Every hardware cleantech company eventually hits the same wall. It has proven the technology, signed early customers, and raised what venture capital was willing to give it. What it needs next — capital to build first-of-a-kind plants, fleets or scaled infrastructure — looks nothing like the capital it has raised so far. And the investors who specialise in infrastructure-scale capital won’t touch it yet, because the risk profile isn’t one they’re built to underwrite.
This is the missing rung: the gap between what venture capital will fund and what infrastructure capital will touch. It isn’t a temporary market wobble. It’s structural. But there are now well-worn routes across it, and the founders and investors who understand them early-on are building — and backing — companies differently.
Why the gap exists
The mismatch starts with fund mechanics. A standard venture fund is built to exit in seven to ten years. Climate hardware — plants, fleets, first-of-a-kind facilities — typically takes eight to fifteen years to reach commercial scale. Most funds structurally cannot hold long enough to see a hardware bet through to a viable exit.
The exit market has adjusted accordingly rather than closing outright. SPACs, which accounted for 42% of climate tech exits in 2021, made up just 4% of them in 2025; traditional IPOs actually rose 17% year-on-year but remain selective, reserved for companies with clear unit economics and regulatory tailwinds; and M&A now accounts for roughly 89% of all climate tech exits (Sightline Climate, State of Climate Tech 2025). The quality bar rose; the exit route narrowed to the ones that can prove commercial readiness.
That narrowing shows up hardest at the stage in between. In a 2025 investor survey, 51% named the first commercial-scale facility as the toughest stage to finance through 2026, and 69% expect first-of-a-kind funding to shrink further. Within that, 40% flagged deployments in the $45–100 million range as the hardest of all to place — too large for a venture fund’s cheque size, too small and too unproven for an infrastructure fund’s mandate (CTVC / Sightline Climate, 2025 Climate Tech Investor Pulse Check). It is a gap inside the gap, and it is exactly where most hardware cleantech companies live for a period of their life.
Meanwhile, early-stage venture’s own share of total climate tech capital has been shrinking — from around 20% of the market in 2021 to under 8% more recently — as the market matures and capital concentrates in fewer, larger, more provable bets (Sightline Climate, Climate Tech Investment 2025). There is less capital, not more, arriving to underwrite the riskiest stage of hardware scale-up.
Why it bites harder in Europe
European hardware cleantech faces a version of this gap with a specific local flavour. A larger share of Europe’s early risk capital is public or development-bank money rather than private venture — the European Investment Fund alone has committed tens of millions of euros directly into early-stage climate hardware funds, and the EIB Group’s climate-related financing runs into tens of billions of euros a year across the bloc (EIB Group, 2025–2026 press releases). That public capital is patient and mission-aligned, but it is not infinite, and it does not always know how to hand a company off cleanly to private infrastructure money once the technology risk is retired.
European corporates, meanwhile, are structurally more risk-averse about writing that handoff cheque themselves — which matters, because the data suggests the appetite for climate capital in Europe is real, even where the follow-through isn’t. New climate-focused funds raised $103 billion globally in 2025, and Europe led with 54% of that total against just 16% from the US — but only around 60% of the capital these funds targeted actually closed, leaving a roughly $69 billion gap between ambition and committed capital (Forbes, December 2025). Europe wants to lead on climate capital. It is still working out how to commit at the pace its own hardware pipeline needs.
The pathways across the rung
None of this means the rung can’t be crossed. It means it has to be crossed deliberately, using structures many founding teams have never had to use before.
Offtake agreements, converted into debt. For a climate hardware company, a credible offtake agreement functions the way annual recurring revenue functions for a software company — it is the evidence a lender needs. A well-structured offtake, ideally covering 30–50% of a project’s output, can unlock debt financing for a meaningful share of the remaining capital need (World Economic Forum, March 2025). This is now a repeatable model, not a one-off: carbon-removal supplier UNDO used a five-year offtake with British Airways to secure project debt from Standard Chartered, converting a customer contract directly into balance-sheet capital (ACORE, November 2025). The catch is bankability: lenders want fixed pricing, clear milestones and take-or-pay terms, and first-of-a-kind diligence alone can run two years or more, dominated to date by government-backed lenders willing to do that work (US Department of Energy, November 2024).
Mergers and acquisitions, used as an accelerant. With M&A now the exit route for the large majority of the sector, scaling founders should treat consolidation as a legitimate route to reach infrastructure scale faster than an organic build-and-raise cycle allows — combining with a strategic or trade buyer to access balance sheet, distribution or an existing asset base, rather than waiting for a venture round that may not arrive on the timeline the technology needs.
Blended capital stacks. The bankable capital stacks now being built for first-of-a-kind projects combine grant or development-bank funding, venture or growth equity, project debt and offtake-backed revenue in a single structure, rather than expecting one type of capital to carry the whole risk. Layering is now the norm, not the exception, precisely because no single investor class is built to hold the entire risk curve from technology proof to commercial scale.
Corporate capital, deployed as an LP rather than a captive venture arm. A corporate venture unit lives or dies with the sponsoring business’s own fortunes — when a parent company hits a downturn, the venture arm is often one of the first things cut, regardless of the merit of its portfolio. That isn’t a hypothetical risk: several corporate venture units, including ones dedicated to decarbonisation, have closed in the past two years as their parent companies came under financial pressure. A corporate LP position in a specialist fund is structurally more durable — it survives a change of CFO or a difficult results season in a way a captive investment team often does not, while still giving the corporate the market access and technology visibility it was after.
Separating the project vehicle from the operating company. Infrastructure investors underwrite cash flows, not technology risk. Keeping the project — the plant, the fleet, the specific asset — in its own vehicle, distinct from the company that owns the underlying IP and technology risk, allows each to be financed by the capital type actually built to hold that risk: equity into the operating company, debt and infrastructure capital into the project vehicle.
What this looks like from both sides of the table
We’ve seen this structuring problem from both the founder’s side and the investor’s side, and it is recognisably the same problem in each direction. On the founder’s side, sharpening how a fast-growing life-sciences company told its investor story — putting the milestones, the capital need and the risk profile into terms an investor could underwrite — was less about the pitch and more about proving the company understood its own financing pathway. On the investor side, a strategic assessment carried out for a venture investor evaluating a clean-technology portfolio company came down to the same question from the other direction: does this business’s financing plan actually match the capital available to it at each stage, or is it assuming a Series B that the fund economics won’t support? Both engagements were, underneath, about the same thing: matching the structure of the ask to the structure of the capital that can actually say yes.
The implication: design for bankability from day one
The founders and investors crossing this gap successfully are not waiting until the venture round runs out to think about infrastructure capital. They are designing for it from Series A — building the corporate structure, the customer contracts and the project vehicle with the eventual debt or infrastructure raise already in mind, rather than retrofitting bankability onto a company that was built for a different kind of investor.
For venture and fund managers, the opportunity is to be a genuinely constructive part of that journey — helping portfolio companies structure toward the next capital type rather than defaulting every follow-on conversation to another equity round. For scaling founders, the lesson from the week’s fund-manager conversations was blunt: financing is no longer just about the cap table. Offtake, debt, blended structures and project vehicles all shape whether a company reaches scale — and very few founding teams have had to navigate all four before.
The rung between venture and infrastructure capital isn’t disappearing. But it is no longer uncrossable, and the businesses treating it as a design problem — rather than a funding gap to hope their way through — are the ones reaching commercial scale on their own timeline, not the market’s.
