Key stats on Climatetech VC to use at the dinner table 🍽️
Impact Supporters Issue #21. Thanks for being here. If you have comments or feedback drop me a message.
Disclaimer from August Solliv: Everything that I write here is my own opinion and my own research, and is not affiliated with any current or former employments i.e. it’s my evening and weekend work 😉
Greetings, Impact Supporters! 🌍 It’s August Solliv 👋 Welcome to this week’s 5 min short article - which is for once not an interview, but something I have been asked for again and again → what are the key stats to know on climatetech VC for when I sit with my friends and family at the dinner table?
Note: This article focuses on climatetech VC due to the scarcity of data on general impact VC. See the bottom of the article for more reflexions on the choice of data. All data is from Sightline Climate, 2024, except if otherwise stated.
Here are the main points:
The global climatetech VC investments in 2023 totalled approx. $32bn 💰
Climatetech Seed rounds were the only ones resilient in 2023, not decreasing in size 🌱
The largest climatetech fundraising in 2023 was H2 Green Steel’s, worth $1.6bn 🔝
Most climatetech VC investments focus on three sectors: Transportation 🚆, Energy ⚡, and Food & Land Use 🌾
Climatetech VC investments overfund certain sectors. For example, Transportation represents 41% of climate investments since 2020 but only 15% of emission sources 📈
Approximately 50% of climatetech VC investments are directed towards hardware 🛠️
Get the details in the graphs below! 📉
Size of global climatetech VC landscape 📏
The global climatetech VC investments in 2023 were worth approximately $32bn according Sightline Climate (and closer to $70bn if you include more later stage investments and broader financing initiatives - see end of article for details). In 2023, investment in climate technology decreased by 30% from 2022 representing the first drop in annual climate tech investments.
Split of climatetech VC funding across stages 📈
In general, the later stages of VC funding have a larger share of annual climatetech VC investments as the average deal is much larger. The climatetech seed rounds were the only that were resilient in 2023.
Top 10 climate fundraises in 2023 🔝
In 2023, the 10 largest climatetech fundraises represented approximately 20% of total fundraisings. The largest climatetech fundraising in 2023 was that of H2 Green Steel.
Investments by sectors 🏭
Most climatetech VC investments are focused on 3 sectors: Transportation, Energy and Food & Land Use. Within the sectors, it is often a small handful of types of technologies that receive majority of funding.
Industry investments vs emissions ⚔️
Climatetech VC investments are skewed toward some industries that historically were frontrunners on innovation, but that don’t necessarily represent the largest climate challenges for the planet (at least from a CO2 emissions perspective). Transportation is the best example thereof, representing 41% of climate investments since 2020 but only 15% of emission sources.
HW vs SW 🛠️
Climatetech VC investments primarily go to hardware solutions as these are the ones tackling real emissions issues. Today, approximately 50% of climatetech VC investments go to hardware.
Exits 🚪
Climatetech startups struggle to go public through IPOs, often getting acquired by corporates or competitors instead.
Perspectivizing (size of SDG funding gap, impact investments and total VC funding) 🤓
To offer some perspective for those dinner table discussions, let's delve into what the $32bn really means.
Firstly, it is far from enough to solve the world’s current planetary boundaries. There is today an annual Sustainable Development Goals (SDGs) investment gap of $4tn annually across all asset classes.
Secondly, climatetech VC investments get a lot of press. However, compared to investments in impact specifically, it is still small. Today, the GIIN estimates that over 3,349 organizations currently manage $1.164 trillion in impact investing AUM worldwide (GIIN, 2022).
Thirdly, comparing the climatetech space to the global VC space, the growth in climatetech investments has meant that it today represents more than 10% of total VC investments. Dealroom estimates the global annual VC investments to total $315bn in 2023 (Dealroom, 2024a).
Note: This article uses only the data from Sightline Climate (where possible) in order to create congruency in the numbers throughout the article and as Sightline Climate is climatetech specialists and has the most narrow focus on VC investments. The data is based on Sightline Climate’s report from January 2024 on the state of climatetech: Sightline Climate, 2024. Below is a quick comparison of sources so that you can see the importance of the methodology of the researchers behind the numbers. The main differences between the sources below is the scope on asset classes and scope on what is considered climatetech.
Various estimates of the total climatetech VC market in 2023:
Sightline Climate $32bn
Dealroom $76bn
Net Zero Insights $73bn
McKinsey $196bn (includes broader climate and buyout investments)
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Links to primary data source: Sightline Climate, 2024