The Only Lever Left
Private equity is mourning its vanished financial levers. Growth-stage Energy & Resilience never had them — and the one lever it does have is the one nobody built an instrument for.
There’s a conversation running through private equity about the death of the old return math: leverage costs too much, entry multiples have nowhere left to run, and the exit no longer arrives above the entry by default. Three of the four levers that built that industry were financial, and the one still standing — operational delivery — is the one its diligence machinery was never built to read.
Growth-stage Energy & Resilience should watch that conversation with a certain grim amusement, because it never had the financial levers to lose. No leverage to speak of, no multiple arbitrage, no engineered exit. A growth-stage company in this sector ever had exactly two levers: a market curve and a technology edge. The last three years took both. The market curve became unpredictable — demand moving on geopolitical anxiety and lobby outcomes, decoupled from electricity prices and payback math, at speeds no capacity plan absorbs. And the technology edge went onto the commoditization clock, where a lead built over a decade evaporates in a handful of quarters against a cost and quality curve made in Shenzhen.
What remains — for PE by subtraction, for growth-stage by construction — is the same lever: whether the organization can actually produce what the plan assumes. And here both worlds share a problem. The plan is fully instrumented. The organization is not.
Where the truth reports
Start with the number most plans are built on, because the problem begins there.
Charlie Munger’s view of EBITDA was that whenever you see the word, you should substitute “bullshit earnings” — and in this sector his point isn’t rhetoric, it’s engineering. Look at what the acronym deletes, letter by letter, in a hardware-and-software company. The D is the fleet: every unit shipped ages in the field, and its replacement and service burden is a real future bill arriving on a physical schedule — depreciation isn’t an accounting fiction here, it’s deferred cash. The A is the platform: the technical debt accumulating under every release the growth plan demanded. The I is the capital stack the whole asset-heavy model runs on. EBITDA removes precisely the three costs that kill stacked companies, and then presents what’s left as “operational performance.”
So a board pack demonstrating margin progress on EBITDA has demonstrated nothing about the company’s physics. The numbers where reality still reports are further down the page: EBIT at minimum, EBT honestly, and free cash flow always — the line that cannot be groomed, because the field crews, the suppliers, and the debt service all collect in cash. A growth-stage plan in this sector routinely demands 40–70% annual revenue growth, sustained across years, while the cost base holds. Whether that’s real is not visible in a metric designed to exclude the cost of the machine that has to produce it.
Two model types earn a partial defense, and naming them keeps the argument honest. In an ODM-sourced model, the company owns no fab — the hardware cost arrives as purchased COGS, inside EBITDA rather than deleted below it, and the D shrinks toward vehicles and tools. In a disciplined Hardware-as-a-Service structure, the fleet depreciation is still large, but it’s explicit, scheduled, and audited by whoever financed the fleet — the D isn’t hiding; it’s collateral. The critique lands with full force where it always did: the integrated own-manufacturing model — own product, own plant, own fleet, own service book — which is, not coincidentally, exactly the model the commoditization cliff is forcing out of this sector. The pivot these companies have to make anyway, from own-box manufacturing to ODM and service, also shrinks the room the metric has to hide things in. Until a company has made that pivot, read the lower lines.
Nobody goes to root cause
I’ve been on both sides of that table — sell-side and buy-side — and I’ll say it plainly: in none of those DD processes did anyone go to root cause. Not once. The only times I’ve seen a company’s actual stall mechanism get named were in board sessions, deep in the work, usually too late to be cheap. Never in a data room.
And it isn’t only the diligence that misses it. The management teams miss it too, in their own company, with all the data in front of them. End-to-end process reviews — lead to operations, order to cash, cash to upsell — get run silo by silo. Each function reports its own stretch, its own numbers, its own plan. The tensions between them, which is where the company actually breaks, stay untouched. Not hidden. Just nobody’s job.
The reason is rarely incompetence. It’s territory. “It’s business to fix this” — I’ve heard that from CSOs and COOs protecting authority in their own field. CFOs who won’t step into what they consider foreign territory: hardware manufacturing, customer service, technical debt. Every one of them competent. Every one of them looking at their own square.
