The State of Climate Tech Q3′ 23
Net Zero Insights’ quarterly analysis on global funding and deal activity in the private market venture space.
17th October, 2023
After negative growth in Q1 and Q2, climate tech funding has shown a sign of recovery with more than 50% QoQ increase in Q3. However, that’s not the complete picture. 2023 has been a challenging year for venture capital as well as the broader market and that reflects in climate tech investments too. The number of deals in climate tech have been declining steadily since the last six quarters, with the largest decline rate happening in Q3 2023 (-21%). This mismatch in increased funding and reduced deal activity is due to a bunch of $1B+ deals this quarter- the highest number seen in any quarter till date. Thanks to the exhilarating boost in mega-rounds and scale-ups, it has brought Q3′ 23 funding levels close to the glorious levels of 2021 and 2022, signalling optimism for a revival out of the funding downturn.
FUNDING IN CLIMATE TECH REBOUNDS IN Q3, FIRST POSITIVE QOQ GROWTH SINCE Q4‘22.
New Q3 Climate Tech Investment Data from Net Zero Insights and Alder & Co. Shows Global Funding Rebound to 2021 Level.
Data Shows Record Number of $1B+ Deals while Seed Activity Plummets.
LONDON/PORTLAND, Ore. – October 17, 2023 – Net Zero Insights, the leading market intelligence platform for climate tech in Europe and North America together with Alder & Co., a purpose-driven climate tech marketing agency, today announced Q3 climate tech investment results demonstrating a 53% QoQ increase (from $14.9B in Q2 2023 to $22.8B in Q3 2023).
However, Q3 2023 saw an overall decline in deal activity, falling for the second consecutive quarter and reaching a record quarterly low (recording a 21% QoQ decline).
“In Q3 2023, the climate tech industry achieved a remarkable milestone by securing its best funding quarter of the year, providing a beacon of hope for its recovery. This quarter witnessed the first quarter-over-quarter growth in 2023, showcasing renewed investor confidence,” said Federico Cristoforoni, Co-founder, Net Zero Insights. “Notably, massive investments poured into the most mature sectors, namely energy, transport, industry, and the circular economy. On the flip side, pre-seed and seed deals continued their declining trend, highlighting a shift in investment focus.”
Unexpectedly, this quarter recorded the highest ever count of $1B+ deals of any quarter, and included deals such as France-based Verkor’s $2.1B Series C + Debt + Grant funding and Sweden’s H2 Green Steel’s $1.6B private placement–the largest in Europe’s history. These had a significant impact on the overall funding landscape; driving investment dollars up yet the total deal count is down and pre-seed and seed-stage companies seeing the steepest decline in deals. .
According to Sophia Escheu, an Industrial and Climate Tech Analyst at Speedinvest, “echoing the trends of the previous two quarters, a mix of rising interest rates, persistent inflation, and geopolitical tensions, has cast a challenging shadow over the global startup landscape, resulting in slow growth and a dip in VC investments, climate tech included. Additionally, Q3 often witnesses a slight dip in activity as European VCs take their summer breaks, with many founders delaying fundraising until investors return to their desks.”
“Demand for seed and Series A funding remains high,” said Melanie Adamson, Partner & CEO, Alder & Co. “Where early-stage funding has ‘not been available,’ we see grant funding and equity loans filling the void.”
The report also focuses on Germany, India, and Africa; as landmark events and announcements from the three regions had a significant impact on global funding this quarter.
The German government approved €212B for its Climate Transformation Fund (KTF); a landmark commitment to help speed Germany’s transition to an emissions-free economy.
India hosted the G20 summit, after issuing its first two tranches of sovereign green bonds for climate finance worth almost $2B earlier this year.
Finally, Africa made a piece of history in Q3 2023 by holding its inaugural Climate Summit–a convening of 20 African Heads of State, hundreds of world leaders, that collected nearly $26B in investment pledges from multi-varied sources.
Net Zero’s reporting uses proprietary data from Net0 Platform to analyze funding activity and liquidity events for climate tech startups, scaleups and SMEs.
About Net Zero Insights
Net Zero Insights operates the Net0 Platform – today the most comprehensive database of climate tech startups and SMEs globally. Investors, corporates and decision-makers work with us to gain insight into financial and tech trends by accessing data on funding rounds, liquidity events, activity sectors, technology, patents, contact details, and much more. Find out more: netzeroinsights.com
About Alder & Co.
Alder & Co. is a leading, global strategic brand marketing agency with the mission to drive the adoption of climate technologies until they become universal. Alder partners with forward-facing, innovative climate tech companies who need progressive brand & marketing strategies to drive growth, secure investment and make the impact needed to address our generation’s most urgent crisis – our environment. Find out more: alderagency.com
Whitney McGoram: firstname.lastname@example.org
Despite the increase in funding, deal activity plummeted this quarter. It has been on a declining trend from the last six quarters but saw the largest decline rate of 21% QoQ happening in Q3 2023.
The mismatch in increased funding and reduced deal activity can be attributed to bunch of $1B+ deals this quarter.
The declining deal activity within the quarter waterfalled quite strongly for Pre-Seed and Seed stage deals. Compared to the other equity stage deals, pre-seed and seed deal activity observed the sharpest decline this quarter.
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