🌏 $30bn and 14% fall as market finds new normal in ‘24

Happy New Year 🎉 We’re glad to be back in your inbox after a little R&R over the holiday break, and we’ve got one last gift for you: our 2024 Climate Tech Investment Trends report, live now.

It’s our fourth (!) year releasing this report, and while the climate capital stack has expanded and matured since we first started out, the VC layers are still crucial. They serve as launchpads for getting innovative climate technologies out of the lab and into the world as FOAK plants or new products — and we crunched the numbers to show just how much.

This 2024 Climate Tech Investment Trends report has all of the funding and deals data by stage, vertical, and product type, but we also have a whole other layer of analysis just for clients. Sightline Climate clients can access the full report and underlying data pack, with complete data and analysis of 2024 climate investments across graduation rates, sectors, ‘first-of-a-kinds’, exits, investors, geography and product type via the platform here. If you’re interested in becoming one, request a demo here.

📊 So what does the data say? Investors didn’t fully push the restart button in 2024, as the 2023 “wait-and-see” crowd had hoped. The still-high interest rates, delayed IRA funding rollouts, and political uncertainties created headwinds that hit strategies and deployment. Don’t expect to see another 2021/22 ZIRP-fueled funding mania anytime soon. 

But 2024 did bring fits and starts of opportunity and optimism for the sector. AI spurred clean firm power, Europe strengthened carbon markets, and emerging economies’ climate tech demand opened up. Hesitant investors now have more clarity around interest rates, geopolitics and policies, and exits (the good kinds, and the bad kinds). Mainstream infrastructure and growth investors increasingly view climate infrastructure as just, well, infrastructure. 

Buckle up as we speed through a TLDR of the report in this newsletter. But you can sit back and enjoy the ride with the full public version, with additional charts and commentary here. 

📅 And if you want to dive in even deeper (and get access to some more insights), join us for a webinar on Thursday, January 23 to review key highlights from this and our recent climate capital stack report with Sightline Co-founders Kim Zou and Mark Taylor to get our take on what’s to come in 2025, followed by an audience Q&A.

Highlights

💰 2024 investment: Venture and growth investment in 2024 totaled $30bn, down 14% from 2023, much less than the previous 24% drop, showing the sector settling into a new normal.

🤝 Deal count: Deal count was relatively flat, at 1,460 in 2024, compared to 1,468 in 2023 — but with increases in later stage deals as climate tech sectors mature.

📉 Late: Investment in Series D and beyond fell 38%, while Series C was essentially flat at 1% lower. Deal counts for both were up about 20%.

📈 Early: Seed and Series A split on investment trends, with Seed up 3% and Series A down 8%. Deal counts for both were down, Seed by 10% and Series A by 4%.

💸 Round size: Average deal size fell 14% to $24m. Growth deal sizes were down a dramatic 48%, but Seed and Series B were up 12% and 38% respectively.

🚗 Vertical: Energy came top in 2024 investment, up 12% to $9.4bn. Transportation underperformed, down 36%. Industry was down 29%, returning it to fourth place behind Food & Land Use.

💤 Fewer repeat investors: There were 12% fewer investors overall in climate tech in 2024, with repeat investors rising to make up the majority. Sector tourists have left for other pastures as climate-focused funds topped the charts for deals in every investment stage.

🎉 Cumulative: Since the start of 2020, ~3,900 climate tech companies have raised $182bn+ of venture funding across over 6,200 deals.

A note on methodology: This funding report captures only Venture Capital and Growth Equity deals that have been publicly announced through regulatory filings or press releases as of December 31, 2024. Read more about methodology and definitions at the bottom of this post. 

2024 Update TLDR

Climate tech venture and growth investment totaled $30bn, down 14% from 2023 as deal count holds

• A new normal. Total investment was down 14% in 2024 from 2023 — less than the 24% drop between 2022 and 2023, but still more than the 5% drop between 2021 and 2022. Meanwhile, the number of deals was basically flat in 2024 with 1,460 deals, compared to 2023’s 1,468, as investors favored slightly smaller deals for companies with clear pathways to scale and commercialization. 

Growth is slow, but steady

• Cumulative investment reached $182bn in 2024, but growth is slowing. After cumulative investment more than tripled from 2020 to 2021, yearly totals are now flat or declining. What initially looked like exponential growth has become decidedly linear: The CAGR for 2020-2022 was 135%. For 2022-2024, it was 25%. 

