Assembly Required: The Hardware Scale Up Roadmap

A practical guide to building hardware companies, and how to get them financed.

Note: The hot air may have come out of the “Climate” bubble but the reality is that the net zero transition is still as necessary as it was 4 years ago at the peak of Climate 2.0 and 10 years before that, when Cleantech 1.0 came to an end. Many oil and gas companies have shed their “green” commitments but regulation largely still mandates long-term decarbonisation, and the introduction of CBAM in the EU and future changes to Article 6 should strengthen the economic argument further. While I originally wrote the bulk of this article at the tail end of 2024, largely aimed at “Climate” companies, these milestones are likely relevant for many large-format hardware companies be it defence or robotics. Climate 2.0 was about carbon but it was also a solid example of concerted industrial policy - something many Western countries sorely need right now - so this framework should be viewed through that lens: A roadmap for making the technologies underpinning the future of industry a reality.

We still need more technologies

To reach net-zero by 2050, we need more. Not just more deployments of existing technologies but developments of new ones. Whether that’s new technology to enable net zero shipping, novel chemical production pathways or new forms of energy storage, much of this is still to be invented. Some of these solutions will emerge from leading industrial players, but many of these will take shape as venture-backed startups, requiring funding, commercialisation, and team-building. Relying on all of these technologies getting to scale in order to solve climate change is high-risk. Multiply those risks across all the technologies we need, and the chance of success for this energy transition looks daunting. And that’s before we factor in the shifting macroenvironment of market pricing, policy changes and consumer sentiment. So how can we de-risk the micro, to enable the macro?

We need to start pooling our knowledge. The software industry has successfully navigated this journey, distilling lessons in books like The Lean Startup and Zero to One and accelerators like YCombinator and Entrepreneur First to put those into practice. We need the same approach for climate hardware. A lot of the net-zero transition is about energy efficiency – but there’s an irony in teams wasting energy reinventing the wheel.

A good starting point is ensuring that your approach has the best chance of being competitive. We spend most of our time at Deep Science Ventures trying to figure out what the most competitive technology will be for a given application – it’s critical to get right. Climatetech spans entire industries, so while it’s hard to be specific in a short article, in the next section we’ll outline a high-level framework adapted from the Adoption Readiness Levels (ARL) developed by the Office of Technology Transitions (part of the US Department of Energy). This framework outlines a scalable approach, but the journey to achieving it – that’s where this article comes in.

In this article, starting with what defines a ‘good’ climate company, we outline the critical milestones teams must hit – aligned with major funding rounds – to get there. It’s a distillation of what repeatedly gates scale in climate and energy startups: a credible route to cost-competitiveness, a system that performs outside the lab, validated commercial traction, a competent team, and enough capital to keep the lights on.

We hope you find it useful.

What makes a good climate company

As a former founder, I fixated on the product, often falling into the “build it and they will come” trap – an illusion fuelled by survivorship bias. What’s clear in all great companies is that a strong product is a critical foundation, but it is only part of what’s necessary to truly scale a business. This section borrows from the ‘Adoption Readiness Levels (ARL) Framework, highlighting the characteristics that exist at scale for a strong climate business. For completeness, I’ll also add a couple of additions from our own framework.

The ARL Framework is composed of four sections with multiple sub-sections – you can see the original version here. The descriptions here for each sub-section are idealised, linked to the “Low Risk” sections of the framework. If you can achieve all of these today, incredible. If you’re not there today for a given sub-section, but have a path to getting there, good. If you will never get there (in some instances it may never be possible), it does not mean that your approach is not worth pursuing – it is the sum of these risks that really matter.

Value Proposition

A great climate technology must provide a compelling advantage over existing solutions while being economically viable:

• Delivered cost: Either at cost parity with incumbent solutions or, in the short term, a clear route to cost-competitiveness at full-scale with a robust understanding of what levers you need to pull to get there

• Functional performance: Defensible technology solution that provides a sustained improved performance and/or benefits that justify replacement.

• Ease of use / complexity: Easy to deploy with minimal integration risk from changes in process or operational use.

There are lots of other voices in the ecosystem who are big proponents of this.

Market Acceptance

To scale successfully, companies must demonstrate demand in an attractive market, with a repeatable and scalable sales process:

• Demand maturity / market openness: Demand exists for your product in the market, with standardised off-take, and an easy ability to reach customers.

• Market size: The classic VC question – “how big is the TAM?” – remains crucial. Winners are those who are well-positioned to compete in a large market - >£5bn is a helpful guide.

• Downstream value chain: Path to market is clear, e.g. distribution exists, with no change required to other margins/incentives in the value chain.

Resource maturity

Market demand alone isn’t sufficient; scaling a climate technology requires robust supply chains, scalable production processes and financial support to grow:

• Capital flow: Return profile for your project / repeatable unit is attractive to equity and debt funders and repeatable. Risks are sufficiently mitigated through operational track record and/or insurance.

