Tech Funding Trends #1: Climate Tech

One can measure trends by different standards. That’s because trends are variable, changing with the weather. You can observe a trend based on data, which measures past activities (deal flows and value at an instant t), but they do not necessarily represent predictions. Predictions can be based on trends, but not solely.

In a multi-modal world, there’s dozens of trends-influencing events a year. Trends are bound to change with the weather, in a sense.

Well, then, let’s talk about the weather:

The climate sector can be considered trendy, zeitgeist-y, and reforms have been passed that influence funding in the renewable energy/climate-friendly tech sector. Yet funding in climate tech has known quite the bum over the last year, especially in the U.S:

Climate Tech Trends in the U.S:

• VC funding for climate tech startups has decreased to its lowest level in almost three years.
• Q1 saw climate tech startups raise $5.7 billion through 279 VC deals, according to PitchBook data.
• This represents a 36% decrease in deal value and a 31% decrease in deal count compared to the previous quarter.
• Quarterly deal value has fallen by more than 50% since its peak in Q3 2021.
• This trend is concerning for an industry that had previously shrugged off the tech market downturn.

This is concerning for many reasons, as the world faces a catastrophe-inducing warming threshold within the next decade, per IPCC’s report published last month.

This dip, however, is reflected all over the tech world, as VCs' struggles continue.

There’s reasons to be hopeful, however.

In Europe, VCs are going nuts over climate:

Climate technology investment in Europe has experienced a remarkable growth of 7x over the past five years, surpassing the global average of 4.9x.

Notably, sustainability-focused venture capital firms in Europe have successfully raised a total of $1.8 billion in 2022 alone, with a significant contribution coming from the €350 million fund established by World Fund, a venture capital firm supported by Ecosia.

Effy is a great example of climate oriented company that got funding: raising the (literal) roof on home energy renovations, the French firm secured 20€ million in investments led by Felix Capital Venture.

Other great climate tech fundraising also happens with Debt as the leading investment vehicle. For example,  SUNfarming GmbH is a supplier of a wide range of solar systems and photovoltaic systems with services for home and commercial applications. They just raised €50 million (US$53.8 million) in a mezzanine financing agreement with HANSAINVEST Real Assets GmbH to develop PV projects in Poland.

The European Commission takes on a lot of responsibility, with its innovation fund one of the world’s largest funding programmes for demonstrating innovative low-carbon technologies.

The European Commission Innovation Fund in 2022, it’s:

• 138 project proposals from EU Member States, Norway, and Iceland
• Total funding requested: EUR 12.1 billion
• Around 15 cross-sectoral applications received
• Over 50 projects produce at least two different products, such as e-fuels, chemicals, hydrogen, biofuels, electricity, or bio-based products
• Wide scope of the Innovation Fund and its contribution to decarbonisation pathways of multiple sectors, regions, and Member States
• Proposed projects expected to reduce around 712 million tonnes of CO2 during their operating period under the Innovation Fund.

This is only the tip of the iceberg:  If you’re interested in other European Climate Tech news, check Tech.EU’s climate tech-related news

This concludes our first weekly Tech Trend on Climate Tech.

Share it if you found it useful!