ClimateTech Investment Highlights

Key updates from the week in climate tech & energy: • China's largest utility started construction on a new $3.9B transmission line + pumped hydro storage project as it continues to lead both renewable energy & transmission line deployment globally. • The EPA & Biden Administration formalized new rules that will ratchet up limits on tailpipe emissions (based on grams of CO2 per mile) from cars. The stated goal is to encourage half of new car sales by 2032 to be zero-emissions vehicles. Car manufacturers will likely be most immediately affected; while it's not a ban, OEMs will have to meet new average emissions limits across product lines. • TerraPower announced plans to build its first molten salt nuclear reactor in Kemmerer, WY, starting as early as June. The goal is to have the plant online by 2030. The company has raised more than $1B so far. • NVIDIA, the chip-making darling and currently the third-largest public company in the world, announced it aims to improve weather forecasting as part of its AI buildout. Specifically, the company is launching its 'Earth-2' climate digital twin cloud platform, which will help other organizations simulate & visualize weather & climate at new scales. • Google, Microsoft, & Nucor announced a new financing strategy to support growth in clean energy generation to meet growing demand. They aim to accelerate first-of-a-kind & early commercial projects in advanced nuclear, geothermal, long-duration energy storage, & more. They started by issuing a request for information for projects seeking offtake agreements. • Spiritus announced it will build its first direct air capture project in central Wyoming. The project, Orchard One, aims to capture 500,000 tons of carbon per year at a cost of less than $100 by the end of its 2nd phase of development & 2M tons per year at < $75 per ton at full scale. • Salt River Project & NextEra Energy Resources commissioned two solar-plus-storage plants in Arizona this week. The first is the Sonoran Solar Energy Center, a 260-MW solar farm with 1 GWh of battery energy storage. The 2nd, the Storey Energy Center, is a 88 MW solar plus BESS facility. NextEra operates both plants & will sell electricity to Google for a new data center in Mesa, Arizona. • Developers in Ohio also got the green light for a $1B solar + storage + agrivoltaics project. The Oak Run project will span 6,000 acres of farmland & feature 800 MW of solar + 300 MW of energy storage. Elsewhere, in Kentucky, developers will invest $1.3B to build a closed-loop, 287 MW pumped-hydro storage near an abandoned coal mine in Bell County. • In a blow to geoengineering research, Harvard paused efforts to conduct small geoengineering & stratospheric aerosol injection experiments. • State Farm noted this week that it will 'non-renew' 30,000 Californian homeowners, renters, & other property insurance policies. Last year, State Farm stopped accepting new property/casualty insurance policies in CA. #climatetech #energy

Venture Capital is not set up for Climate tech. You don't need to spend a lot of time fundraising as an early-stage startup to know this. The rate of VC funds shot up between 2010-2020, valuations were at an all-time high and we started to think we could throw money at anything and it will give us 20 to 30% return annually (IRR). Well just about anything. As long as it was SaaS. Hard tech is a whole new ball game. Green steel and CO2 capture, for example, require substantial investment at an early stage and need more time to break even and scale. VC may eventually come in and play an important role but the early capital stack for climate tech startups looks different than traditional VC-backed companies. To get to product market fit Climate tech start-ups need a combination of the following in their capital stack: -Non-dilutive project Grants: from governments, philanthropic foundations, private grants and prizes -Angel Investors / Syndicates : High net worth individuals, previous founders etc Catalytic Capital: These are funds prioritizing impact potential over financial returns -Rolling funds: funds raised on a rolling quarterly basis, minimizing the hurdle to fund launch. Typically thematically or community-focused, with similar terms to VC deals  -Accelerators/ Incubators/ Fellowships: Programs offering funding and resources such as strategic partnerships, advisors, and workshops to help founders build and iterate on their ideas and technology.  (Kinda like what we are doing with Energy Tech Nexus) You should talk to VCs, but do so knowing that many may not ready to take the cost burden until you have sufficiently derisked your solution. And if that is the case, you have other options. #founder #climatetech #VC #entrepreneurs

