It’s Not the Product!

Case in point, let’s talk about lithium.

If you’ve been anywhere near the climate tech/green energy space in the last few years, you know that lithium is vital to the energy transition. This rare metal is a key component of batteries, especially the enormous batteries powering EVs, so for a while, it was worth a lot more than its weight in gold. In 2022, the lithium price peaked, with mining companies being able to offload their ore for over $4000 per dry tonne. That boom was driven by a sudden surge in EV manufacturing and purchasing, particularly in China.

But when Chinese EV sales started falling, driven by massive tariffs in Europe, the US, and Canada, they took lithium prices down with them. Suddenly, the entire EV market was down, and with no one wanting to purchase EVs, no one wanted to purchase the raw materials needed to make them. That led to lithium stocks piling up with no buyers, and lithium prices crashing to almost the price of production. The current price for lithium ore nowadays doesn’t even break $1000 per dry tonne, less than a quarter of what it was in 2022.

But it’s not just rare metals like lithium that can feel the squeeze. “Common” metals like iron can also be affected by these issues. In 2021, iron ore prices peaked at about $214.43 per dry tonne, driven by increased manufacturing. But in late August 2024, one dry tonne of iron ore went for about $98.7, less than half its former price. That price dropped even further in September, down to $91.4 per dry tonne. That’s a significant tumble, and it can partially be tied to a downturn in China’s economic market.

Changes in the price of iron have a ripple effect throughout the entire market, and there are now fears that the price of steel, which is made from iron ore, could drop next. ArcelorMittal, a global steel manufacturer based in Luxembourg, has already pointed out that the current ‘overcapacity’ in the global steel market is likely to lead to trouble down the line.

So with all of these volatilities and uncertainties in the markets, it’s no wonder why price is at the forefront of every business’s mind, and sustainability, while important, takes a backseat to the very practical concern of whether your product can do the job on the cheap. That means founders need to ensure that their product can do it all while being green, not the other way around.

Diving a little deeper, this reality means that founders cannot rely on technologies that are only justified when the prices of commodities are higher. As we’ve seen, those prices can easily go down, and then you’ll be out of business.

Instead, founders need to be thinking about the market and its needs from Day 1, building a plan that will allow them to enter the market while prioritising customers whose needs align most with their capabilities and their story. The product needs to conform to the needs of the market and customers, not the other way around. By taking this into consideration from the very beginning, founders can actually design their product around the needs of their customers, ensuring a place for their product even in a crowded market.

For example, if you know that your product is going to be somewhat pricey, or if you know you cannot match a competitor’s quality at their price point, you definitely shouldn’t target an industry where both price and quality are critical. Instead, you should focus on different markets where you can play to your strengths and outshine your competitors. For instance, startups entering the battery industry should probably target energy storage applications rather than the automotive sector, where the focus is on high quality and low prices.

You also need to think about who you’ll be talking to when you start selling your product to your customers. If you’re relying on advertising to people in procurement roles, for example, they’re not likely to be very helpful. Procurement specialists are looking for cheap, proven, and currently-available technology, so they’re not going to be interested in your brand-new, exciting, and possibly expensive idea. Instead, you should reach out to people in sustainability, R&D, or strategy roles, so you can really make the most of what you have to offer.

It might seem like a lot of planning to do, especially when your company is so new, and especially because you need to do some of this before you’ve even developed your product. We get it, but trust us, having a plan in place for these things will help you be more intentional about the decisions you’ll make throughout your company’s development, saving you a lot of time and trouble in the long haul.