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Startups that have proven a new material in the lab still face a familiar roadblock: customers won’t commit to large orders without confidence in supply, and manufacturers won’t expand capacity without firm buyers. That gap is especially urgent now as apparel brands and climate-focused companies look to replace conventional fabrics and fuels with lower‑carbon alternatives.
Josh Felser, co-founder and managing partner at early-stage firm Climactic, has quietly launched a new effort aimed at closing that gap. The initiative, called Material Scale, pairs established buyers with materials startups and provides a blended financing structure designed to bridge the cost of initial large orders.
Materials businesses encounter a tougher early path than many software firms. Software founders can scale by buying cloud capacity or accepting temporary losses to win customers; makers of physical goods must underwrite manufacturing and logistics before volume discounts or repeat business arrive. That asymmetry leaves many promising climate‑tech materials stranded before they reach commercial scale.
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How Material Scale is intended to work
The platform’s model is straightforward but uncommon in the materials world: a buyer agrees to place a bulk purchase at market price; Material Scale advances the funds and closes the timing and financing gap; the startup receives the working capital it needs to produce at scale.
- Buyer commits funds via a purchase order flowing through Material Scale.
- Material Scale advances capital to the startup through a mix of loans and **warrants**, limiting immediate dilution.
- Material Scale then completes the transaction with the buyer, effectively buying and reselling the material to synchronize cash flows and production.
The structure is a form of hybrid debt-equity financing: debt provides near-term working capital while warrants give investors upside if the company succeeds. Felser describes the approach as “minimally dilutive,” aimed at preserving founders’ equity while unlocking production.
Ralph Lauren has signed on as a buyer for the initial launch, and investor Structure Climate has joined Climactic as a general partner in the effort. Material Scale has not closed its first transactions yet, but Felser says several large apparel manufacturers have expressed interest and a long list of startups would qualify for funding.
Early capital will be deployed from a special purpose vehicle of roughly $11 million. The plan is to test the model in the apparel supply chain, then extend it to adjacent sectors—alternative fuels was specifically mentioned—as the vehicle scales toward a larger, nine‑figure ambition.
Why this matters now
Brands and manufacturers are under growing pressure to decarbonize and to source more sustainable inputs—but they are also wary of supply risk. If financing frictions keep novel materials off factory floors, adoption stalls and emissions reductions are delayed. Material Scale attempts to remove one of the most practical obstacles: the lack of synchronized demand and production finance.
For startups, the potential upside is tangible: a verified buyer plus capital to produce at scale can fundamentally alter a company’s valuation and next steps. For buyers, the model offers a way to secure supply of promising low‑carbon inputs without forcing startups into harsh financing terms.
There are caveats. The approach depends on bona fide buyer commitments and on Material Scale’s ability to underwrite and manage operational risk. A platform like this also concentrates counterparty exposure: if a buyer pulls back or production falters, both the startup and the financier could face losses. Observers will be watching how contracts are structured and which safeguards are put in place.
Felser says he hopes the model will be copied. “We need more novel instruments like this to attack climate change,” he told TechCrunch, arguing that flexible financing tailored to physical‑goods startups could accelerate the adoption of sustainable materials across industries.
Whether Material Scale becomes a standard tool for climate tech commercialization will depend on execution—and on whether other investors and buyers are willing to deploy similar deal structures at scale. For now, the initiative points to a growing focus on practical finance solutions that move low‑carbon technologies from prototypes into factory supply chains.
