Why It is Important to Review Your Thinking
Back in June of 2022, I created a roadmap for everything I need to do/know to start an algae carbon capture company. This roadmap includes the algae growing process end to end, how I was going to turn algae into a product, and different steps for implementation. The problem was after I wrote it, I never looked at it again. The whole point of the roadmap is to give you direction for future action, if you never check it, then the roadmap does not fulfill its purpose. When you don’t check over your thinking you are bound to have obvious errors. Example from my roadmap below.
The first half of my roadmap was great. It indicated that I need to identify cost factors for cultivation, dewatering, and drying (big cost categories for algae), and identify what products I will produce. After that point is when I started to have bad sequencing.
The original sequencing includes Get customers —> Raise Money —> Hire engineers to build reactor —> File patent —> Hire project developers —> Deploy for customers.
Problem 1: Getting Customers and Raising Money Before Making The Product
If you were to evaluate the thinking process, you would realize I’m selling my product before I make it. It makes more sense to make the product than sell it to customers.
Problem 2: Raising Money Before Talking To Project Developers and Project Finance Experts
Since my technology was not new/novel the amount of research and development (r&d) capital would be minimal compared to most climate companies with brand-new technologies. This meant that the first round of funding should include the cost of 1 pilot project with customers. To know the cost, I need to talk to project developers who had deployed the same machines before to identify the cost. If I raised money before talking to project developers I likely will not be raising an adequate amount.
Since I’m deploying existing technology, it is possible to get project finance and not need to include it in the fundraising round. The reason I didn’t want to rely on it, is in case the banks say “Your company has no track record of building these projects so we won’t fund you.” I know this is true in energy storage. It is possible to get project financing if you spent 20 years in the industry and wanted to start another company that does the same work because your track record is transferable. Even if I could get project financing, then I would need to bring in an experienced person in project development on the team. This means I need to talk to them either way.
As I’m writing this, I realized I also need to talk to project finance experts in the energy sector. These are the people who deal directly with the banks and understand how they think. If you know the right information before raising money, you will know if you will get project financing from a bank or if you should include project costs in the fundraising round. This is an important gap in my knowledge. Talking to finance experts was not obvious to me before writing this. (Hint hint — this is why you review)
Problem 3: Not Knowing The Timeline of The Patent
If you don’t know, a patent provides you with a 20-year monopoly on your technology. This gives you time to do R&D, bring your product to market, and enough time to become a market leader.
The original roadmap includes me getting a patent after I raise money. If I pitch investors with no patent, everything I am telling is considered public disclosure, meaning that people can share your technology and it will no longer be considered patentable.
If you wanted to keep your invention protected, but did not have a patent then you need them to sign a non-disclosure agreement (NDA). You might think “This is a simple signature.” What you don’t realize is investors are not making decisions alone. They have a team to run due diligence on your technology to make sure what you are describing is possible. Investors need to talk to the partners to inform them of the decision and why they think you are a winner. This means a significant number of people in the firm need to sign NDAs. This is friction that investors don’t want to deal with, so they won’t talk to you.
Signing NDAs is also not standard practice for climate companies. Normally, some PhDs did research in a lab, the university filed the patent and the PhDs are licensing that patent to start the company. Having a patent is the default in climate tech. If you ask them to sign NDAs, they are going against the standard practice and they are taking more effort to interact with you. This is not worth it for them when they consider hundreds if not thousands of deals a year.
Based on this understanding, you should file a patent or intellectual property (IP). When you read an introductory book on patents (highly recommend reading this free book from Bold Patents Law Firm) to have context before you talk to the IP attorneys. You will learn there are 2 types of patents.
A provisional patent which is a 1-year patent
A non-provisional patent which is a 20-year patent
Before I describe why provisional patents exist, you need to understand that worldwide the common practice is a first-to-file system. The first person who files the patent will get the rights. A provisional patent in this case is useful for a couple of reasons:
It allows you to talk to investors, potential employees, and suppliers.
It allows you to test the market to see if there is interest in your product. This is relevant when you are producing a product where the demand is unclear
Ex. Imagine a machine that holds your books and flips the page when you read so you don’t need to put in any effort.
It allows you to refine your product while having patent protection.
Why would you not get a Non-provisional 20-year patent instead?
The difference between the 2 patents is cost. A provisional patent is cheaper to file (when using an IP attorney) than a non-provisional one. Why? A non-provisional requires formal claims, while a provisional does not. A formal claim describes a part of your invention and provides a clear limitation that other people can not cross, otherwise they are infringing on your patent. Keep in mind, you can infringe on a patent. It only becomes a problem when the person holding the patent is aware of the infringement and decides to sue you. If they are not aware, then there are no consequences.
When you create a brand-new technology, some of the details might be fuzzy. If you file a non-provisional patent and then have a change in your core technology, then the claims you have are no longer useful. The 1-year protection of a provisional allows you time to make sure you have the right claims.
Based on the information above, below is the updated roadmap.
Algae experiment to validate cost —> Talk Scientists —> Talk to Engineers—> Talk to Project developers —>Talk to project finance Experts —> Patent —> Raise Money —> Start a company and hire people —> Get Customers.
Note: It is possible for some of the steps to occur in parallel (ex. talking to scientists and engineers can happen at the same time).
The main piece of information that was not mentioned in previous sections is why the patent step happens before you talk to all the people who could be potential team members (scientists, engineers, project developers, and finance experts). Due to the limited 1 year timeline, you want to spend the most amount of time refining your product. You need to have the scientists and engineers ready to start working with you as soon as you fundraise (which is after patent filing).
The project finance experts help tell you whether you can get money from banks or not. Project developers, even if they are not needed to know how much money you should raise, it is important to identify how to reach them effectively so you can have fast recruitment when you need them. This is similar to me spending 2 months trying to figure out who is the right person to talk to at a large organization (is it people in production, supply chain, sustainability, innovation, the executives, or their board?) and how to best reach them. If I already raised money and spent 2 months to get the insights I mentioned in the cold outreach section, then it would look like I’m making slow progress. When I do it right now before raising money, nobody cares except me.
Side note: through me writing this update I added scientists and project finance experts to the roadmap. These are clear in hindsight, but I originally did not include them because I didn’t review the roadmap.