What that looks like from inside
None of this shows up in a data room. All of it shows up the moment you put the same structured questions to every executive separately, run their answers against the financial model, and add an outside operator’s read of the same situation. Not because any single answer gives it away. Because the disagreements do.
The chairman wants the new modular IoT platform built greenfield. The CPO needs every person he has just to keep the existing platform standing under the growth already booked — he cannot staff a greenfield build, and he has not said so in those words. Both positions are defensible. Together they are a plan that cannot be executed, and nobody has put them in the same room as the same question.
The CSO reports a strong pipeline, and it is strong. He is also not supporting the COO’s end-to-end process build, because pipeline is his number and process is not. Both are performing well against their own scorecards. The company is losing the handoff between them.
The CFO can see the manufacturing partner will not ship on time. He sticks to the plan anyway, and gives the CPO’s ODM proposal less attention than it deserves. The reason isn’t financial. It’s cultural — shifting from being a German hardware manufacturer to being an ODM served by a Chinese global player is an identity change nobody wants to be the one to propose. So the risk stays in the model as a timing assumption rather than a decision anyone has made.
Four executives. Four rational positions. One plan that does not survive contact with all four at once.
That’s what an organization under load looks like before it fails. Not a bad number — a set of tensions nobody has surfaced, sitting exactly where the plan needs the most from the machine. And no leadership workshop surfaces them. No offsite, no trail in the Alps, no fifth whisky at the hotel bar. What comes out there is agreement — because that is what those settings are built to produce. The disagreements stay silent, and nobody in the room is counting what the silence costs.
The plan is not the organization
The distinction matters more than it sounds. A plan requiring 60% annual growth isn’t a financial object at all. It’s a claim about an organization — that throughput can rise while the cost base holds, that the leadership team agrees on where the growth actually comes from, that the operational machine underneath the model can produce what the model assumes. Diligence verifies the growth is in the model. It has no instrument for whether the organization exists that can deliver it.
And the claim runs in both directions, which almost nobody tests. A plan gets stress-tested against the upside case; the organization gets read for whether it can scale. Nobody asks the reverse question: if demand drops 30% for three quarters — and in this sector, it does — what in this cost structure is actually fixed, what is genuinely variable, and who has the authority to decide? That is not a forecast. It is a structural fact about the company, readable today. The insolvency wave of the last three years was, at bottom, a list of companies that had been built for the step-curve upward and only for that.
Diagnosis is not a forecast
Worth being precise here, because this is where most operational DD quietly overclaims.
No instrument can tell you whether a company will grow 60% a year. That’s a forecast, and forecasts about complex organizations are opinions with confidence intervals attached. Anyone selling certainty about the future of an operating business is selling you their judgment, dressed up.
What a diagnostic can tell you — deterministically, from evidence, the same way twice — is whether the conditions for that growth exist right now, and what specifically stands between the organization and the plan. Whether the executive team is aligned on the mechanism or only on the number. Whether the operational data supports the assumed unit economics or contradicts them. Which obstacles the company controls, and which are structural facts of its market that no amount of capital will move.
In the case above, that comes down to two questions with real answers: are the COO, CSO and CPO actually aligned on building the new modular platform — and has the ODM shift been decided, yes or no? Neither question is in the model. Both determine whether the model is worth anything.
That last distinction — controllable or structural — is what an investment committee actually needs. A company facing controllable obstacles is a rescue with a defined path. A company facing structural obstacles is a different asset entirely, whatever the model says. Writing the same check into both is how the last cycle’s portfolios got built — and those returns are public now: as of late 2025, only a quarter of 2021-vintage venture funds had returned any capital at all. The herd verified plans. Nobody read the organizations.
The question for the committee
Next time a plan crosses the table needing years of high double-digit growth to make the case, the question isn’t whether the model is right. The model is always right — about itself. And it isn’t whether the EBITDA bridge looks disciplined; that metric was designed to look disciplined.
The question is whether anyone has read the organization that has to produce the plan — in numbers that can’t be groomed, and in the disagreements the board pack was built to average away.
Robert Kellner is co-founder of ClimeNow — Execution Intelligence for capital decisions in Energy & Resilience. Under Load reads what happens when capital meets a scaling company.