Venture capital climate companies are ramping up their efforts to combat climate change by channeling billions into technologies aimed at fostering a sustainable future. Nevertheless, the second quarter of 2024 witnessed a notable decline in climate tech funding, hitting its lowest quarterly level since Q2 2020, as outlined in a report by CB Insights. Funding plummeted by 20% quarter-over-quarter (QoQ) to $4.9 billion, continuing a downward trajectory in the sector. Despite this dip, the number of deals experienced a modest uptick, with 397 deals sealed in Q2 2024, though still below the quarterly figures seen in 2023.
Investors in climate tech are exercising increased caution, showing a preference for smaller mid- and late-stage deals. Yet, they remain on the lookout for opportunities in the early stages of funding, where promising prospects lie. Notably, Q2 2024 marked the second consecutive quarter without the emergence of any new unicorns (private companies reaching valuations of $1 billion or more) in the climate tech domain. This absence of new unicorns aligns with the dwindling sizes of late-stage deals, underscoring the prevailing prudence among investors.
The overall decline in climate tech funding and the shift towards smaller deals mirror broader trends in the market, indicating a more selective and cautious approach by investors. Venture capital (VC) remains the dominant group (25%) investing in the industry on a quarterly basis since 2020. The top four venture capital climate companies identified by the CB Insights Report are pivotal players in advancing green technologies crucial for combating climate change.
SOSV, a global venture capital firm headquartered in the United States, stands out for its focus on investing in early-stage deep tech startups with an emphasis on human and planetary health. Founded in 1995 by Sean O’Sullivan, SOSV has expanded its assets under management to over $1.5 billion, backing over 500 startups worldwide. Operating various accelerator programs like IndieBio and HAX, SOSV equips startups with access to laboratories, office spaces, and mentorship. The firm’s commitment to environmental sustainability is evident through its investments in companies developing alternative proteins, carbon capture technologies, and other solutions to reduce carbon emissions.
Global Brain, a leading venture capital firm based in Japan, has been instrumental in fostering innovation by investing in startups globally since 1998. With over $1.9 billion in assets under management, Global Brain has supported more than 1,000 startups across various industries, including technology, sustainability, and critical minerals. The firm’s focus on renewable energy and eco-friendly technologies aligns with its mission to drive advancements in critical industries, such as the sourcing and processing of minerals essential for clean energy technologies.
Lowercarbon Capital, a prominent venture capital firm in the United States, is dedicated to expediting the transition to a low-carbon economy. Founded by Chris Sacca and his team, the firm concentrates on investing in innovative technologies and business models that address the climate crisis and reduce global carbon emissions. Their portfolio includes startups pioneering zero-carbon cement, methane reduction in computing, fully electric planes, and advanced carbon removal technologies, all aimed at combatting climate change while delivering robust financial returns.
These venture capital climate companies play a crucial role in driving innovation and sustainability, contributing significantly to the global fight against climate change.
