Climactic launches hybrid fund to get startups through the ‘valley of death’

The article discusses a new initiative called Material Scale, launched by Josh Felser, co-founder of the venture firm Climactic, aimed at helping climate tech startups—particularly those producing novel materials—overcome the challenging "valley of death" phase. This phase occurs after startups have developed prototypes but struggle to scale production and secure enough sales to sustain growth. Unlike software companies that can scale rapidly with cloud services and often operate at negative margins initially, materials startups face skepticism from markets about their ability to scale without guaranteed customers. Material Scale addresses this by creating a hybrid debt-equity investment vehicle that leverages purchase orders from established buyers to fund startups’ production costs with minimal equity dilution. Material Scale’s initial focus is on climate tech startups in the apparel industry, with Ralph Lauren joining as a buyer for the platform’s launch. The model involves buyers committing funds to cover material costs at market price, while Material Scale provides the remaining capital through loans and warrants. This simultaneous deal structure between buyers, Material Scale,