• Project development, integration and management: Proven track record of deploying this technology at scale in real-world applications, with predictable outcomes for time and cost.

• Infrastructure: Abundant, implementable infrastructure exists to support the new technology.

• Manufacturing & supply chain: The components and manufacturing processes used already exist, with no need for invention of new manufacturing techniques or complex sub-assemblies.

• Materials sourcing: Inputs are readily available. None of the materials used, either as an input or in off-the-shelf components, are subject to geopolitical risk.

• Workforce: Existing talent can deploy and operate your technology at scale with little training required.

License to operate

Regulatory, policy and public perception factors can significantly impact whether a technology scales:

• Regulatory environment: No changes in regulations are required to deploy the technology. Application of those regulations are predictable and won’t risk delays.

• Policy environment: No policy interventions are required to drive adoption.

• Permitting and siting: Predictable process regarding time and budget that is repeatable.

• Environmental and safety: No negative externalities environmentally.

• Community perception: Strong public support for this technology.

These criteria offer a strong benchmark for building a best-in-class climate company, regardless of sector. I would add one additional bucket which, while implied above, is worth pulling out explicitly:

• Team: A high-performing team is essential for successfully scaling a climate tech company. The team should be world-class in their respective fields, with capabilities that align with the critical milestones they need to achieve to get to scale (more on that in the next section). Equally important is their ability to attract and retain top-tier talent to fill gaps in expertise as the company evolves.

So, from this, we now know where we’re headed. So how do we get there?

---

Outcomes to Scale: Critical Milestones

It’s common sense that having a mature technology but lacking commercial traction wouldn’t be sufficient to raise the funding needed to build a pilot, let alone a commercial demonstrator. So how do you progress these in tandem and how do those align with investor/funder expectations?

To do this, we’ve developed a framework that we call the “Outcomes to Series B”, which we believe is best used in parallel with a laser focus on the 3-4 inflection points that you need to achieve on the route to Series B and beyond - they are the critical path. The below provides some examples for these 3-4 inflection points:

• Prove the critical technical innovation, e.g. product evolution specifications, energy consumption declines, etc

• Prove the critical commercials, e.g. signed, bankable offtake agreements, partnership for a major route to market, etc

• Prove the critical financials, e.g. sufficient equity funding to deploy the first pilot, or securing project debt, etc

Sometimes there could be multiple within the same category, e.g. component and integration-level technical innovation or supply and demand-related commercial agreements - what matters is that these are on the critical path, so you can go no further without overcoming them. It’s likely that you’re going to draft the first list yourself but it’s important that you don’t stop there – go speak to other founders, friendly later-stage investors and get their perspective too. Iterate, iterate.

That being said, achieving those 3-4 milestones alone often isn’t sufficient; there are a bunch of other expectations that we’ll cover in the next section.

Outcomes to Scale: General Framework

Alongside the milestones above, which are specific to your technology and market, we also have a number of more generic milestones, which we have broken down by both stage and milestone domain.

At each stage (Pre-seed, Seed, Series A, Series B - we originally focused up to Series A but I’ve added Series B for completeness) we have 4 main milestone workstreams: Commercial, Technical, Team, and Fundraising & Operations. In each of these workstreams are the relevant milestones that we would expect a venture to have before targeting a relevant funding round. (i.e. If you want to raise a decent pre-seed, make sure you hit all the milestones in the “Pre-Seed” section).

This framework is not exhaustive and it’s not perfect - there will of course be edge cases which don’t fit; in particular, technologies that require either large or low amounts of capex to climb the TRL ladder (e.g. fusion or mobility respectively). Ultimately your best bet will be to speak to sector-specific investors at various stages, to see what they might expect from a target company. In any case, it’s best practice to build investor relationships early, before you need them, and now you have an easy discussion topic!

Pre-Seed Objectives

The objective of pre-seed funds is to try and eliminate the fundamental scientific risk attached to the approach, as well as verify key commercial/customer requirements. We recommend that teams have completed the below prior to Pre-Seed:

Commercial Milestones

• First version of the technoeconomic analysis complete

• Key suppliers and customers identified and key costs validated

• Other key external stakeholders identified (EPCs, etc)

• Material transfer agreements with suppliers

• Technology evaluation agreement with customers in over 50% of key target verticals

• Starter branding & website

Technical Milestones

• Expert validation on the technical approach

• Technology roadmap identified to TRL4 and TRL7

• Technology landscape mapped

• IP strategy in place

• Provisional patent (system-level) underway

• Lab space identified/secured

Team Milestones

• Founding team requirements mapped against target outcomes for Series A

• Founder indicator assessments complete (e.g. evidence of determination, technical ability, and the ability to recruit and lead through uncertainty)

• Gap analysis of team requirements vs founders and founding team

• Clear hiring strategy to Series A

• Potential Advisors identified / engaged

Fundraising & Operations Milestones

• Critical milestones, team and funding requirements are aligned with investor expectations

