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21st Century Carbon Removal Business (part 1)

October 28, 2021

This is a note about existing business models for carbon removal startups (part 1), leading into opportunities for new business models (part 2).

You can watch the full video here. I've talked a bit about "are you selling a physical product vs carbon credits" before, and this is digging more into it.

In carbon removal, I've generally held this traditional "20th century" business model in mind: A company makes a product, a customer buys that product and pays the company.

For example, Apple makes a laptop, a student buys it and pays Apple for it. The carbon version: a company makes a carbon cement, a builder buys the cement and pays the company. Another example: a company makes biochar, a farmer buys the biochar and pays the company.

But I keep running into the same challenge with using this business model to get to gigaton scale carbon removal. To use this model, the product that you're selling must actually be faster, stronger, or cheaper. The challenge is when I add up all the opportunities to make things faster, stronger, cheaper, the sum isn't removing gigatons of carbon.

Which means we need a different model.

First off, does this 20th century model work for carbon removal businesses?

Yes, in a focused range of opportunities. Here's two categories that I see working for carbon removal companies using this model:

1. Stronger -- there are a handful of opportunities to make stronger, better performing materials using carbon dioxide. Example: stronger cement by adding carbon dioxide gas.

2. Faster and cheaper -- "trim the supply chain" seems to be the most prevalent model for success in carbon removal. Here's the story: Your company produces a carbon based molecule on-site or nearby for a customer. This cuts shipping costs compared to alternatives. And it's produced nearby, so it's more reliable and won't get lost in shipping, delayed by a flood etc. Here's some real examples of "trim the supply chain" models: carbon dioxide gas made on-site for a greenhouse, biochar made on the farmer's land, and chemicals made right at the factory where they're used. I see many startups operating with this version of the model, and I'm sure there's more to come.

These business model can and will work. However, a few stronger materials and a bunch of supply chain shrinking companies aren't going to remove gigatons of carbon by themselves. That's where there's an opportunity for a shift...which involves rethinking what your "product" is. That'll be in part 2. In the meantime, you can watch the full message in the video here.

Are there any other "better faster stronger" business models you've seen in carbon removal besides the two I covered above? Hit reply!

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