Climate Tech Startups Raise $8.1 Billion in First Quarter, Near Record Amounts of Funding
Climate tech startups are on the rise, with a whopping $8.1 billion raised in the first quarter of 2024. This near-record amount of funding indicates that the slowdown seen in 2023 may have been just a blip, rather than a sign of a prolonged downturn.
According to a new report from PitchBook, the value of investments in climate tech startups was up nearly 400% compared to the previous quarter, despite a slight decrease in the number of deals. Investors focused their attention on materials, including green steel and battery materials and minerals.
Three early-stage firms led the pack in terms of deals closed, with Climate Capital securing 94 deals, Lowercarbon Capital closing 70, and SOSV coming in with 59 deals. However, the total number of deals closed in the first quarter was down 20% compared to the previous quarter.
Despite the lower deal count, the $8.1 billion raised by climate tech startups in Q1 was second only to Q3 of last year. Noteworthy deals, such as Swedish startup H2 Green Steel raising $4.5 billion in debt and $215 million in equity, helped keep the sector buoyant.
Other significant deals included battery recycler Ascend Elements adding $162 million to its Series D round, battery manufacturer Natron raising $189 million for a commercial-scale factory, and Lilac Solutions closing a $145 million Series C round for its lithium extraction technology.
While the large rounds in Q1 may seem exceptional, they could be the start of a trend where nine-figure raises become more common. As the climate tech sector matures, more companies will need substantial funding to reach commercial scale.
Investors have been favoring established companies with customer traction and revenue, leading to fewer deals but larger rounds. This trend reflects the need for significant investments to reach net zero carbon emissions, estimated to require $230 trillion over the next 25 years.
As climate tech startups navigate the “valley of death” between early-stage funding and scaling, lessons learned from companies like H2 Green Steel and Ascend Elements will shape the future of the sector. With a playbook in development, large funding rounds like those seen in Q1 could become the norm rather than the exception in the coming years.