As we close the books on one of the most unusual years in our history and look to a better, brighter, and less catastrophic 2021, we can at least assure ourselves that 2020, at minimum, offered us some interesting lessons for the energy tech space. Here are some of ours:
- It pays to be green and clean – 2020 accelerated interest in energy transition as the oil and gas industry experienced yet another major disruption. Businesses that were not previously marketed as emissions reducing strived to clarify their role in energy transition. |
- SPACs are a viable option for earlier stage companies to access hungry public capital – 2020 saw the largest number of SPAC IPOs and subsequent deSPACs in financial history. As companies look for alternative methods of raising capital and going public in a dry private capital environment, SPACs will continue to be an attractive alternative.
- Never take capital for granted – with the private capital shortage, companies that coincidentally raised money in late 2019/early 2020 benefitted from having sufficient runway to take them through the worst of the pandemic, while companies that had planned to raise money later in the year were left with the short end of the stick. The lesson may be to raise capital when you can – and not necessarily when you absolutely need to.
- Who backs you matters – companies with stingier or less flexible investors suffered more when things got tough. Finding a backer with deep enough pockets and sufficient belief in the business to be able to provide emergency capital in unforeseen circumstances mattered more last year than ever.
- Who buys from you matters – similarly, the quality of a company’s customer base is thoroughly tested in times of distress. Quality can be measured in several dimensions: creditworthiness of the customer, resiliency of the customer’s budget, confidence in and commitment to the solution by the customer, and strength and level of advocacy within the customer’s organization. Working across lower quality customers or with less developed customer relationships was the source of a lot of the customer attrition in 2020.
- Ability to effectively pivot business model and end market exposure is a very useful skill to have – companies that were able to move quickly to reduce exposure to oil and gas activity and increase exposure to other markets like other industrial services (or even PP&E) had access to more capital and commercial contracts during the pandemic than those that had siloed themselves into being strictly oil and gas facing. For energy tech companies, 2020 demonstrated the value of flexibility and understanding the transferability of technology between industries.
- Remote working is sustainable, and in many cases, preferable - 2020 was a big experiment in the merits and challenges of remote working. For most office jobs, going remote affected productivity less than expected, though sacrifices in face-to-face interaction had an obvious impact on roles that relied on in-person sales or marketing. For heavy industry operations like working on an offshore oil rig, 2020 was the year to push for more automation and remote operations. Many companies found remote working not only acceptable but sometimes preferable in lowering operating costs and company emissions.
- Achieving 1.5C is really, really hard - with the pandemic, global emissions fell nearly 9% y/y, meaning we were finally on track to delivering the emissions reduction needed year to year for our 1.5C goal. But as we saw, that reduction did not come without massive disruption and economic fallout. 2020 demonstrated that getting to our green paradigm near term may only be possible alongside enormous sacrifice.
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