4 Trends in Climate Tech Investing
Now, more than ever, is an important time for the United States to take a hard look at how to achieve net-zero carbon emissions. Factors like a new administration, the United States’s return to the Paris Agreement, and more corporations and local/state governments setting carbon neutrality targets mean there is a lot of opportunity at this moment. Large-scale changes are needed, but those can’t be made without new technology. Many are looking to climate tech, which broadly encompasses the technologies and innovations that reduce greenhouse gas emissions and address the impacts of climate change.
These new technologies, and the innovators behind them, will require capital, mentorship, and support to develop and scale. But to understand where climate tech is going, we first need to understand where it stands now. We compiled a list of over 350 accelerators and incubators, venture capital firms, corporate venture capital firms, and private equity firms, ranging in size and scope. Some were founded for the sole purpose of investing in climate tech, while others are generalists that recently have made their first investments in climate tech startups. After compiling and analyzing this list, these are the four key takeaways on the state of climate tech investing.
- The firms are spread out geographically.
While we focused on the state of climate tech investing in the U.S., we included nearly 70 international firms investing in U.S. companies. The VC firms’ headquarters are spread out all over the world, with many cities having only 1–2 VC firms investing in climate tech. This mirrors broader venture capital patterns where firms concentrate in large metropolitan areas like New York and San Francisco. However, other cities including Boston, Chicago, Boulder, and Los Angeles were in the top 10 on our list for the most number of firms investing in this space.
2. There’s been significant growth in the number of firms started in the past decade.
Before the early 2000s, there were 1 to 2 of the firms on our list were founded per year. That number has steadily increased ever since, peaking in 2016 with over 30 firms founded. Over 50% of these firms were founded in the last decade. Since many of the firms founded before the 2000s are generalists and have recently gotten into the climate tech space, looking exclusively at when firms were founded likely underestimates the recent surge in climate tech-focused investments. According to a report on climate tech by PWC, the amount of money flowing into climate tech increased 10x between 2013 and 2018.
3. Private equity and corporate venture capital firms channel money into climate tech.
Private equity firms and corporate venture capital firms are playing an increasingly large role in channeling money toward climate tech. Corporations are beginning to see the costs of climate change, in addition to facing increasing pressure from consumers and investors. In response, they are developing strategies to adapt to and mitigate the effects of climate change by transitioning to renewable energy, setting net-zero goals, and investing in new technologies. While this is a promising trend, we need more corporations investing in climate tech solutions and accountability for net-zero commitments.
4. Accelerators and incubators are stepping in to creatively address critical needs.
Our list includes nearly 50 accelerators and incubators, which provide a range of services and support. Accelerators focus on “accelerating” the growth of existing ideas by providing capital and connections. Incubators play a variety of roles related to “incubating” new ideas, including co-working space for entrepreneurs to work and test new ideas. Incubators like Greentown Labs and Sustainable Startups also provide educational opportunities and work to build a community of entrepreneurs, investors, technologists, attorneys, and others. Meanwhile, firms like Activate reduce the barriers to entry for scientists to develop new ideas by providing 2-year fellowships with a living stipend, healthcare, and a travel stipend in addition to providing the more traditional incubator functions. And M-Corps makes it easier for startups to get their products manufactured and to market, and focuses on providing technical expertise related to the manufacturing process.
To view the full list of climate tech investors, click here. Did we miss any firms you think should be included? Feel free to make a recommendation here. We’d like to acknowledge the following individuals and companies who have compiled relevant lists in the space and served as a foundation for our analysis: Dave Kirkpatric, Climate Tech VC (VCs and Accelerators), New Energy Nexus, Amasia, and PWC.
