What investors really look for in a climate startup’s financial model

Raising capital as a climate startup is unlike raising for any other category. On top of convincing investors you have a viable product, you have to demonstrate your decarbonization impact – all while operating at the edge of policy, science, and infrastructure. 

Despite this complexity, during the fundraising process – whether you're pitching to a climate-focused VC, an impact fund, or a catalytic lender – your mission risks being boiled down to a few spreadsheets. To win investor confidence, you’ll need to go beyond the basics and build a model that weaves storytelling, technical design, and strategic thinking.

Talha Kadri is a Lead on Enduring Planet’s Financial Planning and Analysis team. We sat down with him to find out what separates a passable model from a fundable one, from the ability to test scenarios to having clarity into your cash flow.

Tell the story first, then prove it with the model

Climate companies are rarely straightforward. Whether you’re deploying direct air capture systems or electrifying agricultural equipment, your value chain likely cuts across manufacturing, logistics, policy incentives, and customer behavior. A successful fundraise will depend on your ability to convince investors that you understand how these pieces fit together.

To pull this off, your financial model needs to be grounded in the real-world drivers that shape your operations, rather than relying on formulas that are pulled from thin air. A driver-based approach to modeling tells investors you understand the factors that are propelling your growth, like site acquisition pace, customer conversion rates, and policy-dependent adoption curves.

For instance, say you’re a company in the recycling space, where your business’s growth is tied to the number of physical collection hubs in the US. A driver-based revenue model would map out deployment timelines for each location, capacity utilization, and market-specific ramp-up assumptions. This gives both your and your investors a clear view into how each new site will contribute to your business’s performance, and which levers (e.g. timing, throughput, regional costs) will have the biggest impact.

Put unit economics front and center 

Investors are looking for systems that scale, and unit economics is the fastest way to validate yours – especially for hardware and infrastructure startups. Your model will need to answer questions like:

• What’s the cost of deploying one unit (one battery, stove, or software license)?
• What’s your margin per unit today, and in 12 months?
• When do you break even, and at what scale?

Separating unit economics from your core P&L will clarify these points, allowing you to drill into product-level performance and see how it rolls up into topline outcomes. In your model, this will look like a detailed unit economics tab that breaks down revenue, COGS, logistics, and servicing costs per unit. With this, you’ll be able to easily compute payback period and gross margin per product, while investors can better evaluate your scalability under different rollout scenarios.

Here, it’s also important to note that climate is unique from other sectors in that you’re often managing environmental unit outcomes as well as financial ones – such as $/ton of CO₂ avoided, cost per household electrified, or lifetime emissions savings per customer. Tying these units to impact metrics is pivotal when you’re targeting catalytic capital and sustainability-focused funds.

Scenarios matter more than forecasts

Investors understand that forecasting is not an exact science. They aren’t expecting accuracy, but are looking for a business that can adapt to change, and has a feasible back-up plan should growth fall short of your expectations.

So, while you can’t eliminate uncertainty and curveballs, you can plan ahead. With a flexible scenario builder that allows you to toggle key variables, you can test multiple paths to scale – from premium pricing with fewer customers, to a lower price but higher volume model, or a middle ground that optimizes margin and reach. 

Scenario analysis is a crucial but often missing component of most models – look out for a future Insight from us on why it’s indispensable for your business.

Cash discipline signals leadership

In such a capital-intensive sector, the size of your round matters less than whether you can make it last long enough to hit the next milestone – it’s no good raising $2m if you’ll need a $10m bridge after 12 months.

Having eyes on your cash flow with a 24-month rolling forecast is essential, but unless it links to your hiring plan, capex spend, and revenue recognition logic, you’re still flying blind. 

This gap is why we’ve developed the Cash Strategy Budget. This new tool gives you this essential visibility into your short and medium-term cash flow by itemizing: 

• Forecasted cash inflows (like your revenues, grants, or credit sales)
• Committed and variable outflows (such as payroll, capex, and contractor expenses)
• Key timing assumptions (including payment cycles and grant disbursement dates).

The Cash Strategy Budget helps you communicate your burn rate across scenarios, and gives you a clear line of sight into exactly when your next funding round will become necessary. It’s especially valuable for hardware startups, where capital staging is critical. When done right, a model that integrates these qualities becomes a blueprint – not just for raising money, but for running your business with discipline and clarity.