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\u201cEvery creator painfully experiences the chasm between his inner vision and its ultimate expression\u201d\u00a0 –<\/i><\/b>Isaac Bashevis Singer<\/i><\/b><\/a><\/p>\n Summary:<\/b> Carbon removal is at a \u2018chasm\u2019 point between early customers who are interested in visionary new products and a more mainstream market who desire pragmatic, whole solutions. There is some evidence that this transition is happening already in a very limited fashion.<\/span><\/p>\n Hi all, I\u2019m writing today as a participant in and observer to the early stages of the Carbon Dioxide Removal market, which appears to be at a crucial point. The hallmark of CDR purchases so far has been characterized by early customers who are intent on \u2018seeding the market\u2019, leaving an open question as to who a customer would be beyond that.<\/span><\/p>\n CDR.FYI\u2019s 2024 Year in Review<\/span><\/a>\u00b9\u00a0<\/span> sums up CDR at the end of 2024 as a:<\/span><\/p>\n \u201c<\/span>picture of a market that has been seeded and nurtured by a few hard-core buyers who have continued to increase their commitment while struggling to \u201ccross the chasm\u201d to the next stage of buyers who will further scale the market.\u201d<\/span><\/p>\n This post (Part 1 of 2) will be descriptive, talking about CDR\u2019s early customer segments by drawing from Geoffrey Moore\u2019s excellent Technology Lifecycle Adoption Curve, outlined in detail in his classic marketing book <\/span>Crossing the Chasm<\/span><\/a>.\u00a0<\/span><\/p>\n In Part 2 I will be more prescriptive, suggesting ways that CDR companies could cross the chasm to find new mainstream customer groups.<\/span><\/p>\n Here is a graphic of Moore\u2019s adoption lifecycle curve that I\u2019ll refer to:<\/span><\/p>\n From this, three segments are most relevant to the industry now: Innovators\/Enthusiasts, Visionaries (AKA \u201cEarly Adopters\u201d), and the Pragmatist Early Mainstream. In doing so I\u2019ll provide examples of CDR customers that are roughly in each of those segments to illustrate the nature of the voluntary purchasers to date.<\/span><\/p>\n A general sweep of this lifecycle curve paints a picture familiar to those who have followed the start of new technologies over time: Enthusiasts and Visionaries in an early market, followed by a much larger mainstream market, separated by a gap in expectations – The Chasm – denoting a marked difference in customer expectations for a more standardized, robust solution. Note how much bigger the Pragmatist segment is relative to the Technology Enthusiasts and Visionaries! Getting to that segment of customer is key to technology startups survival in the long run, and carbon removal is no different.<\/span><\/p>\n Technology Enthusiasts:<\/b><\/p>\n Description: <\/span><\/i>This group (sometimes called Innovators) are most interested in technology for technology\u2019s sake. They take pride in being the first to get their hands on something so they can experiment with it, and are usually the most forgiving of quality issues – priorities are access to anything new New NEW!\u00a0<\/span><\/p>\n To connect with these customers: <\/span><\/i>\u00a0Features and possibilities are most important. No need to sell the larger vision – the technical aspects and \u2018cool\u2019 factor of being the first are enough to convince.<\/span><\/p>\n CDR Example:<\/span><\/i> The first greenhouse customers from the famous <\/span>Climeworks \u2018Capricorn\u2019 site in Hinwil, Switzerland<\/span><\/a> which started selling CO<\/span>2<\/span> gas in 2017 are the nearest Enthusiast customers. At 900 tons per year, Capricorn was a demonstration project relative to the scale of later Climeworks DAC facilities – it closed down in 2022. Notably its first customers were <\/span>for the physical gas rather than for the carbon removal credits<\/span><\/i>. The voluntary market crediting standards had not been developed yet, and the main application of this demonstration site was to provide a feedstock.<\/span><\/p>\n Visionaries<\/b><\/p>\n Description: <\/span><\/i>This class of customer has a dream to transform the way business is done as a means of achieving a long range goal. That vision is the foundational basis of why they are making their usually high profile purchase. Typically, they are not very price sensitive at all, in service to the vision that they have for where the technology could go, and are willing to accept the product itself as enough – they\u2019ll figure out the details later once the supporting services get sorted out.\u00a0<\/span><\/p>\n To connect with these customers: <\/span><\/i>\u00a0Talk about The Big Vision about how this could revolutionize businesses, industries, and markets. (How to define those markets coming in Part 2\u2026) In effect, they provide that first client for a startup, enhancing visibility and ultimately credibility through a successful pilot project – so the customer can show the world that this thing works on a limited scale outside a laboratory.