"Felser noticed it was a common occurrence among startups producing novel materials. Fesler, who previously founded and invested in software startups, said the problem they faced seemed a bit unfair. "Software companies sell at a negative margin all the time in the beginning, you know, Uber, Lyft, you can look at lots of different examples," he said. "But for materials companies, they they're not allowed to do that. One of the questions I had is, 'why is that?'""
"Felser has been quietly working on a new project, called Material Scale, that brings the two sides together using a hybrid debt-equity investment vehicle to give materials startups a boost, TechCrunch has learned. Material Scale will initially focus on climate tech startups in the apparel industry. Material Scale is betting on startups with commercial-ready products that are ready to scale if a customer can purchase in bulk."
Startups that produce physical materials face a valley of death after prototyping because they must both sell product and scale production before costs are covered. Materials startups cannot match the early negative-margin strategies common in software because buyers doubt their ability to scale without guaranteed supply. Josh Felser created Material Scale to bridge buyers and materials startups with a hybrid debt-equity vehicle. Material Scale will target climate-tech apparel startups, secure buyer commitments to cover material market cost, and finance the remaining gap through loans and warrants to de-risk scaling.
Read at TechCrunch
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