Defining Value Propositions

The climate technology sector is booming globally, particularly in the UK where $4.3b has been invested into climate tech startups in the last five years.

Defining your value proposition is an incredibly powerful way of helping your green tech business to standout from the crowd. As a climate tech venture capital fund that invests in UK early stage green technologies, we understand the importance of a business having a clear and defined value proposition that can be easily communicated.   

Your value proposition is crucial if you are a startup, especially when pitching for funding or entering a new market. Being able to quickly and concisely communicate why your technology is the best alternative is invaluable.

At the Clean Growth Fund. we work hand-in-hand with our sister-company, Carbon Limiting Technologies (CLT), who give ongoing support to our portfolio companies once investment has taken place.

CLT’s Chairman, Christopher Tchen, has over 30 years of experience consulting with corporates and startup cleantech entrepreneurs, helping them to understand their customers’ needs and how to articulate their value proposition in a compelling way. In this article, Chris shares his techniques and tools to help you to develop your most impactful Value Proposition.  

Creating strong value propositions

A value proposition is a concise statement of benefits that a company (or technology) promises to deliver to its customers. A well written value proposition:

  • is easy-to-understand
  • clearly explains how your technology fills a need
  • concisely communicates benefits and costs (both financial and non-financial)
  • state why it’s better than other technologies available on the market

The ideal value proposition is ‘to-the-point’ and appeals to a customer’s strongest decision-making drivers.

Finding your value proposition

Your value proposition sets you apart from your competitors. Finding your value proposition, particularly in climate technology, will likely take some in-depth research and development of a deep understanding of your competitors and your market.

Consider the below questions:

  • Who are your customers?
  • What are your customer’s problems that you are trying to fix?
  • What risks is a customer taking by choosing your technology over another?
  • Who are your competitors?
  • Why is your technology better than your competitors?
  • What benefits does your technology have for the environment?
  • Can you prove your value proposition? Quantifiable evidence to back it up.

Take a leaf out of IKEA’s book

IKEA provides a great example of a value proposition that goes beyond products and price, as it includes a large number of benefits over competitors as well as some unusual ‘costs’ for customers. Introducing a new sustainable technology to market is very much like this, as both operational and financial requirements are often very different from conventional technologies.

Benefits of IKEA:

  • Designer (Nordic) furniture at reasonable prices
  • Immediate purchase (furniture sold at traditional stores often have a 6+ week wait time)
  • Be inspired by their displays – purchase coordinated accessories
  • Lunch at low prices
  • Excellent parking
  • Childcare (the ball pond!)
  • “A day out”

Costs of IKEA:

  • The price of the furniture (modest)
  • Being your own delivery driver and warehouse person (but no delivery charge)
  • Becoming a furniture maker at home (furniture from competitors is usually delivered constructed)
  • Unplanned purchases – when did you ever only buy what you planned on at IKEA?

Given the Benefits vs Costs above, practice what you would write as IKEA’s value proposition. We think we would write something like: ‘Inexpensive, durable and fashionable furniture, available immediately.’

Even with the cost of delivering and having to make your own furniture, the IKEA value proposition remains compelling to millions of customers globally, as customers can quickly calculate the benefits of making the trip to IKEA and lugging it home in their car versus using traditional competitor furniture brands.

Adapting your value proposition

Consider that your value proposition may need to be adapted for each type of customer that your technology comes into contact with. Think about and write down the different customer types that your tech will have along the way – for example: investors, manufacturers, distributors, installers of your technology and the end customer. Your value proposition when pitching to investors may need to be completely different to the value proposition that you would use for an installer of your technology. See below an example of how to alter your technology’s benefits depending on who you are targeting:  

Customer Segment: InvestorCustomer Segment: Installer
Invest in our company because our technology: Saves the most carbon emissions vs other available alternativesOffers better potential financial returnsInstall our technology for your customers because it is: more reliable than current available technologiesquicker to install saving you time

Tool for writing a value proposition for each customer segment

When creating a value proposition for each customer segmentation, try using the below tool to help define and write each one. Once you have chosen your Customer Segment, begin by writing down the Benefits that your technology has for this customer. Next, write down the Costs for this customer (‘costs’ are the risks or tasks that your customer takes on by choosing your technology over another). Finally, write your Overall Proposition Description (this is where you form your concise value proposition that meets all of the customer’s needs and fears).

Communicating value proposition

When you’re a clean tech start-up, it’s important that you can easily prove your value proposition and demonstrate your technology’s claims. For example, when pitching to a clean tech fund for investment, you’ll need hard evidence and research that verifies your carbon emissions savings projections – so do ensure that you have put in the work to ‘back up’ your value proposition. A value proposition is incredibly powerful when its quantifiable, for example “Our technology is fives times faster than current available alternatives”, or “Our technology can help to reduce carbon emissions by up to 30%”.  However don’t ignore the costs or issues your customer will face – including them in your definition of the value proposition will force you to consider how to help customers address or mitigate them (for example IKEA’s excellent car parks and abundant trolleys help customers to mitigate the cost of being their own delivery person).