Ranked sixth in terms of growth potential, the climate tech VC ecosystem remains resilient to economic headwinds. Unlike its tech counterparts dragged down by the recent VC slowdown, climate tech funding roars back, with $8.1 billion poured in Q1 2024. 

Climate tech venture capital scene overview

Government creates favorable climate investment opportunities. Supportive government policies and international agreements increase the demand for climate tech solutions. New regulations have made previously impractical sectors like low-emissions cement and steel viable. For example, the Inflation Reduction Act provides tax incentives and subsidies for companies developing and deploying low-emissions technologies. Similarly, the European Union Emissions Trading System prices carbon emissions, encouraging industries to adopt low-emissions technologies to reduce costs.

Many tech companies set sustainability targets. Over 5 thousand businesses worldwide have received approval from the Science Based Targets initiative to reduce their greenhouse gas emissions, thus contributing to global decarbonization efforts. This corporate commitment to sustainability fuels the appetite of climate venture capital firms for energy efficiency technologies, renewable energy solutions, and carbon capture and storage.

Technological innovation fosters climate tech funding. First, advancements in carbon capture, emissions tracking, electric vehicles, and sustainable industrial processes reduce emissions and align with global sustainability goals. Second, climate tech companies scale up faster than other tech ventures and lead in patent filings. These economic opportunities and rapid growth turn climate tech startups into hot tickets for climate tech VCs.

Most active VC funds in climate tech

There are almost 200 venture capital funds investing in climate tech. One of the leading firms is Lowercarbon Capital, co-founded by Chris Sacca, an early Uber and Twitter investor. This fund channels sustainable venture capital to founders who slash CO2 emissions and buy people time to save the planet. In 2023, it participated in 15 funding rounds, with the largest one of $70 million Series B round for Loam Bio, an Australian startup focused on carbon capture in soils. 

The others include Khosla Ventures, a Silicon Valley veteran focused on clean technology venture capital investments, and Climate Capital, a stage-agnostic firm that invests in founders targeting climate adaptation and emissions reduction.

Climate tech startup ecosystem

With over 45K startups, the climate tech sector has all the chances to become unstoppable. More than $8.1 billion raised at the start of 2024 suggests that the challenging Q4 2023, with its $5.7 billion in climate tech VC funding, was more of a blip than a sign of a prolonged downturn. 

Large rounds tend to become the norm, not the exception. In 2024, H2 Green Steel, a Swedish startup focused on decarbonizing the steel industry, secured $215 million in equity and a staggering $4.5 billion in debt to fund a new plant. Ascend Elements, a climate tech unicorn worth $1.6 billion, raised $704 million in the Series D round. These examples present a broader climate tech trend. Many companies produce physical products rather than software, thus requiring substantial climate tech funding to scale up. The only problem is that a few companies are now ready to make a leap. However, as early-stage startups grow and mature, more will reach the point where they can secure significant climate investments. 

Climate tech VCs prioritize mature ventures, but early-stage startups can still disrupt the carbon-tech subsegment. Many investors are ready to fund companies with proven customer traction and revenue. In climate tech, the pool of viable investment opportunities is smaller because many companies still carry significant technical risks. Q1’s numbers show that investors favor safe, revenue-generating startups. However, this doesn’t mean that early-stage ventures don’t have any chances to fundraise. In fact, it’s the opposite, particularly in the carbon-tech subsegment, which offers abundant growth opportunities.

Awareness of climate change grows, and so does consumer demand for more sustainable solutions. The world needs to pour $230 trillion in the next 25 years to achieve net-zero carbon emissions. Climate investment funds see high returns, which pushes them to back innovative technologies and business models that tackle environmental challenges. 

Ready to enter the climate tech VC scene? Ensure that you take an effective investor outreach strategy with you. We’ve prepared a list of top climate tech venture capital funds to streamline your fundraising journey.

Discover how to secure funding for your climate-changing technologies,
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Most notable startups in climate tech

The climate tech sector boasts over 2K startups, the most notable of which is Northvolt, a Sweden-based venture focused on developing eco-friendly lithium-ion batteries. With $5 billion received in funding, the company aims to reduce the carbon footprint of battery production by 80%. This startup also contributes to renewable energy through sustainable battery supply chains. 

