No One Pays for Green Anymore - Yair Reem (Extantia)

Episode Overview

• The episode argues that the "Green Premium" model is no longer viable and climate tech must instead offer a "Green Discount" by being fundamentally better, faster, or cheaper than existing solutions.
• It redefines this "discount" not just as a lower price, but as superior overall value, including long-term operational savings, enhanced efficiency, and supply chain resiliency.
• The conversation emphasizes that for climate tech to succeed, founders and investors must align with the core business priorities of industrial customers, such as cost and performance.
• A key theme is the necessity of partnering with large industrial polluters, viewing them not as adversaries but as essential partners for scaling decarbonization technologies.

Key Concepts

• Green Premium vs. Green Discount: The central argument is the shift away from expecting customers to pay more for sustainable products ("Green Premium") towards the necessity for climate technologies to offer a "Green Discount"—meaning they are either cheaper or provide superior performance.
• Value-Driven Adoption: A successful green product can justify a higher initial cost if it delivers a compelling long-term value proposition, such as significant operational savings, reduced maintenance, or enhanced efficiency.
• Industry-Centric Product-Market Fit: Climate tech success hinges on understanding that industries prioritize price, performance, and resiliency. The most effective solutions address these core needs first, with sustainability as a powerful secondary benefit.
• The Role of Transition Technologies: The discussion distinguishes between long-term "net zero" solutions and more immediate "transition technologies" (e.g., sustainable aviation fuel) that are crucial for helping industries decarbonize in the interim.
• Collaboration with Heavy Industry: Instead of being viewed as adversaries, major industrial polluters are presented as essential partners for scaling decarbonization solutions due to their infrastructure and market size.
• Supply Chain Resiliency as a Key Driver: In the wake of geopolitical and pandemic-related disruptions, offering a resilient and localized supply chain has become a significant and valuable selling point for new technologies.
• Evolving Investor Focus: Venture capital evaluation is shifting from a primary focus on technological innovation to a greater emphasis on a startup's go-to-market strategy, commercial traction, and alignment with real industry demand.

Quotes

• At 0:02 - "New technology, always comes with a premium. There is no single technology almost that in iteration number one was cheaper than previous technology." - Yair Reem explains that initial versions of new technologies are inherently more expensive than established ones.
• At 0:27 - "Companies need to build fundamentally interesting solutions for industry, solutions that are faster, better, cheaper, and they happen to be green." - Yair Reem outlines his investment thesis, emphasizing that a solution's primary value must be its superior performance, with its green attribute as a secondary benefit.
• At 18:31 - "So we're happy to pay a small premium for a while, but the value is bigger." - Yair Reem explains that customers will accept a higher initial cost for a green product if the long-term value, such as energy savings or reduced maintenance, is significant enough.
• At 20:37 - "They are not our enemy. They are the guys that we need to work with and go hand in hand on a journey to decarbonization, to net zero." - Reem argues that large industrial polluters should be seen as partners in the green transition, as they are essential for scaling new technologies.
• At 25:54 - "We have cost-competitive graphite, and it's resilient, and it's green. All of a sudden people are listening." - Reem shares a real-world example of how a portfolio company succeeded by leading its pitch with cost-competitiveness and supply chain resiliency.
• At 31:19 - "We don't care about the technology anymore. We've seen a lot of stuff solving steel... We need to understand the go-to-market. We need to understand the traction." - Reem emphasizes that VCs have shifted from a purely tech-focused evaluation to prioritizing a startup's go-to-market strategy.
• At 32:46 - "Get the right people, the right team. I think that's the most important thing for us as partners... I'm as good as my team." - When asked for advice for aspiring VCs, Reem stresses the supreme importance of building a strong, collaborative, and capable team.

Takeaways

• Frame your climate tech pitch around its core business value—cost-competitiveness, superior performance, or supply chain resiliency—and treat the environmental benefits as a powerful bonus.
• Actively seek partnerships with large industrial incumbents; they are not adversaries but essential customers and allies for scaling decarbonization efforts.
• When developing a product, focus on demonstrating superior long-term value through operational savings or enhanced efficiency, rather than just competing on initial price.
• Maintain continuous dialogue with your target industry to deeply understand their primary business drivers and pain points, ensuring your solution aligns with their priorities.