Data centers, clean firm power are new mega-deal darlings

• Data centers and clean firm power drive mega-deals. While the biggest deal was for IM Motors, a Chinese EV manufacturer, it’s data centers that stand out as the new mega-deal sector. Scala and Crusoe both support clean energy for data centers. Investors are still focused on clean firm power, with deals for X-energy (developing small modular reactors) and LDES producer Form Energy making the top 10. However, deal sizes have shrunk as the market pulls back from growth plays — standards for deals are higher, but check sizes are smaller.

Growth investment drops 38%, early stage stabilizes

• Growth stalls, hitting total annual investment. Large growth-stage deals, which have carried overall investment numbers since 2020, dropped 38% from 2023’s $11bn to just $6.7bn in 2024. Meanwhile, the notable 23% increase in Series B funding was mostly the result of a few unusually large deals, including $1.1bn for IM Motors, $331m for Electra, and $308m for EnerVenue. Seed investment has hovered around $2.7bn since 2022 as the appetite for early bets in climate tech stays consistent.

Growth and Series C deal counts were up by more than 20%

• Fork in the road as early stage deal counts drop, later stage deal counts rise. After steady rises from 2020-2022 across Seed, Series A, and Series B, counts are falling slightly. Both Series C and Growth counts rose by over 20%. The largest Series C deals are concentrated in the nuclear (X-energy, Zap Energy), mining (KoBold, Lilac Solutions), and low-carbon fuels (Infinium, Twelve) sectors, for commercial-scale projects. And while Growth deal counts on the rise, they’re smaller and blended rounds, more like bridges but not labeled as such. 

Nuclear returns to power while batteries run out of charge

• Autos stay strong in Transportation, but a shake-up is coming. The fall in Transport is mainly a fall in batteries. Autos held roughly constant, down just 2%, while batteries saw a massive 79% drop of $4.8bn, and aviation saw a massive increase of 369%.
• Nuclear and energy storage returned to dominance. In 2021, the two made up 46% of all Energy investment. By 2023, this had fallen to just 19%. 2024 saw both rise again, nuclear up 85% and energy storage 184%, to together make up 38% of all Energy investment.

Graduation rates rose despite a slight dip in company numbers

• Signs of recovery as graduation rates bounce back. 2024 saw 1,186 companies raise money, compared to 1,263 in 2023. Overall graduation rates rose from 19% in H2’2023 to 25% in both H1’2024 and H2, reversing the downward trend that started in 2022 — and a signal that the market is thawing.

Exits more than double to record high in 2024

• Exits in 2024 grew a whopping 136% compared to 2023. Acquisitions made up the vast majority, at 92% of all exits. The total number of IPOs rose slightly compared to 2022 and 2023, but stayed lower than both 2020 and 2021. SPACs continued to fall, making up only 5% of exits in 2024 — a far cry from 2021, when they represented 49% of all exits. The count of IPOs rose in 2024 with 6 companies going public, compared to 5 in 2023. There’s marked progress coming from emerging markets, with two large IPOs in India. 
• Plus, acquisitions are higher than any past year. But most of them were undisclosed, a signal of smaller outcomes. We predicted last year that tuck-in acquisitions would rise, and that it would be a buyer’s market. That prediction looks to have panned out, and acquirers are taking full advantage.

Oil majors continue their buying spree 

• Oil and gas companies are buying their way into renewables and the energy transition, with 3 in the top 5 most active climate acquirers. As the European majors make their own transition from oil companies to energy companies, they continue to buy up projects and add expertise by acquiring companies.However, with these companies also making high-profile comments about doubling down on oil and gas, or moving away from technologies like offshore wind, this could be the feast before the famine.

Solar sentiment dims, but Transport failures stole the show

• Solar and Transportation hit hard. Eleven solar companies filed for bankruptcy, primarily in the residential sector — surpassing 2023's peak of seven bankruptcies in the auto industry. Changes to California's net-metering system, which cut payments by 75%, hurt solar installers and suppliers. The transportation sector also struggled, with high-profile bankruptcies like Northvolt and Fisker dampening investor confidence for other companies in the sector. 

