New York is launching a $10 million program to support climate tech startups, following Massachusetts’ lead

The New York State Energy Research and Development Authority (NYSERDA) is introducing a $10 million convertible note program aimed at supporting climate technology startups while building back the state’s economy, which has been hit hard by Covid-19.

Earlier this year, Massachusetts Clean Energy Center’s (MassCEC) launched a similar program that offered $1.9 million to eight early-stage clean tech companies.

“Because economies were shut down, we also had concerns about the companies in which we had investments, and we had to think about how we could help those companies get through the pandemic,” Steve Pike, CEO of MassCEC said, explaining how the idea developed. NYSERDA and the California Energy Commission both reached out to MassCEC after it developed its program.

According to Carmichael Roberts of Breakthrough Energy Ventures (BEV), the MassCEC’s note program provided a great way for his firm to contribute much needed capital for adversely affected emerging clean technology companies. It also gave BEV the opportunity to evaluate these businesses for direct investments down the road, he said in a release when the funding recipients for MassCEC’s Bridging Recovery for Innovators Driving Green Energy Solutions (BRIDGES) program were announced last month.

“The BRIDGES program supports companies that are developing the next generation clean energy products and services that will help Massachusetts and other states achieve their emission reduction goals more quickly and at lower cost than would be the case with the technologies and service models available in the market today,” MassCEC’s Pike said.

As a funding tool, the convertible note program offers startups the flexibility to grow, John Lochner, vice president of innovation at NYSERDA said.
Typically, if a startup issued a convertible note doesn’t generate cash flow early enough, the note converts to equity. Conversely, if the startup does generate sufficient cash flow, the note gets paid down. New York Green Bank is working with NYSERDA’s technology to market team to service the notes issued under the Climate Progress convertible note program.

“Climate tech innovation is a critical piece of the state’s map to reaching its climate goals,” Lochner said. New York’s Climate Leadership and Community Protection Act (CLCPA) mandates that New York state reach 70% renewable energy by 2030; it also says that the state has to have a zero-emissions electricity sector by 2040.

New York’s $10 million Climate Progress convertible note program is designed to provide catalytic capital to early stage climate tech startups provided that they have raised less than $25 million in private capital, have less than $10 million in annual revenue and have fewer than 50 employees, with at least one employee based in New York state

“One employee is the minimum requirement for consideration when we review applicants. [Applicants also] need to demonstrate how their product benefits New York state,” Lochner said.

In addition to aligning with New York’s CLCPA, an applicant must show benefits to New York such as a New York state-based supply chain, vendors or service providers, or that it has New York-based physical assets, or that it has a current or future market of customers in New York state.

Applications to the Climate Progress program are due by either January 6th or April 14th. Up to $500,000 in funding is available per approved project, NYSERDA said.

Under the BRIDGES program, eight early-stage, Massachusetts-based clean energy startups are receiving a total of $800,000 in funding from MassCEC and an additional $1.1 million in funding from MassCEC’s partner, the climate technology venture capital firm BEV and a syndicate of co-investors that includes SE Ventures, Clean Energy Venture Group and NOVA, the external ventures arm of Saint-Gobain.