🌿 Some bright-spots and a couple of concerns. 🍃 Here is the latest trend on how Climate Tech investments are evolving from the eminent Sightline Climate (CTVC) team.  🌿 Below I’m comparing their 2022 and 2023 market trend report. 🍃 Let me know what stands out and what I missed? 💸 Investments 2022: Climate tech companies raised +$40B across ~1,000 venture and growth deals in 2022 2023: Climate tech companies raised $32B, down 30% from 2022, although CAGR remains high since 2020 at 23%. 🤝 Deal Count 2022: Deal count grew ~40% across every industry 2023: Deal activity decreased for the first time since 2020, with deal count down 3% compared to 2022. ♻ Round Sizes 2022: Round sizes were smaller at every stage compared to 2021, with sharper 30%+ declines in Later-stage 2023: Average deal size decreased even more, - 28% compared to 2022. As total deal count only fell 3%, smaller rounds were likely driving overall market decline. ⏳ Stages 2023: Early: Seed and Series A deal activity tapered, marking the first decline in Series A deal count, down 11%, and a slower growth of Seed deals at 12%. Late: Growth investment fell 41% and Series C fell 35%, with deal counts for both down about 30%. 2022: Early: Early stage activity accelerated 61%+. Late: Growth stage dropped and the Middle of the market flattened. 🏫 -> 🚗 What Vertical? 2022: Carbon and Built Environment were emerging stars, multiplying 2.4x and 3.8x in funding respectively since 2021 2023: Transportation and Energy investment declined, but remained on top. Food & Land Use fell dramatically, down -55%, and was replaced by Industry in the ‘big three verticals’. 🌿 Two other things to note:  🍃 Since the start of 2020, ~2,600 climate tech companies have raised $142bn+ of venture funding across 4,156 deals. That is really encouraging and worth remembering as we lament the slowdown from 2021-haydays. For those of us who were part of the CleanTech cycle, these are really robust numbers on a completely different level than CleanTech. (For reference: Between 2011 and 2016, VC cleantech investment declined by nearly 30 percent, from $7.5 billion to $5.24 billion. In addition to a lower total amount invested, the number of deals fell from 649 in 2011 to 455 in 2016 / Brookings) 🌿 I’m concerned about the continued decline of repeat investors. 🍃 In 2022, 2,000 investors joined > 1 climate deal. Of those, 613 invested in more than 5 climate deals last year. However in 2023,  the number of investors who did 5+ climate deals slumped 25% compared to last year. That means very few of those 2,000 investors who joined more than 1 deal moved into a repeat investor role. 🌿 Crossing fingers this will change in 2024! Kimberly Zou Sophie Purdom Mike Schroepfer Tom Steyer Ed Walters Ida Hempel Guillaume De Dorlodot Heather McGeory Daniel Firger Brendan Wallace Rene Velasquez Jay Lipman Susanne Fromm Hampus Jakobsson Funda Sezgi Pepe Agell Alex Prather Dimitry Gershenson Cody Simms Stephen Murphy

📣 🌎 🌟 For all of y’all in and around and curious about #climatetech, this 2023 Retrospective from Sightline Climate (CTVC) may be the most impactful report you’ll read in 2024 🌟 🌎 📣 TLDR; Climate tech funding and deals dropped in line with the broader 2023 venture market, as water has finally started to find its level. https://lnkd.in/eN96CPRK 💰 2023 investment: funding in 2023 totaled $32bn, down 30% from 2022 in line with the overall venture market, although CAGR remains high since 2020 at 23%. 🤝 Deal count: overall deal activity decreased for the first time since 2020, with deal count down 3% vs 2022. Since the start of 2020, ~2,600 climate tech companies have raised $142bn+ of venture funding across 4,156 deals. 😰 Pacing: the market freeze finally reached early-stage climate investments. Series A investment down a whopping 41%, pacing of deals for Seed & A much slower. Unsurprisingly, Growth investment -41%, Series C -35%, with deal counts for both down ~30%. 📉 Deal size: downsized rounds plus slower activity made for a double whammy of investment decline. Overall deal size declined 28% following -23% in '22. Profitability & smaller rounds are back in vogue. 🚗 Verticals: Transportation and Energy investment declined, but remain popular. Food & Land Use fell dramatically, down -55%, and was replaced by Industry in the big three. Despite the downward trend, most verticals are still up on where they were in 2020. 💤 Fewer repeat investors: the number of investors participating in 5+ climate deals in 2023 slumped 25% compared to last year. The climate tech VC tourists have officially retreated. Please 👏 the entire CTVC and Sightline Climate team who work all year in order to produce this analysis Kimberly Zou Mark Taylor Oliver Booth Walker Hamby Guy Cohen Travis Kennedy Andrew Dreis Sarah Wotus Scott Gigante Jessica Bailey John Tan Shreya Polkampally Saya Ameli Hajebi Kobi Weinberg Ethan Tan William Tate Mudit Agrawal Download the public report with additional charts and commentary here 👉 https://lnkd.in/ebjWqYVm Register to become a Sightline Climate client to access the full report, 2024 predictions, underlying data, and charts here 👉 https://lnkd.in/eik7fxVD Surprised? Expected? Confused? Excited? What do you think? Let's discuss in the comments!

