Learning curves can make or break a business. In the previous article, we explored why understanding your learning curve is critical to scaling a climate tech business. Specifically, we saw that not every technology has a product where economics get better and the product gets cheaper with scale.

In this article, we show why that’s not enough: to truly compete, you also need to understand the learning curve of your competitor.

Don’t Get Caught in the Better Mousetrap Fallacy

Let’s face it — this is a trap most founders fall into (VCs too, but we’ll focus on founders here): they think only about their own cost curve.

They look at the price of the competitor that is the incumbent solution, and they claim that as their technology scales, their solution will become cheaper than the incumbent. That means that they assume the incumbent’s price will stay constant, and their own learning curve will eventually bypass the incumbent price as it decreases.

But the incumbent technology didn’t fall out of the sky. It also came out of the market. In many cases, the incumbent is also a start-up, just one that started maybe 3–5 years before yours. That means that just as your technology grows, develops, and scales, the incumbent’s technology is constantly developing. Most technologies don’t stand still, they continue to develop, and some learning curves develop very fast over time.

The end result is that your start-up solution never beats the incumbent, even if it might seem better on paper.

This is what Andy Lubershane describes as the “Better Mousetrap Fallacy”. It’s the mistaken belief that a superior product will automatically achieve market success. A lot of founders think that if they have a better mousetrap, meaning that they have a product that’s better than the competition, they will naturally succeed. But actually, there are a lot of factors that go into a product being a success.

Let’s look at actual mousetraps, for example.

Since the U.S. Patent Office was established in 1838, more than 4,400 mousetrap patents have been granted, making it the most frequently patented device in American history. But despite this flood of innovation, only about 20 designs have ever achieved commercial success. The classic spring-loaded snap trap, patented in the late 19th century and popularized by investors like William C. Hooker and James Henry Atkinson, remains by far the best-selling and most recognisable mousetrap worldwide, dominating both the U.S. and international markets. While a handful of other designs have made money, none have come close to matching the enduring popularity and profitability of the simple snap trap.

In climate tech, there’s a huge tendency to think that a breakthrough technology innovation will be the next big thing — leading to a frenzy of investment in better mousetraps, from over 80 nuclear SMR (small modular reactor) designs to more than 100 direct air capture companies, most of which will never scale.

And yet, the Better Mousetrap Fallacy persists. When something innovative comes along, it’s easy to assume it will quickly outshine or replace existing solutions, whether from incumbents or from other startups. As an industry, we make this mistake every day by extrapolating on the solar and batteries learning curve, and often fall into the trap of being overly optimistic about new technologies and products.

But this is a trap, because better mousetraps are not the solution to every problem. Sure, there are some areas in the fight against climate change where we do need technological innovations. But in a lot of cases, what we really need are smart ways to deploy the tech we already have.

Where founders go wrong is they frequently overlook the power of the learning curve. When evaluating a new product’s potential, we shouldn’t just compare it to the price of the incumbent. Instead, we need to consider where that competitor will be in the future.

Chasing the Sun

Solyndra (Cleantech 1.0) is a classic example of focusing too much on a better mousetrap.

Solyndra was one of the first companies to get governmental backing in 2009, when the U.S. government was handing out subsidies for green energy. They were a solar panel start-up, and presented a new kind of tubular solar panel. They claimed their panel was made of a thin, next-generation material that would be cheap to install, and that other big electric companies would pay a premium for their panels because it would save them on installation costs.

Their product was so exciting that they received a 535 million USD loan guarantee from the U.S. Department of Energy. They then went on to raise over a billion dollars from private investors. At a time when traditional solar panels were extremely expensive and installation costs were high, it looked like they couldn’t possibly fail. But in 2011, Solyndra filed for bankruptcy.

What happened?

They failed to consider the learning curve. Between 2009 and 2011, the costs of traditional solar panels plummeted as solar panels from China entered the market, while Solyndra’s costs stayed high. So, people naturally bought solar panels from China instead, leaving Solyndra in the dust.

