In the rapidly maturing climate and decarbonization tech market, climate VC (venture capital) firms play a pivotal role in fueling innovation and scaling transformative solutions. As the urgency to combat climate change intensifies, investors are paying close attention to early-stage climate tech startups that promise advancements that are both groundbreaking and commercial viability, and represent a high growth investment opportunity. This news roundup features articles about climate VCs, climate tech start-ups, top brands and investor sentiment.
Funding the green energy transition via public markets is tough as they have ‘very short memories,’ KKR climate head says – Fortune
“Money managers overseeing private equity and debt portfolios are now emerging as a powerful force in climate finance. It’s a timely development, as capital-intensive green tech companies struggle to attract sufficient investment and high-carbon large caps face diminished interest from shareholders for ambitious decarbonization plans.
An energy crisis, as well as higher inflation and interest rates, have complicated the energy transition. And add to that a protracted stock market selloff: Since the beginning of last year, the S&P Global Clean Energy Index is down 28%, compared with the 45% increase in the S&P 500 Index.
In private markets, however, it’s a very different picture. Between 2016 and 2023, private fund allocations to renewables have consistently outperformed those in oil and gas, according to a recent MSCI Inc. analysis.”
In the Dimming Market for Climate Tech Funding, Bright Spots Persist. How to Hit the Moment Just Right – Inc. Magazine
“Funding for climate venture capital funds has cooled considerably, plummeting to $3.9 billion in 2023 from the $18.7 billion raised in 2022, a peak fueled by regulatory, government, corporate and global acceptance of climate change, the Wall Street Journal reports. But a change in beliefs about climate change was undermined by high interest rates, and a decline in VC exits in climate tech. As of June, climate VCs raised $3.4 billion in 2024.
…Compared with other startups, climate tech companies face an additional hurdle. Not only is money tight in general, but climate technology is often novel, and investors are more risk averse right now. Ross Trenary, CFO at LevelTen Energy, a renewable transaction infrastructure company, said founders in the climate tech space should anticipate longer funding rounds, and be prepared to pitch more firms than usual. If investors want to play it safe, Trenary then recommends highlighting similarities with your company, and ones the firm has worked with in the past to remove some of the mystery.”
Sustainable travel: the companies and initiatives offering solutions to tourism’s social and environmental challenges – Impact Investor
“But hope for a more sustainable form of air travel is on the horizon. Several companies in the aviation sector have developed a range of innovative technologies to bring emissions down further, from those developing low carbon e-fuels, to companies working on making aeroplane powertrains more efficient.
ZeroAvia, a pioneer in short-haul hydrogen aviation, is in the second category and has developed what it says are the world’s first zero-emission powertrains for commercial aviation. It has also been one of the portfolio companies in climate tech VC Systemiq Capital’s fund I since 2019.
Irena Spazzapan, managing partner for Systemiq Capital, explained: “ZeroAvia strips out the hydrocarbon-powered propulsion engines from aircraft and replaces them with hydrogen-powered electric powertrains and hydrogen tanks.”
Bill Gates’ climate VC raises $839M toward new fund, sector’s largest this year – PitchBook
Bill Gates-backed climate VC Breakthrough Energy Ventures has gathered $839 million in its effort to raise the firm’s third flagship fund, according to a regulatory filing, making it the largest climate fund raised so far this year.
Breakthrough has made early bets on several now-prominent climate startups. It led Boston Metal‘s Series A at a $55 million valuation (last valued in 2023 at $860 million), Redwood Materials’ Series B at a $217 million valuation (last valued in 2023 at $5.25 billion) and Pivot Bio‘s Series B at a $200 million valuation (last valued in 2021 at $1.7 billion).
Inside ABP’s push to support climate start-ups and scale-ups – Net Zero Investor
With more than €500 billion of assets under management, Dutch pension fund ABP is one of the world’s largest asset owners. It is also relatively strong on climate change. Since its 2021 commitment to cut €15 billion in exposure to fossil fuels, ABP has exited all assets in oil, gas and coal – including liquid assets worth about €10 billion.
Why is there a funding gap? Most of the companies that we fund also attract interest from commercial venture capital funds. For example, US venture capital firms participated in a subsequent funding round for Soly. But those firms weren’t there at the beginning. So there’s definitely a funding gap for early stage start-and scale-ups.
Climate-focused venture capital funds, 2002-present – Venture Capital Journal
Following is a list of climate VC funds that have raised capital since the start of 2022, based on Venture Capital Journal research. We update the list whenever we learn about new funds. As of August 6, 2024, the list was made up of 51 firms that have held partial or final closes on 63 funds for a combined $15.6 billion.
This year alone, two dozen climate funds have raised more than $6.8 billion combined. The average fund size (as of August 6) was $286 million, up from an average of $202 million in 2023 and $267 million in 2022. The median fundraising amount for 2024 ytd was $250 million, up from $181 million in 2023 and $70 million in 2022.
Why Bill Gates’ Breakthrough Energy and other investors are scouring universities for founders – TechCrunch
Climate tech companies often face a ‘valley of death’ between lab experiment and investable company. Founders have typically had to solve that problem themselves. But increasingly, investors are intervening early.
For investors who can stomach earlier stages, the advantage is clear: an early window into the founders of tomorrow. These bets tend to be riskier and because the valuations are lower and the checks are modest, the potential returns can be significant. “The term we use internally on this topic is proto-companies,” Johanna Wolfson, co-founder and general partner at Azolla Ventures, told TechCrunch. “It’s not a company yet, but if you squint, you can see how it could become a company.”
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***Climate PR news roundup guest post from FischTank PR interns Baylee Matthews and Uju Ike***