I am late to do it but still want to share the summary and post the link to SVB Climate Tech Report that we published earlier this summer. SVB holds an optimistic outlook for the future of the industry, believes the solution is not to rely on a single wonder invention but to leverage all the existing innovations and technologies, and highlights the following trends in the climate tech sector:   1. Diversification: Climate tech 2.0 is emerging, driven by a diverse cohort of companies offering a wider range of solutions. From deep tech innovations to AI and machine learning, the sector is evolving rapidly. 2. Decarbonization via Electrification: The electrification of energy and advancements in virtual power plants, smart grids, and storage are driving decarbonization efforts. Electrification of vehicles, buildings, and industries is the goal, supported by climate technologies. 3. Government Support and Funding: Over the past three years, US government action on energy innovation has taken a monumental step forward. The Bipartisan Infrastructure Law (BIL), the CHIPS Act, and the Inflation Reduction Act (IRA) will channel nearly half a trillion dollars towards climate technologies and energy infrastructure within the next decade. 4. Maturation and Investment: Late-stage climate tech companies make up over 44% of VC deals, reflecting investors' confidence in long-term viability of the industry. This maturation has led to a surge of unicorns with 80 climate tech unicorns worldwide, including 14 US companies that achieved unicorn status since 2022. These unicorns span various sectors, such as energy, transportation, agriculture, and waste management. 5. Challenges in Fundraising and Growth:  Climate tech fundraising has experienced a 60% YoY decline, mirroring the broader VC fundraising market's slump. Although VC deal activity in climate tech has fallen by 21% since 2022, the decline has been less severe compared to other technology sectors. 6. Exits wait for open window: Market volatility has led to a decline in IPO and de-SPAC activity in the climate tech exit market. M&A activity continues, yet unreported valuations suggest obscured performance. Falling enterprise value to next twelve months (EV/NTM) revenue multiples indicates decreasing valuations, prompting companies to wait for more favorable exit opportunities. 7.  Evolving Business Models: Recurring revenue models, like "hardware-as-a-service" (HaaS), gain traction. Companies leverage collected data for added value, with 41% of HaaS respondents owning data generated by their hardware.   A special acknowledgment to SVB Clean Tech team behind this report: Dan Baldi, Jordan Kanis, Mona Maitra along with Market Insight researchers Eli Oftedal, Josh Pherigo and Liz Cahill. For the complete report, follow the link: https://lnkd.in/gnZc87ca Silicon Valley Bank, First Citizens Bank  

Very significant new energy transition and clean energy funding. ECP (Energy Capital Partners) has raised over $4B for its latest fund V Will continue ECP’s investment strategy of “transforming attractive and growing companies” in power generation, renewable and storage assets and critical sustainability and decarbonization infrastructure. ECP just announced the $2.6bn (equity value) take-private of Atlantica Sustainable Infrastructure Plc, a diversified renewable and power platform with assets located primarily across the US and Europe. French gigafactory startup Verkor secures €1.3B loan Building its first gigafactory, in Dunkirk, which will cost €1.5bn. Production is set to start in 2025, at which point the company says it will be manufacturing enough batteries to power 200k cars each year. The new loan comes from the sixteen commercial banks and three public banks, including the European Investment Bank (EIB), Bpifrance, ING Bank NV and Banco Santander. Zenobē secures over £1B to drive electric bus transition in the UK This new debt financing builds upon Zenobē’s existing £241 million platform established in 2022. The financing structure is designed as a long-term debt framework for electric bus fleets, providing stability and confidence for transport operators considering the switch from conventional diesel vehicles. the company is financing 39 fully electric vehicles at Transdev Blazefield’s Harrogate depot, along with a 15-year battery management service. Similarly, Nottingham City Transport’s new fleet of electric single-deck buses also benefited from Zenobē’s financing structure. Clean Energy Ventures raised a $305M fund Will continue to focus on early-stage climate tech startups, though it will also add “pre-growth” investments. Those will typically be larger checks, maybe a little bit higher valuations. The startups will have de-risked the technology, and they’ll have a product in the market, but still be at the early stages of market adoption. Will reserve 30% to 40% of capital for follow-on investments into companies that fit the “pre-growth” profile. Initial checks will range from $500,000 for a smaller seed round up to $8 million for a Series A. Total investment per company, including follow-ons, will average around $15 million. Loving the fact that every week I have to pare down the funding announcements to only the top 9 and 10 figure deals. So much activity in this space!! As usual links to sources in the comments. #sustainability #energytransition #greentech #venturecapital #startups

Commonweal Ventures’ approach to venture investing recognizes that government investment drives a significant portion of the VC market. A new report just published by Sightline Climate (CTVC) highlights this trend in clean energy: Of the 10 largest VC and growth equity rounds in climate tech, 4 of the companies received significant government investment in the last two years, including Redwood Materials, Verkor, and Ascend Elements.   Other highlights: 🌎 Climate Tech attracted $32B in venture funding in 2023 and has attracted a total of $142B over the past four years. 🚌 Transportation accounts for 40% of all venture climate tech funding since 2020. 🌱 Earlier-stage climate tech deals were the most resilient in 2023's tough venture market. While funding declined across Series A to Growth rounds, Seed investment increased by 7%.