• Financial model complete, aligned with TEA, technical roadmap, and hiring plan

• Full fundraising plan to Series A (Identified as part of financial modelling)

• Fundraising materials complete and target investors identified

• Grant landscape mapped

Seed Objectives

Having taken the fundamental scientific risk off the table with the pre-seed funds, you’re now ready to raise a Seed round. With this funding you’re going to take your first engineering risk off the table, moving from bench-top to your first end-to-end unit, typically in the kilograms of material per day scale. We recommend that teams have completed the below prior to Seed:

Commercial Milestones:

• Further refinement of the technoeconomic analysis, including validation of key variables

• Letters of intent signed with customers, indicating offtake volumes, prices and quality

• Direct engagement underway with suppliers and other key stakeholders (e.g. EPCs)

• Featured in 1 or more major publications (trade and/or general press)

• Full website developed

Technical Milestones:

• Key patents filed

• TRL4 achieved with a clarified roadmap to TRL 8

• Technical performance in line with expectations for technoeconomic analysis

• Technical validation from one customer

Team Milestones:

• 100% of core tech lead roles filled (scientific, engineering, software, depending on project needs)

• Team gap-analysis completed against target outcomes to first of a kind commercial deployment

• Advisory board in place

Fundraising & Operations Milestones:

• Critical milestones, team and funding requirements are aligned with investor expectations

• Financial model complete, aligned with TEA, technical roadmap, and hiring plan

• Brand name investors engaged

• Strategic investors engaged

Series A

With the Seed funds, you’ve taken some of the engineering risk off the table, showing that you’re able to turn the fundamental science into a product and making necessary changes to the core design, input materials, etc, and are now ready to raise a Series A. With these funds, you’re now ready to take even more engineering risk off the table, to figure out how an integrated system would operate, deploy your first end-to-end pilot system and likely begin work on development of your first of a kind system. We recommend that teams have completed the below prior to Series A:

Commercial Milestones:

• High-confidence in technoeconomic analysis, with project finance model (if relevant) showing a realistic 20% pre-tax, unlevered, pre-terminal, nominal IRR

• Contracted future revenue of >$1m

• High-confidence on revenue >$10m from long-term offtakes, with a credible path to $100m in 5-7 years

• Experienced suppliers and other key stakeholders contracted, e.g. EPCs

• Additional mainstream PR coverage (1x feature) - consumer/investor facing

Technical Milestones:

• Component-level patents filed

• TRL5/6 achieved, depending on the technology - pilot is online and generating promising performance data

• Pilot decommissioning plan in place

• EPC scopes are well documented

• Demonstrator/Commercial FOAK space secured

Team Milestones:

• 100% of scaling roles filled or JDs live (Sales, Finance, Strategy, Regulatory, as needed)

• No gaps in leadership

Fundraising & Operations Milestones:

• Professional financial models complete

• Evidence of financial and accounting excellence

• Evidence of diligence by third-parties (venture debt, insurance, etc)

Series-B Milestones

With your previous round of funding you’ve deployed your pilot system, are gathering useful operational data, may even be selling offtake from that unit and have probably started development of your demonstration unit or commercial first of a kind project. With this next round of funding, we’re now really starting to scale and the proof points we achieve will be critical in unlocking the non-dilutive funding required to deploy multiple projects.

Commercial Milestones:

• Offtake contractually agreed, ideally on a take-or-pay basis for at least a sizeable percentage of it

• There is a pipeline of maturing projects, with similarities that indicate potential for scale

• Credible bill of materials and EPC contract tendering

Technical Milestones:

• TRL6/7 achieved, depending on the technology

• Front-End-Loading 2 achieved for the commercial demonstration unit

Team Milestones:

• Team focus change from technology development to project development

• Strong culture of safety, quality and efficiency

Fundraising & Operations Milestones:

• Interested Project Special Purpose Vehicle participants

What next?

Now you’re really scaling. Assuming successful completion of the Pre-Seed through Series B milestones, it’s likely that you’ll have a commercial first of a kind project, which is hopefully performing as per your high-quality technoeconomic analysis at an attractive IRR. You’ve proven that it works. Now can you do it again, with better terms and with investors with larger pockets?

How to Use This

Whether for fundraising insights or team alignment, this guide outlines key milestones to help you benchmark your journey to scale. This won’t be perfect and the edge cases won’t fit, but in most cases it will still be a handy guide.

If you’re at the start of your journey, or even if you’re already underway, a helpful starting point might be ‘starting from the end’; taking the milestones at Series B and seeing how quickly (and indeed, whether) you can get there from wherever you are today. Hopefully this gives you the clarity to focus on the hard part; execution.

On the milestones themselves, we’re always looking for feedback, so we’d love any you can share - you can drop me a note on LinkedIn. Good luck with your journey!

Credits: A huge thank you to Tim Woodcock, Julian Ryba-White (and the rest of Mark1), Erin Livesey-Becks, and the entire DSV Climate team for kicking the tyres and filling in the gaps.