Climate tech growth during economic cycles

If we’re being honest, we’ve all already felt this coming — but now the data is definitive. The H1’2024 climate tech funding market has fallen back to 2020 levels. Nothing’s particularly new, though. Since the peak of Q3’21 madness, the climate tech market has been consistently constricting. And to be fair, the market slump isn’t limited just to #climatetech; the broader venture market continues to retrench, be it from sticky inflation, high interest rates, or geo/political chaos. What’s actually novel is that the downtick in funding & deals has finally reached the early stages, and that former darling companies have officially shuttered. Outcomes & key stats: 📉 Seed activity tumbled -30%, echoed by a -25% hit to Series A and B activity, signaling the end of early-stage resilience to the downturn. ⏱ Raising a Series B now takes 2.5x longer than in 2021. 💔 Ten notable climate tech companies filed for bankruptcy in H1’24 including Fisker, Arrival, and Running Tide. The impact to the nascent Carbon sector can’t be overstated, nor is this likely the last shakeup to a former darling startup. 👻 The tourist investors have gone home (-44% count of unique investors), slowing the deployment rate of climate specialist funds. Call it dry powder, slow to fire. Drivers to watch closely: 1️⃣ Graduation rates:  The cohort founded at the start of climate tech’s resurgence in 2018-19 are quickly approaching the Series B cliff. Expect a surge of B-stage urgency to awkwardly coincide with investors taking their sweet time on due diligence (time to raise jumped from 11 to 26 months between rounds!). Meanwhile, growth investment and deals have also dropped precipitously. Late-stage funds are holding on to record levels of dry powder, while holding out for more concrete proof of commercialization and ARR goals. 2️⃣ Fewer, bigger — but better? Despite deal activity rates declining, the deals that did sign & wire were larger and healthier. The average Seed deal size rose 21% verses the year prior. In particular, deep tech startups were able to successfully raise larger rounds. Case in point: Industry sector deals count dropped -41%, while the average Industry deal size jumped +29%. 3️⃣ Sophisticating capital stack:  Despite our “CTVC” name, we’ll be the first to say that the strongest climate tech companies leverage the full climate capital stack -- beyond just venture capital. Many of the most notable deals from the last six months came from companies graduating from equity to project finance and debt in the race to deploy, deploy, deploy. Namely, advanced geo developer Fervo Energy, thermal energy storage provider Antora Energy, and textile-to-textile recycler Syre raised massive rounds for hardware buildouts. Plus, steelmaker H2 Green Steel, lithium extractor Lilac Solutions, and LAES developer Highview Power all raised “FOAK” rounds to support commercial-scale projects. Check out the full Sightline Climate (CTVC) analysis below 👇

Did Climate tech decline in 2025? Here is my take: -Total VC and growth funding was flat year-over-year (less than 10% increase even). I take this as good news given the current anti-climate environment we are in. - AI's insatiable appetite for power became the unexpected forcing function. Data centers needed clean, reliable energy at scale... and suddenly climate tech had a customer with deep pockets and urgent timelines. This drove a fundamental shift in how climate tech gets funded. The market matured fast, with a growing share of capital coming from non-dilutive and blended-finance structures rather than traditional equity rounds. This is where hard tech, capital-intensive technology funding needs to be, and I hope it will lead to more funding mechanisms that are not venture capital. Sector winners : Nuclear: Absolute monster year. Advanced nuclear and small modular reactors attracted some of the largest funding rounds, driven by AI and data center power demands Geothermal: Momentum continued with substantial investment growth, benefiting from drilling innovation and oil & gas talent crossover, again all driven by data center power demands Grid tech: Massive growth as utilities raced to keep up with demand and reliability pressures. Grid modernization became a core infrastructure play Energy overall: Surpassed transportation as the most-funded vertical for the first time in recent memory, highlighting the shift toward energy-supply decarbonization Sector Losers 🙁 : Hydrogen: Funding collapsed 63% YoY as policy support weakened and project economics failed to pencil out. Wave of bankruptcies and consolidation followed Vertical farming & alt protein: Continued consolidation and closures EVs: Market stalled in the U.S. (though stayed strong internationally) Over all, fewer deals, bigger impact, better capital - that's maturation, not decline. And we can all thank AI. #ai #datacenters #yearinreview #climatetech2025 #climatetech #energytech #venturecapital

We’re witnessing a paradox: despite a policy environment seemingly hostile to decarbonization (tariffs on cleantech imports, moratoriums on IRA fund disbursements, and the proposed rollback of DOE programs), U.S. climate tech funding surged by nearly 65% in Q1 2025. But what is perhaps more revealing than the capital flows is the rhetorical shift underway. In response to shifting political priorities, a growing number of startups are revising how they present themselves. Companies are beginning to distance their public messaging from terms like “clean energy,” “net zero,” or even “climate,” instead emphasizing “energy abundance,” “supply chain resilience,” and “domestic industrial capacity.” Others are shifting their messaging to appeal less to climate frameworks like the SDGs and more to the strategic language of national security and defense procurement. On paper, it’s a brilliant strategy. Venture funding is up. Nuclear and geothermal are gaining traction, bolstered by rising AI-driven energy demands and a revived narrative of American energy independence. In theory, this is resilience. But it prompts my question: should this reframing be seen as retreat or evolution? Language shapes how capital is allocated, which technologies are prioritized, and how legitimacy is constructed in the eyes of policymakers and markets. If climate tech can only thrive when it avoids talking about climate change, it risks becoming more about political fit than environmental impact. With that being said, it's no question the sector has always contained a range of compelling motivations (climate-first, profit-first, or both). Maybe this moment simply makes that diversity more visible. The challenge now isn’t whether the sector can adapt (it clearly can). But I wonder whether it can do so without losing sight of its core purpose. If climate ventures become contingent on ideological compatibility rather than environmental necessity, the sector may become structurally less accountable to its original goals. Would love to hear how others are thinking about this as I wrestle with it, both strategically and ethically. Source: https://lnkd.in/eCxFX8Kx #climatetech #decarbonization #energytransition #netzero #sustainability

