Pre-purchases: an under-used financing tool for climate founders

Too many climate solutions stall because the capital arrives too late. Early projects require real money to prove performance, build infrastructure, and earn buyer trust, yet most traditional capital waits until risk is low. While venture capital looks for scale, project finance looks for stable cash flows – buyers want delivery, not promises.

But one financing tool has helped early carbon removal projects move forward faster: pre-purchase agreements. While they’re best known in carbon markets, the underlying model is far more general and far more adaptable than many founders realize.

Adam Fraser is CEO of Terraset. We sat down with him to discuss how pre-purchases work, why they are catalytic, and how climate entrepreneurs in any sector can start thinking creatively about applying this structure to their own projects.

Pre-purchase 101

Most climate founders are familiar with offtake agreements: a buyer commits to purchase a product or credit once it is delivered. Payment comes later, and risk stays with the developer.

A pre-purchase flips part of that equation. In a pre-purchase, a mission-aligned buyer pays some (or all) of the purchase price upfront for future delivery. The buyer takes on early risk in exchange for accelerating something they believe should exist in the world.

The key difference is timing. Pre-purchases move capital to the moment when it unlocks immediate progress. For a founder, this can mean:

• Funding first deployments or pilots
• Paying for measurement and verification work
• Demonstrating credible demand to other investors
• Reducing reliance on expensive or dilutive capital

For a buyer, this is a way to shape markets, not just participate in them.

Pre-purchases aren’t just for carbon removal

Carbon removal made pre-purchases possible, but it didn’t invent the logic. Any climate solution with high upfront costs, long development timelines, impact-focused buyers, or a reliance on early proof is ideal for pre-purchases.

This is why the model is relevant to sectors like renewable energy, water, resilience infrastructure, and other outcome-based climate assets. In each case, the problem is the same: markets reward delivery, but delivery requires capital first. Pre-purchases can solve that imbalance.

How pre-purchases are structured

Pre-purchase agreements vary widely, but most fall along a spectrum. At one end are traditional offtakes with no upfront payment. In the middle are hybrid structures with partial upfront payment and the rest on delivery. At the other end are full pre-purchases where capital is paid well before delivery.

Contracts usually define:

• The unit being purchased, such as a credit, service, or outcome
• The total quantity and delivery schedule
• Conditions around performance, verification, or reporting
• Remedies if timelines slip or delivery changes

In carbon markets, these units are tons of CO₂ removed. In other sectors, the unit could be megawatt hours, gallons of treated water, avoided emissions, or another clearly defined outcome. The specific mechanics matter less than the principle. Capital is deployed earlier because doing so makes the project possible.

Pre-purchases are used by a unique buyer type

Pre-purchases usually come from buyers with a mission-driven mandate and some flexibility on risk. They could be:

• Corporate sustainability leaders who want to accelerate solutions, not just offset impact
• Foundations and family offices that can blend philanthropic and market goals
• Buyer coalitions that spread risk across multiple participants
• Nonprofits (like Terraset) that can pool philanthropic capital for purchases

In carbon removal, this has included companies like Stripe, Alphabet, Shopify, and Terraset. Similar buyer profiles exist in other climate sectors, even if the structures have not yet caught up.

An important nuance is that most buyers don’t just make pre-purchases. They typically balance a small number of higher-risk early commitments with a larger number of lower-risk purchases. Founders should expect that and plan accordingly.

Where nonprofits come in

One of the least intuitive but most powerful lessons from carbon markets is the role nonprofits can play. Nonprofits can uniquely aggregate philanthropic capital that cannot invest directly, absorb early risk, recycle capital, and act as neutral market builders rather than single buyers.

For founders, this opens up an entirely new set of buyers. Instead of asking whether a buyer or investor will fund the entire gap, the question becomes whether a nonprofit partner could help structure early demand and de-risk the project.

Practical lessons for founders considering pre-purchases

1. Meet the buyer where they are
   Early buyers often have an entrepreneurial, mission-driven mindset – they want to be at the forefront of solving global problems. At the same time, a project is one priority among many within their corporation, family office, or foundation. Making pitches accessible and easy to understand without dumbing down or misrepresenting the opportunity is critical. 
2. Start with credibility, not hype
   Early buyers care deeply about trust. Be honest about what is proven, what is still uncertain, and what milestones matter most.
3. Understand buyer motivation
   Some buyers are focused on removing their footprint. Others want to help create a solution. Some care about wider impact on communities and the environment. These are very different conversations and should shape the opportunity.
4. Find strength in numbers
   One credible buyer can unlock many others. Look at buyer coalitions or clubs where a shared commitment can reduce perceived risk.
5. Plan for delays
   Everything takes longer than expected, so build buffers and grace periods into agreements from the start. Try to maintain flexibility as much as possible, especially on terms like delivery dates. This will keep doors open for potential future customers who need to hit a specific deadline.
6. Humility is key
   Climate markets compare very different solutions side by side. Criticizing other approaches rarely builds confidence.

A tool worth adapting

Pre-purchases aren't a silver bullet, and they won't replace venture capital, debt, or project finance. But they can complement all three when used thoughtfully.

For climate entrepreneurs outside carbon removal, the real takeaway is not to copy a specific contract. It's to rethink how capital, buyers, and mission can interact earlier in the life of a project. The most exciting outcome would be founders in other climate sectors looking at this model and asking, “How could a version of this work for us?”

That question alone is a step toward unlocking more climate solutions, faster.

Adam Fraser is a values-driven, collaborative leader with extensive experience at the intersection of nonprofit, philanthropy and corporate business, particularly in the worlds of climate, sport and social impact. His particular ability to navigate the complex matrix of needs of partners, stakeholders and funders with those of community leaders and delivery agents has allowed him to generate tens of millions of dollars of investment into frontline organizations to drive maximum social return on investment through tangible impact on the ground.