Return and new investors down at all stages

• The market saw fewer numbers of returning, new, and departing investors alike, suggesting the investor pool may be stabilizing after a rapid surge of new entrants in 2020-2022, followed by falls in 2023 and 2024. Total investors peaked at 2,270 in 2022, dropping 14% in 2023 and 12% in 2024. 

Energy sees both the most general and specialist investors

• Specialist investors grew as a % of total investors in most verticals, with the exception of Built Environment where it was flat. It’s now highest in Carbon, at 37% (the Carbon vertical includes a huge range of technologies, from DAC and CCS to carbon markets). Assessing these deals often requires technical knowledge beyond what a generalist investor would have on-hand. The sector with the lowest % of specialist investors is Food & Land Use, at 27%. Many of these startups cross over into the consumer sector, where generalist investors are more comfortable.

Methodology

Asset class

This funding report captures only Venture Capital and Growth Equity deals that have been publicly announced through regulatory filings or press releases as of December 31, 2024. We also verified deals directly with the most active investors. Where other market observers may promote larger climate market sizes, we stay true to our Climate Tech VC name and carefully exclude:

• Country/ state-level funding (e.g. State-owned enterprise funding)
• Non-dilutive funding (e.g. debt, loans, asset financing, grants)
• Project finance
• Private equity
• Post-IPO funding

We’ve long held that climate tech is a theme not an industry. Our definition of climate tech comes with two filters: 1) climate impact and 2) climate vertical. Companies must tick the box in at least one category for both filters in order to make the cut.

Climate Impact 

To be counted as climate tech, companies must fulfill one or more of the following “climate impacts”:

Mitigation - Directly decarbonize across key emissions sectors. 

Examples: electricity & heat, ag & land use, industry, transportation, buildings

Adaptation - Adapt to a changing climate with new products and economic models.

Examples: New insurance products, producing food to use, geo-engineering

Monitoring - Gather information / data about emissions or climate risks and impacts to generate insights.

Example: Emissions and sustainability reporting, climate risk and intelligence

Removal - Remove existing emissions from the atmosphere

Examples: Carbon removal, nature-based solutions, reforestation

Regeneration - Enhance general environmental “positive externalities” and “do more good, not just less bad”

Examples: Regenerative ag enhances biodiversity & sequesters carbon

Climate Vertical

In addition to having climate impact, companies must fall into at least one of the seven broad climate verticals below. These verticals encompass 60+ sectors and 250+ technologies helping us mitigate, adapt, monitor, remove, and regenerate in our warmer and weirder world.

⚡ Energy - The electrons and fuel that power us

Sectors: new generation technologies (e.g., nuclear, solar, geothermal), energy storage, hydrogen and other low-carbon fuels, enabling renewables software, marketplace, and grid management platforms, DER and demand response tools, utility transmission and distribution services

🚗 Transportation - The movement of people and goods

Sectors: battery technologies, EV autos, EV charging and fleet management, electric micromobility and ridesharing, zero-emission planes, boats, and trains, urban public transport

🌾 Food & Land Use - The nutrients and resources that give us life

Sectors: alternative proteins, regenerative farming, vertical farming, sustainable fertilizer and animal feed, nature restoration and ecosystem services, remote sensing for crop yield optimization, autonomous farming equipment, water tech, and food waste reduction

🏭 Industry - The goods and raw materials we use every day

Sectors: low-carbon cement, chemical and plastics, steel, manufacturing, metals and mining, circular economy commerce, sustainable textiles and packaging, waste and recycling

☔ Climate Management - The data, intelligence, and risk associated with a changing climate

Sectors: emissions and sustainability reporting, earth observation through remote sensing, climate risk and intelligence platforms

🏠 Built Environment - The places we live and work

Sectors: sustainable building materials, low-carbon heating and cooling, prefab construction, energy efficiency, building electrification and energy optimization  

💨 Carbon - The avoidance and removal of emitted carbon

Sectors: carbon offset marketplace and procurement platforms, carbon utilization, carbon removal and storage technologies, point-source CCS, verifiers and ratings enablers

NOTE: You may notice that some of our numbers are larger in this update than previous editions. We constantly update the dataset to have the most accurate data possible, including adding post-dated deals.

🎁 Now that’s a wrap on the TLDR! If you’ve got this far in the email and haven’t yet clicked, get the full report here.

Have a different take on what’s driving these trends? Or questions about our analysis? Drop us a note at [email protected] if you’re looking to dig deeper into the 2024 investment numbers.