If you are looking into debt options in Germany, it’s worth getting in touch with public banks (e.g. Landesbanken, KfW and EIB) on available loan guarantees.

There are different types of debt financing instruments, such as normal loans, venture debt, and — in some cases — leasing which all come with their own prerequisites, side conditions and pricing logic. Have a look into your options and see what makes sense for your company:

Debt Overview


Equity financing, including venture capital, is the most common type of financing among startups. While equity comes at a cost — giving away a share of your company — it can lead to turbocharging your growth with a large inflow of cash and — if investors are selected properly — a lot of ongoing support and expertise from experienced professionals.

For companies that require a lot of capital to scale, like climate tech hardware startups, financing exclusively through equity is almost never a good idea. Venture capital is expensive and investors will likely want to primarily cover your operating expenditures (OPEX) and give you enough capital to unlock other financing options mentioned above for your capital expenditures (CAPEX). Founders should carefully consider the right mix between financing options rather than aiming at raising through straight equity.

Another approach that many climate tech hardware companies take is building their FOAK plant through a Joint Venture (JV) with a potential customer. A JV structure can help finance your plant without giving away company equity (only a share of the plant’s ownership). A JV should be treated with care as decisions on the plant are jointly made with the other party of the JV. The alignment of incentives needs to be carefully orchestrated or a critical time and resources could be wasted.

One important aspect of equity financing is the proper alignment of the financing rounds with milestones and deliverables. A rule of thumb is that before you kick off any subsequent financing round, you should be able to showcase progress on deliverables and a certain level of de-risking of the tech development and commercial adoption of your solution. A smart roadmap, with the right alignment of milestones, can significantly improve your ability to fundraise and the cost at which this will happen.

Financing Playbook:

As a climate tech hardware founder, you need to understand how grant, debt and equity finance work and how they can work together to unlock the success of your company. Successfully funding your climate tech startups through the early stages will likely need all three. With that, we’ll leave you with our last pro tip for this toolbox:

💡Think about your finances and funding options like a Rubik’s cube. You will need to tweak it until you find the perfect fit for your business.

A big shoutout to all contributors to this article: Kostas Valaris (Extantia), David Strittmatter (ICODOS), Dr. Julian Weisbrod and Tobias Lechtenfeld (1.5°Ventures), and Yair Reem (Extantia).



Fernanda Bartels
Extantia Capital

Head of Marketing @ Extantia Capital. Follow our publication on Medium and join the conversation!