The first half of 2024 saw a weak $11.3bn start, with investment finally returning to 2020 levels pre-climate tech hype. Over the past six months, the climate tech market has continued to constrict, with a noticeable downtick in deal count and funding in H1’24, affecting even early-stage investments like Seed and Series A. But it's not just climate tech, the broader venture market is in a slump from sticky inflation, high interest rates, and geopolitical turmoil. But it's not all doom and gloom. We’re also seeing signs that many companies and projects aren’t solely relying on VC funding anymore, as they’re starting to graduate from equity to project finance and debt in the race to deploy, deploy, deploy. Some new and interesting highlights here: 💰 H1’24 $11.3bn funding: Funding in the first six months of 2024 totaled $11.3bn, down 20% from H1’23 and down 41% from H2’23. 📈 Early-stage takes a hit: Seed funding declined 12% in H1’24 vs. H1’23, and Seed deal count decreased 30% for the same period for the first time. 💸 Round size: Average deal size for Seed, Series A, and Series B increased by 19%, signaling a flight to quality for performing companies making it past Series A. 📅 Time between rounds: The average time it takes a company to raise a Series B in 2024 is more than double the time it took three years ago, jumping from 11 months to 26 months between rounds ⛰ Series B Valley of Death: And the Valley of Death between Series A and Series B has become more precarious, as a large cohort of climate tech companies approach the milestone. 💥 Notable deals: The companies that were able to get funding this half-year represented many of this year’s emerging trends in climate tech: hype-y AI and the clean firm power it requires, high-flying Sustainable Aviation Fuels, and batteries leading the charge. Advanced geo developer Fervo Energy, thermal energy storage (TES) provider Antora Energy, and textile-to-textile recycler Syre raised massive rounds for hardware buildouts. Plus, steelmaker H2 Green Steel, lithium extractor Lilac Solutions, and Liquid Air Energy Storage (LAES) developer Highview Power all raised “FOAK” rounds to support commercial-scale project development. 👉 Check out the full Sightline Climate (CTVC) H1'2024 investment post with charts and analysis tracking investment, deal activity, FOAK deals, bankruptcies, time between rounds, and investor activity: https://lnkd.in/evG9_-_Y 👉 And read the key takes from Michelle Ma at Bloomberg Green: https://lnkd.in/er8pjdcd #climatetechvc #climatetech #funding

ClimateTech funding – down from record highs, but the broader trend shows resilient growth. CTVC’s assessment of the 1H 2024 market is “poor performance”, but I think that misses the bigger takeaway. If we compare 1H 2024 against most periods in 2021-2023, the trend is flat or down. But compared to 1H 2020, Climate Investment was up 80%, or 16% CAGR. And over the same period, dollar funding has increased in every stage of investment except for Series C, and was up massively in Seed/Series A. TLDR: Climate funding is down from peak ZIRP-era levels – and so is the rest of the venture ecosystem. In that context, investors weathered the storm and are still putting capital to work, and founders are still building and innovating – I’m glad to see it. One takeaway that felt dead on: Raising a Series B takes 2.5x longer than it did in 2021. This has a real impact on how companies operate and think strategically about their next financing. The goalposts have moved in terms of what Series B+ investors want to see for business milestones (commercialization, technical de-risking, GTM scalability). This is similar to what SaaS companies have felt at Series A stage – in climate, the changing rubric is occurring a stage later. Strong work by the Sightline Climate (CTVC) team in wrangling this data! Link to the report in comments. #venturecapital #climate #climatetech

Why is climate tech investment surging and what’s driving it? Despite economic uncertainty, the climate tech sector has shown remarkable resilience and growth. In 2024, U.S. climate tech startups raised $24 billion in the first three quarters, closely following 2023’s $24.8 billion over the same period (PwC). Globally, climate tech now accounts for nearly 20% of all tech funding, a figure that has doubled in just three years (Pollination Group). The sector’s focus is also shifting to high-impact areas. AI-driven climate ventures raised $1 billion more in 2024’s first three quarters than in all of 2023 (PwC), showcasing the scalability and ROI of software solutions. Energy-related startups saw a surge, attracting nearly 35% of climate tech funding in 2024, up from 30% in 2023. This growth is underpinned by several drivers: 🌍 Policy incentives: Legislative frameworks like the Inflation Reduction Act (IRA) are spurring innovation with tax credits and grants for clean technologies. 💡 Economic opportunity: Solutions like energy analytics software deliver cost savings and operational efficiencies, reducing energy expenses by more than 20%. 🤝 Stakeholder expectations: Consumers and investors demand greater accountability and transparency in addressing climate change. For property owners, the benefits of this trend are clear. Advanced platforms like CIM’s PEAK provide real-time monitoring, optimize energy use, and reduce costs by identifying inefficiencies and maintenance needs early. These solutions can lower energy expenses by up to 20% while increasing property value through sustainability and efficiency. Explore how climate tech investors are helping to transform industries and drive sustainable innovation: Read the full article at https://lnkd.in/eahkFjgF