Climate Tech Funding Trending Upwards Despite Debt & Megarounds Decline
As of July 2024, climate tech funding year-to-date reached $57.92 billion – a notable increase from the $47.69 billion recorded at the same point in 2023. This 21.4% growth underscores a robust influx of capital into the sector, giving prevalent economic uncertainties, reflecting sustained investor interest and confidence.
However, despite the surge in total funding, the number of deals continues to decline.2024 has seen a 24.5% decrease compared to 2023 as of the end of July, with 4110 deals in total. This indicates a consolidation within the market, with large amounts of capital being funneled into fewer, more mature companies.
In July 2024, $3.6 billion was raised across 446 deals, consistent with the monthly average over the past five months.
So far, the climate tech sector in 2024 is marked by robust funding levels. As the year progresses, monitoring whether these trends will continue to shape the climate tech landscape will be crucial.
Climate Tech Highlights: Equity Dominates, Debt Declines, and Energy and Transport Megarounds
July’s funding landscape showed a continued reliance on equity financing, comprising 78% of the total funding and 46% of total deals. This consistent preference for equity, indicates ongoing investor confidence in taking ownership stakes in emerging companies. The debt trend has been on a downward spiral since its momentous showing in Q1 2024, pooling 11 deals, the lowest numbers compared to the last 6 months.
Grant funding maintained a moderate presence, providing crucial support for early-stage innovations and non-profit initiatives. Other financing types, though smaller in volume, still played a role in diversifying the funding landscape.
July saw 6 megarounds, with no gigarounds These megarounds made up almost a third of total funding for the month, highlighting their impact on the overall funding landscape. Despite the high concentration of capital, the count of megarounds has been decreasing year-to-date, with July being the lowest month of 2024.
Notably, most of the financing for July’s megarounds was directed towards the energy and transport sectors, an allocation underscoring the ongoing prioritization of critical areas addressing climate change, particularly in renewable energy, energy storage, and sustainable transportation solutions.
Among these, were deals like dlight’s $176M for solar products, Zunder’s $244M to advance EV infrastructure, and Upwell Water’s $100M raise to manage and develop water supply, treatment, and management assets.
Climate Tech Exits: despite fewer deals in July, exit activity is still expected to surpass 2023
2024 has seen 186 exit deals year-to-date, a near-equal count compared to the same point in 2023. July 2024 observed a dip in exit deal activity, with only 17 exit deals compared to an average of around 25-30 in previous months. Acquisition deals also dropped to 15, the lowest count for the year. While there were no mergers or SPACs, IPO deals recorded a positive count, leading to 3 so far in 2024 (two in July and one in April 2024).
The reduced exit activity in July implies a cautious market sentiment or a strategic pause as companies and investors reassess their positions mid-year. The almost non-existent number of merger and SPAC deals suggests that consolidation strategies and acquisition routes are less favorable, possibly due to market volatility or shifting investor priorities. However, the emergence of two IPO deals in July hints at a selective push towards public offerings, targeting high-potential companies ready for the public market.
These trends could imply a strategic recalibration within the climate tech sector, focusing on optimizing existing investments and preparing for long-term growth. The lower exit and acquisition deal counts may also indicate a more rigorous evaluation process by investors, emphasizing sustainable and high-impact investments as market conditions continue to remain challenging.
A few notable exit transactions that have taken place in July 2024 have been Leap Green Energy’s $200M acquisition by Brookfield Renewable Partners, Plus Xnergy’s $23.5M acquisition by BM GreenTech Berhad, and Motkraft’s $3.4M acquisition by Skandia GreenPower.
