Many climate startups mistakenly believe they can’t become venture backable by selling to utilities. While it’s true that long sales cycles are common in the utility space, which have made many founders and investors wary, things are starting to change. In many markets, utilities are now specifically looking to buy from startups – meaning it’s prime time to start exploring what this path has to offer.

Grace Penders is a Climate Investor at Equal Ventures. We sat down with her to chat about finding the right stakeholder at a utility, what startups can learn from consultants, and the best people to hire to make these sales.

Understanding utilities

Utilities come in different shapes and sizes

Utilities can often be complicated, highly hierarchical entities, characterized by conservative and bureaucratic thinking. But they come in many different forms. We have utilities – including investor owned, publicly owned, and cooperative / member owned utilities – all of which have distinct qualities and processes. For instance, if you’re selling to an investor-owned utility, you’ll typically have to go through a multi-step, multi-stakeholder process, but if you sell to public utilities or cooperatives, you won’t necessarily need to go through these hoops.

These archetypes can also be segmented by size. Smaller utilities might make decisions quickly, but could have a slightly more traditional outlook, while their larger counterparts can be more modern and forward looking, as they’re more likely to have the capacity for trialing innovation. These nuances impact what utilities are looking for, how they think about investments, and their approval processes, so think about who you’re selling to and make sure you’re matching your offer to what they actually tend to buy.

The average sales cycle

With a larger utility, it’s more likely that many different stakeholders and departments will need to be involved so these sales cycles can take months to years – far longer than with smaller utilities. But lately, this is beginning to shift and some deals have moved in a matter of weeks. Plus, the longer timeline isn’t necessarily something that should put you off; start now and build a big enough funnel that accounts for these complications. For example, you can start with smaller entities like Community Choice Aggregators. The more CCAs you work with, the more coverage you’ll have, and the easier it will be to sell to a larger utility that services those same residents.

Tactics for engaging utilities

Getting in front of the right person

In many ways, selling to utilities is similar to finding and applying for public funding. On the one hand, there’s a routine, formulaic aspect to the process, involving RFPs that operate on fast-moving deadlines. But behind the scenes, you need to be engaging with decision makers and finding several internal champions – you can’t show up cold. 

Again, utilities can be very large organizations, so finding the right stakeholder will be a matter of trial and error. Titles vary, but you’ll typically want to work with a champion at the VP or Director level, whose department will be directly using the solution. They will be heavily involved in bringing the solution back to their specific department and helping the company navigate the multi-stakeholder sales process. At smaller utilities, like co-ops, you’ll want to speak directly to the person who’s in charge of the specific program and will be using the product. 

Positioning yourself

In conversations with utilities, be mindful about how you position the scope of your company. You might have an ambitious vision for the future, but if you present yourself as overly large, you’ll increase the number of stakeholders you need to talk to. Whereas, if you downplay things, you might expedite the process and find it easier to close small bespoke deals, but risk the utility seeing you as one specific use case without understanding your full potential.

Look to the consultants’ playbook 

Selling to utilities is not a new thing. Consulting companies have been doing it for years, so you can learn from their tried and tested practices. 

First, understand that utilities don’t buy products. They buy one of two things: big capital expenditures and services. The former are the biggest contracts you can get with a utility, but involve a long list of steps, like public participation, legal hearings, and determining the rate of return. This complexity is why many startups stay away from selling to utilities, and isn’t where you want to shoot your shot first. Instead, think about things from a solution side, which lies somewhere between capital expenditures and services.

So, when consulting companies sell to utilities, it’s not like selling a product – there’s a whole journey involved. For one, their approach to selling to utilities mimics a “Waffle House menu:” they show them everything they have to offer, but with different packages that are designed to build distinct capabilities. They also break things down into specific scopes of work – starting with a basic package, and then with further options that become progressively more advanced. Borrowing from these strategies will help you meet utilities’ expectations throughout the sales process.

Talk to other founders

Even if you think you understand how to sell to utilities, and even if you’ve worked in a utility before, you need to speak to other founders before you start the process, in the same way that you’d speak to your peers about the current environment before you start raising a round. Surround yourself with a handful of other founders – a shadow board – who’ve already navigated this and can give you insight into the complexity and nuance that’s needed in relationships with utilities.

Stay away from wary investors 

If utilities are likely to be your customer somewhere down the line, and your investors are guiding you entirely away from selling to utilities, you need to educate those investors. Utilities represent a major consumer of energy-related products and services, and if your business can address their needs, you must eventually invest the time and effort to develop that market. To get to the next level, they will need to be your customer down the line.

Hire the right people

A good salesperson won’t necessarily be good at selling to utilities. As with any other industry, you have to speak the language. Founders often choose to hire people who have previously worked at utilities, but this isn’t always the right call – a smart move might be hiring people who have sold to utilities or worked as consultants to utilities in the past. Additionally, folks with that kind of background will also have a vast network that they can sell into right away; win win!

Grace Penders is a climate investor with experience across early-stage and late-stage investments. She focuses on companies that accelerate the energy transition, especially around solutions that push forward energy flexibility. Grace is the Climate Investment Lead at Equal Ventures and had previously invested at Energize Capital. Prior to investing, Grace worked in the electric utilities space where she worked with 14 electric utilities on clean energy, customer, and data initiatives.