What surprised me most about this past week filled with climate-related events spanning every facet of the ecosystem is perhaps how consistent the messaging has been or rather the lack of novelty. The irony in quoting early-stage ecosystem building events as such is not lost on me but is perhaps the most important underlying theme: climate and energy resiliency is a top priority across builders, policy makers (depending who you ask...), and investors. Personally, I have long-held the belief that removing political divineness of the topic is the critical enabler for advancing the entire sector given how paramount the government, namely the DOE, is in propping up technology advancement, accessibility, and consequently affordability. The fact that climate technology conversations are now normalcy is in and of itself the best takeaway. For those unable to make it, a few of these recurring conversations further cemented by the excellent showing during SF Climate Week: 🏛️ Government whiplash is detrimental, especially in this sector - take a look at HR Bill 2811 and 3938 to get a flavor of what would come out of a republican administration 💵 Understanding the financing options - from FOAK funding, non-dilutive matching or DOE loans office programs, corporate investment, or traditional venture investment each comes with its own benefits and trade-offs. Make sure to understand what your capital needs are and what investors (or grantors) across the stack are expecting in return from a risk / reward perspective ⬆️ Returns generally trump pure impact in venture - perhaps a harder point to make for most, but at the end of the day venture investors (outside of those with an impact mandate or other smaller nuances) have an obligation to return capital to their LPs within the confines of their bylaws. This is the true north star of a VC. Its not necessarily good or bad, just fact. Its critically important to understand this as a builder and to align with the incentives of the venture investor on the other side of the table (hence why venture is often not the best source of capital). 🤖AI AI AI...and some more AI but for what? The natural hype of AI was alive and well. It gets at the debate of software optimization vs. steel in the ground and frankly both are needed. While each investor or founder might take their liking to one over the other, it doesn't make the opposite side any less pertinent. Again, understanding who is investing where and what market needs which solution type is the critical unlock. Further, AI still seems to be most used within internal operations but is slowly morphing into the application layer but may still take some time before its realized at scale. #climateweek #consensusthoughts #SFClimateWeek

#climatetransition financing continues to accelerate. While lots of attention gets focused on the inane politics (R lawmakers in NH proposed a bill this week that would make using ESG criteria in investing a felony punishable by up to 20 years in prison) and outsized claims of #esg….the authentic work of #decarbonization and #biodiversity restoration financing is moving forward. For example…. 💰 Notwithstanding a 30% decrease in #climatetech financing (see CTVC Ltd) according to Bloomberg, last year, "The world spent a record $1.7 trillion on clean energy. This is more than the $1.1 trillion that was invested in fossil fuels.” Insufficient, but, accelerating even during a period where interest rates spiked. 🐘"France already benefiting from a twelve-fold oversubscription to its fourth green bond earlier this week. The country sought to raise €8 billion with the sale but saw record-breaking demand of €98 billion from almost 500 investors.” This, notwithstanding the complexity of measuring nature. This represents progress toward funding the $700b per annum finance gap needed to achieve the Global Biodiversity framework. ♻️The EU Commission announced a counter the US IRA to advance green industry. This race to subsidize clean energy changes incentives to draw more private capital into the ring. China remains the largest spender on climate transition (and the largest source of coal fired generation additions with more than 95% of new coal plant capacity added in China last year). https://lnkd.in/eFXiCyQ3

VC funding for carbon removal and carbon market startups fell 50% from 2022-2023, more than for any other climate tech vertical. This includes funding for carbon SaaS platforms (carbon credit marketplaces, procurement platforms, ratings agencies), CCUS, and tech-based carbon removal companies (it excludes nature-based carbon removal). These startups make up 6% of all climate tech companies but received just 3% of all climate tech VC funding since 2020. The bigger picture is that VC funding for the carbon vertical is up 500% since 2020. But it still accounts for only a tiny slice of climate tech VC funding. ----- [Note that this data does not include nature restoration or MRV and remote sensing companies.] Data from Sightline Climate (CTVC) 🔗 in comments #cdr #ccus #climatesolutions #climatetech