Climate Tech
Introduction
Climate Tech refers to an array of technology solutions designed to address climate change and its environmental effects. This can be done by reducing GHG emissions or adapting our systems to environmental changes.
Within the broad spectrum of climate tech, we find different types of technology, such as hardware, software, API, IoT, and biotech. Climate applications span a wide set of industries and sectors.
Here below, you can find some of the main applications for these technologies.
Combined enterprise value
In 2022, the combined enterprise value of global climate tech startups dropped by 30% to $1.6T. However, despite this drop, the ecosystem increased its combined value by 56x in a decade.
Investment by destination
After a record year in 2021, investment into the climate tech ecosystem dropped by 10% in 2022, with $50 billion raised globally. Despite this recent decrease, climate tech investment last year still doubled pre-pandemic levels.
Overall, the ecosystem VC investment increased by 24x within the last decade.
Of the three regions, the EMEA region is the only region registering a growth in investment, specifically of 13%, attracting 17B in 2022. The drop was most significant in Asia & Oceania, at 33%.
The Americas declined by 13% last year, yet it remains the top region globally for overall climate tech VC investment.
Share of total investment
The shares of climate tech investment more than tripled within the last ten years. We also noticed that while the amount invested in climate tech decreased last year, as seen above, its global shares increased by 25% from 8 to 10%.
This indicates that while the market crunch has slightly hit climate tech startups, their popularity among VCs is increasing.
Climate tech and Impact
Looking more closely at the wider impact ecosystem, the numbers considerably change. Here, climate tech attracts the bulk of the impact investment between 70% and 80%.
This indicates that impact startups focusing on climate and the environment are considerably more attractive than startups with a social focus.
Round sizes
If we look at median rounds sizes in recent years, we can notice an upward trend for both climate tech and the overall startup ecosystem in recent years. Climate tech startups show values similar to the rest of the ecosystem, demonstrating that impact does not come at the expense of attractiveness for VCs. Median round sizes are a good proxy for valuations and are even more meaningful than valuations at early stages.
Looking at the changes in 2022 with the market downturn, early-stage round sizes have held and grown even for both categories, while at later stages, performances diverge strongly. Climate tech kept growing even at Series B and Series C+, while the rest of the ecosystem dropped strongly.
By vertical
Electric mobility has attracted the highest share of global investment since 2019. Despite a 48% drop between 2021 and 2022, the vertical is still up 46% from 2020. In 2022, renewables was the second top-funded segment, overcoming other prominent verticals such as EV battery and alternative proteins.
In the last 24 months, circular economy startups registered a 101% growth. The fastest-growing segment in the last 12 months has been carbon capture and storage with a 300%+ growth to $3B. Other segments showing strong growth have been climate fintech and hydrogen.
Early stage by vertical
Looking at early rounds, the ranking changes considerably. This time, circular economy is the top funded segment with 458M in 2022, followed by alternative protein and urban tech. The bulk of verticals registered a decrease in investment in the last 12 months, albeit remaining relatively stable compared to 2020.
Agritech segments are among the few segments that registered growth in 2022. Specifically, regenerative and precision agriculture grew by approximately 100%. Methane emissions mitigation and carbon capture and storage have seen instead the highest growth in the last two years.
Related content
Impact: Methodology & Definitions: Learn how Dealroom defines impact here.
Reports: Impact Startups: 2022 Review
Reports: The Rise of European Climate Tech
Reports: Urban Tech 2022
Reports: The State of Nordic Impact Startups 2022
Reports: Impact Festival 2022