Funding and deal activity in May 2024 was shaped by a notable influx of capital, with $6.6 billion raised across 419 deals. Year to date, climate tech has raised $44.1B in venture funding, a 37% increase compared to this same point last year. However, deal count continues to spiral downward, seeing a 35% decline in count of deals compared to this same point in 2023.
Overall, May 2024’s climate tech funding landscape is characterized by high investment volumes, a significant reliance on non-dilutive funding, and a noticeable contraction in equity financing. These dynamics illustrate a sector that, while still vibrant, is adapting to evolving market conditions and investor sentiments
Key takeaways
- Large rounds continue to shape 2024, while deal activity continues to slip
- Similarly, non-dilutive financing –particularly debt– keeps gaining ground
- Climate Tech continues to see fresh dry-powder for investments
- Exit activity slows, compared to this same point in 2023
Climate tech patterns: funding focused on debt deals and renewable energy solutions
The climate tech funding landscape for the month of May saw a particularly heavy concentration of capital in a few large deals. One gigaround and fifteen megarounds dominated the scene, together accounting for 70% of the total capital deployed during the month.
Debt financing played a lead role, comprising 60% of the funding rounds compared to equity’s 40%. This preference for debt over equity continues to indicate a strategic move by companies to raise capital without diluting their ownership stakes.What is driving investor decision-making towards the lower risk and higher stability associated with lending and investments focused in companies with proven business models and revenue streams?
Among the notable deals in May, we see a continued injection of funds into companies operating within the energy challenge areas. Examples of this were Verkor’s $1.4 billion debt round (the sole giga-round for the month) and Zenobe’s substantial $517.3 million debt round, which underscored the significant investments funneled into energy storage and management solutions. HTEC’s $337 million debt round and Origis Energy’s $300 million debt round further exemplified the trend towards sizable debt financing in support of renewable energy infrastructure and technology development.
New climate tech funds fuel innovation, sustainable solutions, and infrastructure development
In May 2024, we tracked 6 new announced funds, each targeting diverse areas within the climate tech landscape. Notable among these are:
- Bluefront’s $50 million seafood fund aimed at sustainable seafood ventures and
- Blisce’s $162 million fund focused on climate and social impact investments.
- Starshot Capital $35 million fund to back climate-focused startups
- Alcazar Energy Partners $490 million second fund for renewable energy infrastructure projects.
- Eurazeo’s $800 million planetary boundaries fund, a new impact buyout fund
- Shadow Ventures $34 million fund, its second fund to invest in sustainable infrastructure
Simultaneously, several funds held their final closes in May 2024, reflecting a successful period of capital raising for climate-focused investment vehicles. We tracked 15 of these, and some of the most noteworthy ones are:
- Energy Capital Partners $6.7 billion fund close, its fifth flagship fund to invest in power generation, renewable and storage assets and critical sustainability and decarbonization infrastructure
- EnCap Energy Transitions final close of its $1.5 billion energy transition fund II, to invest in solutions that decarbonize the power industry
- FSN Capital Partners final close of its $400 million fund, to bolster its commitment to the green transition
- Norrsken VC finalized $345 million impact solutions venture fund,
- ETF Partners $309 million fourth fund close,
Clean Energy Ventures final close of its oversubscribed $305 million fund, with investment focus areas including industrial decarbonization, plastics and grid-enhancing technologies, such as virtual power plants.
Together, these new fund announcements and final closes in May 2024 highlight a diverse and vibrant investment landscape within climate tech, with substantial capital earmarked for advancing sustainable solutions across different sectors.
Climate tech exits:
Exit activity within climate tech has seen a significant decline year-to-date, with total exits in 2024 so far amounting to just over $1 billion across 125 deals. This represents a notable downtick by 84% in funding and 5% in deal activity compared to the same period in 2023. Furthermore, the overwhelming majority of exits continue to be acquisitions.
The decline in exit activity could suggest a more cautious investment environment due to economic uncertainties and market volatility. It may also reflect a maturation phase in the sector, with companies prioritizing long-term growth and sustainability over quick exits; indicating a shift towards strategic acquisitions and partnerships, as companies seek to leverage synergies and strengthen their market positions.
A few notable exit transactions that have taken place in May 2024 have been Helios Nordic Energy’s $78.9M acquisition by SunMind, Hemp Carbon Standard’s $2.2M acquisition by HEMPALTA, and Repack’s $1.2M acquisition by Oceansix.
