This week:
How tech up-skilling of building materials factories works, and what the nerds love about that model
Why wildfire response (and disaster response in general) could present a massive tech opportunity for founders
What hot takes the nerds have on the $70B of VC funding that went into climate-tech just in 2022
Tapping into export markets by upskilling small factories
Shubhankar discusses an intriguing opportunity in upskilling small family-owned factories in emerging markets like India. These small operations generate $3-5 million in annual output but operate informally without standardized processes. Shubhankar suggests they could significantly increase revenues by meeting the stringent quality standards required for exporting. This would involve formalizing supply chains, procuring reliable inputs, optimizing production, and accessing export markets. The model is providing materials, training, and export access without acquiring the factories. Patric adds it's like private equity without the capital, helping owners stay independent while providing structure, repeatability and group buying benefits. Patric asks "So help me frame this for me. Like what size of factories would this be? Like paint a picture for me." Shubhankar responds they are often house-sized units with small furnaces, raw material storage and finished goods inventory all together.
Private firefighting to fill gaps in disaster response
Patric hypothesizes that private, tech-enabled firefighting forces could emerge as public disaster response struggles with talent shortages and slow technology procurement. He sees parallels in space, defense and healthcare where private actors drove more innovation. Drone equipment, data analytics and dynamic pathfinding could help contain fires, but public bodies can't acquire them readily. Revenue could come from subscriptions, per-fire fees, equipment sales and training. However, the long sales cycle for governments applies regardless. Shubhankar agrees the infrastructure must be rewritten fully, not just augmented with sensors. Shubhankar asks "What sort of revenue or profit pools could they be thinking of accessing?" Patric suggests subscriptions, per-incident fees, equipment sales and maintenance as areas to explore.
Too much climate capital chasing too few breakthroughs
Patric shares data showing climate tech investing reached $70 billion in 2022, more than vertical SaaS, edtech or construction tech. But climate could fall to $40 billion in 2023 as other sectors stay steady, indicating a supply-demand imbalance. With most impact requiring scientific breakthroughs, not just incremental progress, Patric worries non-technical investors lack the expertise to identify truly promising climate startups. An experienced macro investor told him more money went into carbon accounting software than the total addressable market. Shubhankar agrees climate software feels superficial absent progress on underlying infrastructure.
Energy audits and retrofits stand out in climate tech
Patric highlights Enter's business of streamlined building energy audits to determine the most impactful steps for carbon reduction. By assessing physical factors, not just utility data like other climate startups, Enter can objectively recommend upgrades without selling equipment or maintenance. With 20 million buildings needing retrofits just in Germany, Patric sees a huge opportunity for this B2B recommendator model to facilitate emissions cuts. Shubhankar agrees we need more climate startups addressing core infrastructure like Enter versus superficial monitoring.
In-space construction aims for cheaper space infrastructure
Shubhankar is intrigued by a startup Patric is meeting that aims to construct structures in space rather than launching them from Earth. This could greatly expand possibilities for space exploration and habitation if realized. However, they acknowledge the challenges of securing near-term funding without perfect timing. Still, the potential transformative impact makes in-space construction stand out from incrementalist climate models. Patric sees parallels to famous VC 101 examples like Microsoft and Apple in the scope of ambition. Shubhankar says "I think this is one of those things which if they pull it off and I think VCs are guilty of throwing around words like this a bit too much but I think something like this if it clicks it truly is transformative in so many ways."
Specializing in retail store construction and fit-outs
Shub discusses an upcoming meeting with a startup focused on constructing and fitting-out retail stores in Asia, where base buildings are handed over unfinished. Tenants must complete flooring, electrical, HVAC and cosmetic finishing themselves. Patric notes this is common in China but new to him elsewhere in Asia. Shubhankar suggests fully servicing retail store delivery could be a niche play akin to utterly dominating a small asset class. However, the business model remains unproven. Still, specializing in an overlooked segment could drive outsized customer loyalty.
Find more analysis on the Practical Nerds podcast
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Keywords: construction tech, climate tech, AEC, VC investing, upskilling factories, export markets, private firefighting, disaster response, climate investing, energy audits, building retrofits, in-space construction, retail store construction, emerging markets