And Solyndra wasn’t the only casualty. The same dynamic played out across dozens of solar start-ups — especially those developing thin-film or novel PV technologies. Companies like Abound Solar, Nanosolar, and MiaSolé promised technical breakthroughs but were ultimately outpaced by the aggressive cost reductions of Chinese silicon-based PVs. In the end, it wasn’t just about innovation — it was about staying ahead on the cost curve, and China was moving faster than anyone else.

Building Better Batteries

This dynamic wasn’t limited to solar. The same thing happened to Bedrock Materials, an energy storage company, and several other long-duration energy storage start-ups.

Bedrock Materials aimed to revolutionise battery technology by developing sodium-ion batteries. In a world where their biggest competitor, lithium-ion batteries, relied on an expensive rare material (lithium), they seemed poised to become a strong alternative. Sodium exists everywhere, and doesn’t require mining, so it dodges a lot of the scarcity problems and ethical and environmental issues associated with rare metals.

It sounds like a really good idea, in theory, but Bedrock Materials has just announced that they are returning money to their investors and winding down their work on sodium-ion batteries. So what happened?

Well, according to Bedrock Materials’ CEO, Spencer Gore: “The world changed.”

When Bedrock Materials started, lithium prices were high, electric vehicle adoption was growing, and lithium was expected to grow scarcer and scarcer. Bedrock Materials was born into a world that needed sodium-ion batteries. But since then, the price of lithium has fallen by 85%, cutting the price of lithium-ion batteries in half with it. Sodium-ion batteries just can’t compete in that market.

Even the EV market has changed. The pace of innovation and price reduction, especially coming from China (CATL and BYD) doesn’t leave a chance for solutions that try to compete with Li-ion batteries.

It wasn’t that Bedrock Materials had a bad idea. On paper, their idea was brilliant. But they failed to consider the learning curve, or they couldn’t imagine that the learning curve of Li-ion batteries would continue to fall so quickly.

That brings us to one critical lesson:

To succeed, start-ups need steeper learning curves than those of their competitors.

Li-ion had a learning curve of 18%. To compete with them, Bedrock Materials should have been better. If they had a learning curve of over 30%, they might have made it. But they didn’t, and Li-ion just got better and better faster than they did.

It’s not just Bedrock Materials that was blindsided by Li-ion’s price crash. Phelas, another energy storage start-up, has recently pivoted away from its liquid air batteries and towards Catalyst, a software that helps other developers work on battery storage development. The same sort of shifts and pivots are happening across the energy storage industry.

The Price is Always Right

While solar power and batteries might be the biggest examples, this is the reality across a lot of different industries.

Take nuclear for example. Everyone always talks about nuclear, but we are years (fission) to decades (fusion) away from building and operating facilities with an LCOE (levelized cost of electricity) that can compete with the dropping prices of solar and wind. In fact, nuclear has been around for more than 50 years, and this is the only energy source to have prices go up and not down.

And then there’s recycling. On paper, recycling is a very beautiful solution that makes products sustainable even at the end of life. But if the price of virgin material drops below the price of recycled material, there’s no way that people will purchase recycled over virgin material.

This isn’t just an interesting thought experiment. It’s already happening. Look at plastic. While recycled HDPE costs about $0.72 per pound in North America, virgin HDPE now costs only $0.58 per pound. In China and Europe, the trend is reversed, with recycled HDPE managing to stay just a little bit cheaper than virgin HDPE ($0.56 recycled and $0.60 virgin in Europe; $0.35 recycled and $0.46 virgin in China), but the price of virgin plastic is catching up fast.

And while researchers believe there’s still room to recycle EV batteries while making a profit, those calculations are based on the current price of Li-ion batteries, which fluctuates on a daily basis.

What This Means for Founders

Founders are in the unenviable position of having to shoot a moving target. That means they need to focus not on where an incumbent technology is, but where it will be.

The competition never sleeps.

The climate tech market is no longer a blue ocean, and with players enjoying a 3–5 year head start, it’s not enough to be better than the competition. You have to be radically better. That means thinking beyond the current landscape.

On our end, we invest in solutions that deliver fundamental cost reductions of 80–90%, whether that’s through breakthrough technologies or system-level innovation. That’s how we try to stay ahead of the curve and avoid betting on better mousetraps that never scale.

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