Redwood Materials is another prominent climate tech startup that raised over $2.8 billion in funds. Located in Nevada, the US, it’s dedicated to creating a sustainable battery supply chain by recycling batteries to produce anode and cathode materials. This initiative supports the production of batteries for up to 1 million electric vehicles each year. 

One more key player is Universal Hydrogen, a clean energy startup that secured over $82.5 million in funding. Headquartered in California, the US, the company works towards creating more sustainable and environmentally friendly air travel. 

Startup accelerators in climate tech

Numerous climate tech accelerator and incubator programs help founders build successful businesses. Katapult Accelerator is a global three-month program targeted at building and scaling tech ventures with a positive environmental and societal impact. It includes networking events, workshops, one-on-one sessions with industry experts, and $150K—$500K investments. 

Techstars Alabama Power EnergyTech Accelerator runs a three-month program for startups working on renewable energy, energy efficiency, smart grids, electric vehicles, energy storage, and other related areas. Founders receive hands-on guidance, workshops, networking events, and access to various industry experts and investors.

UN Women Climate Tech Accelerator supports women-led climate tech startups in the ASEAN region. This program spans nine months and is divided into three phases: the initial phase focuses on building foundational skills and refining strategies, the second provides regional mentoring, and the third offers continued support and networking opportunities. 

Climate tech angel investors

Aside from climate tech incubators and accelerators, a significant portion of funding comes from angel investors. The sector has a growing roster of angels ready to fund innovative startups. Some of them are founders themselves, like Siraj Khaliq, a co-founder of The Climate Corporation, which uses ML to help farmers manage climate risks. Now, he is a partner at Atomico, supporting deep-tech ventures. Fredrik Hjelm, a founder of the Swedish e-scooter startup Voi, has invested in multiple green technology startups with tickets ranging between €25K-€1M.

Others come from different sectors, like Chris Adelsbach, who is primarily known for his portfolio of 225 investments, mainly in fintech. He has backed climate tech startups like Minimum, a climate impact modeling system, and Connect Earth, a data tool for sustainable financial products.

Recent VC exits in climate tech

Since 2020, almost 300 climate tech startups have exited via IPO, SPAC, and M&A. Although the average value of companies exiting through IPO and SPAC has recently declined due to uncertainty in public markets, the values of M&A deals have risen. Some recent deals include Shell’s acquisition of Volta for $169 million in 2023, BP’s acquisition of Archaea Energy for $4.1 billion the same year, and Chevron’s acquisition of Renewable Energy Group for $3.15 billion in 2022. 

Additional insights 

Although the climate tech sector has been relatively shielded from the recent VC pullback, the due diligence process has become more thorough. Climate tech VCs focus on financial results, development plans, and regulatory compliance, seeking clear evidence of market traction, cost-efficiency, and scalability. That’s why you must prepare a solid business plan and a pitch deck that clearly tells your product’s story to get the funding you want. If you need help with this, reach out to our team for expert guidance—in 2023, our clients raised over $505M, and we’ll gladly help you follow suit!

FAQs

What is climate tech?

Climate tech refers to technologies developed to combat climate change and reduce environmental impact. This includes innovations in renewable energy, energy efficiency, water management, waste reduction, sustainable agriculture, and carbon capture.

What are the most popular climate tech conferences?

Some of the notable climate tech conferences are: Climate Week NYC—a global annual event held in September that brings together business, government, and climate sector leaders to discuss and promote climate action; GreenBiz VERGE—an event series organized by GreenBiz Group every year to accelerate the clean economy through technology and innovation; Bloomberg Sustainable Business Summit—an annual climate tech summit dedicated to promoting sustainable business practices.

What is a climate tech hackathon?

A climate tech hackathon is an event where participants collaborate intensively over a few days to develop solutions for climate change. Teams work together with mentorship and workshops, then present their solutions to judges, who decide the winners. It can be held in various locations globally and is often organized by universities, tech companies, non-profits, and governmental organizations.

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Ruslana

CONTENT WRITER

Hello! I'm Ruslana, a Content Writer at Waveup. Based on my background in marketing research and business analytics, and my current collaboration with the savvy team at Waveup, I'm excited to share my insights and learnings with you.