<\/span><\/p>\n CDR Examples:<\/span><\/i> In CDR, examples of this might be <\/span>the first Stripe purchases<\/span><\/a> long, long, ago (described in a <\/span>Zoom event<\/span><\/a> far, far away\u2026)<\/span><\/p>\n Also, when Shopify began <\/span>purchasing CDR in 2020<\/span><\/a> through its Sustainability fund, this was\u00a0 clearly a move to be in the Visionary position, epitomized by the words of CEO Tobi L\u00fctke: \u201c<\/span>We need more demand to get better pricing, but we need better pricing to get more demand. How do we solve this puzzle? By intentionally overpaying for carbon sequestration to kickstart the demand.\u201d<\/span><\/p>\n One could argue that the Frontier Offtake purchases (and also its earlier Pre-purchases) also constitute this type of buying cycle. The large technology and consulting companies who constitute the Frontier buying group are doing so to seed the market for future purchases.\u00a0<\/span><\/p>\n To that end they have entered into long term agreements with several CDR companies who have the tech proven out enough to deliver over several years. This is a crucial step to help these firms enter the mainstream. The first production runs have an offtaker – and that\u2019s crucial. The next step is to demonstrate they are less risky to more pragmatic customers outside of the Visionary customer segment.<\/span><\/p>\n The Chasm<\/b><\/p>\n While there are differences between Enthusiasts and Visionaries, the contrast in customer demand and size of market opportunity between them is not as great as between Visionaries and Pragmatists.\u00a0<\/span><\/p>\n A company selling the same technology to the same company might constitute a different customer on either side due to the rationale behind the purchase, price expectations, and sales style. Some companies are able to make this transition to meet Pragmatists customer needs at higher volume; some do not and do not make the crossing. I\u2019ll talk about the definition of Pragmatists, and then provide some examples where we may be seeing some limited Chasm crossing already in CDR markets.<\/span><\/p>\n Pragmatists<\/b><\/p>\n This customer segment is interested in a whole solution that they can use for a defined business purpose. They expect progress to be incremental, rather than revolutionary, and have much higher standards of quality and are much more sensitive to price. They are not as interested in being the first to lead and demonstrate how business practices could change, and instead are more inclined to listen to other voices in their own industry and ask what standards exist for a new line of products on offer, which come with their own set of pre-prepared support tools. They also expect a selection of competitor options to choose from – which to them is a signal of a more robust, less risky set of solutions – and a rubric to evaluate these competitors so that their purchase might achieve the pragmatic business solution they seek.<\/span><\/p>\n It\u2019s the rationale and expectations of the purchaser which are so different on either side of this Chasm.\u00a0<\/span><\/p>\n To connect with this type of customer:<\/span><\/i> The large-scale purchasing Pragmatist is less likely to take a risk. They don\u2019t want the pilot facility\u2019s or \u2018beta\u2019 version of a product. Even with a First of a Kind (FOAK) facility, they would prefer not to have the first batch – more likely the second or subsequent batch runs. Showing them a \u2018whole product\u2019 (again, more details in Part 2) that produces results is more important than the core product alone.<\/span><\/p>\n CDR Examples:<\/span><\/i> In Carbon Removal, the most pragmatic customer today arguably is Microsoft, especially in their 2023 and 2024 RFP purchases. The defining purpose of Microsoft\u2019s behavior is in line with its <\/span>2020 pledge<\/span><\/a> to by 2050 \u201cremove from the environment all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975\u201d. In short, they want the sheer tonnage that their portfolio of suppliers can provide to them through a rigorous RFP process.<\/span><\/p>\n Microsoft\u2019s biggest project selections are the: the largest volume is Bioenergy with Carbon Capture and Sequestration – which has been around for longer than many other CDR technologies, so it is more of a proven method. The chief project developers to date are large Scandinavian energy companies, who themselves are more risk averse than a small venture funded startup, and in general can count on <\/span>large levels of national government support<\/span><\/a>.<\/span><\/p>\n Notably Meta <\/span>left the Frontier group of companies<\/span><\/a> and <\/span>initiated Symbiosis<\/span><\/a> in partnership with Microsoft, Google, and Salesforce to focus on less technically risky Nature Based Solutions to achieve a different type of carbon removal at a typically much lower price than durable CDR is able to offer.<\/span><\/p>\n Conclusions<\/b><\/p>\n CDR has drawn customers from all three of Moore\u2019s Enthusiast, Visionary, and Pragmatist groups – some have found Pragmatist customers, others are striving – and at times struggling – to do so. Not all will be successful at making the transition to a more mainstream market.<\/span><\/p>\n
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