Climate tech venture capital fundraising is only a fifth of what it was in 2022. Here’s how you can still get in on a tight market.
If the earth were heating up as fast as climate tech venture capital, maybe we’d be in a lot less trouble. Funding for climate venture capital funds has cooled considerably, plummeting to $3.9 billion in 2023 from the $18.7 billion raised in 2022, a peak fueled by regulatory, government, corporate, and global acceptance of climate change, The Wall Street Journal reports. But a change in beliefs about climate change was undermined by high interest rates and a decline in VC exits in climate tech. As of June, climate VCs raised $3.4 billion in 2024.
And there are indeed bright spots. Climate tech venture capital firm Breakthrough Energy Ventures raised a whopping $839 million for its third flagship fund, according to PitchBook. The Bill Gates-backed fund has now raised the most of any climate tech venture capital fund this year.
Compared with other startups, climate tech companies face an additional hurdle. Not only is money tight in general, but climate technology is often novel, and investors are more risk averse right now. Ross Trenary, CFO at LevelTen Energy, a renewable transaction infrastructure company, says founders in the climate tech space should anticipate longer funding rounds, and be prepared to pitch more firms than usual. If investors want to play it safe, Trenary then recommends highlighting similarities with your company, and ones the firm has worked with in the past to remove some of the mystery. Here are three other tips:
Leverage your network
Seeking venture capital when you already have a foundation of familiarity can help strengthen your credibility, according to Trenary. “We often try to meet new funds through existing investors or people we know,” Trenary says. “There’s a social contract aspect to how we’ll behave in that process, and that tends to be a useful tool to the extent you can leverage your network.”