Grants are cheap, not free
Grants do not take equity, but they carry costs: application time, reporting, restrictions on how money is spent and often a requirement to match part of the funding yourself. That match typically has to come from equity or revenue, so plan the two together.
Equity: fund the company, not the kit
Equity investors expect high growth returns, which makes it an expensive way to pay for hardware installed at customer sites. Use it for product, team and early pilots. Explain to investors how later deployments will be financed so the equity round is not inflated by capital costs.
Project and asset finance
Once assets produce reliable savings or revenue, lenders and specialist funds can finance them against those cash flows. Terms depend on the track record of the technology, the strength of the customer contract and who carries performance risk. Early projects are often the hardest to finance, so a first few may need to be equity-funded.
- Long customer contracts make projects easier to finance.
- Performance guarantees shift risk and change pricing.
- Warranties and insurance on equipment reduce lender concerns.
Terms to watch in climate rounds
Watch milestone-based tranches, where investment is released in stages; they can protect investors but leave you short if targets slip. Check whether investors restrict you from taking project debt later, and how impact reporting obligations are defined.
Climate funding sources and what they cost you
| Source | What it costs | Best used for |
|---|---|---|
| Grants | Time, reporting, match funding | Research and demonstration |
| Equity | Ownership and some control | Team, product, early pilots |
| Project finance | Interest and security over assets | Proven deployments |
| Equipment leasing | Lease payments | Customer-site hardware |
Questions to prepare before you pitch
- Will milestone tranches be tied to targets we control?
- Would this round restrict us from raising project debt later?
- How will impact reporting be defined, and who pays for verification?
- What happens to grant obligations if the company is sold?
How KJ Enterprises evaluates climate tech businesses
KJ Enterprises looks for climate businesses that match each type of cost with the right type of capital, and whose AI demonstrably improves returns per deployment.
If that describes your company, you can apply for investment. Related reading: the complete funding guide and the step-by-step how-to.