*Date: 2/16/2024*
This week, the Wall Street Journal published a post encouraging Silicon Valley to [embrace the boring side of the insurance industry](https://www.wsj.com/finance/silicon-valley-needs-to-accept-that-insurance-is-boring-899d5b16?mod=Searchresults_pos1&page=1). Reading the post through the lens of the energy transition, I felt like the Leo meme.
At Energize, we have an internal saying, “Build the engine to match the race.” Critical industries like energy, construction, manufacturing, and logistics don’t adopt technology quickly, and you often can’t spend more to accelerate growth.
This is a feature of these industries, not a bug. Adopting technology too quickly can risk billions of dollars. Selecting the wrong cybersecurity provider can leave them open to attacks. Procuring inferior materials can set a project back months. Haphazardly building a nuclear reactor is a recipe for disaster. The risks of moving too quickly far outweigh the rewards.
We love these customers because once they pick a vendor, it’s a 10+ year relationship if handled carefully. The $100,000 ACV entry eventually becomes a $1,000,000 ACV anchor customer.
This is the paradox of the energy transition and venture capital. It’s a great place to find tech-inspired optimism full of buzzwords and the market size to end all market sizes. It mixes badly, however, with the attempt to grow faster than the industry will allow. “Move fast and break things” doesn’t resonate with industries where breaking things means losing their greatest asset, trust.
I’ve always found this framework helpful for thinking about company growth. The growth rate should be a magnitude higher than industry CAGR + inflation. Those two are the baseline growth rate to serve the industry, and anything on top of that is where excitement begins to build.
The energy transition and climate software will continue to attract large amounts of capital over the coming decades. It’s one of the biggest opportunities of our generation and is primed for innovation.
In some pockets, however, growth rates will look much different than in the sectors investors are accustomed to. As long as the engine matches the race, that’s okay. But investors would do well to remember that companies can die from indigestion just as quickly as they die from starvation.