As a sign of stabilization in US venture
capital, findings show long-term tailwinds behind climate
tech
SAN FRANCISCO ,
May 14,
2024 /PRNewswire/ -- With 88% of global carbon
emissions now covered by a net-zero goal, climate tech has
outperformed and investors remain committed to the sector,
according to a new report from Silicon Valley Bank (SVB), a
division of First Citizens Bank. While overall venture capital (VC)
fundraising and deal activity in 2023 saw a 24% decline from 2021,
climate tech is only 14% below 2021 results, with several
individual subsectors like carbon tech and climate data showing
signs of growth.
"With steady fundraising and an increase in funds and firms
investing in the sector, the groundwork has been laid for ongoing
support and investment in climate technology solutions," said
Dan Baldi, national head of SVB's
Climate Technology and Sustainability practice. "Amid the growing
presence of climate risks, technologies geared toward mitigating
these hazards are positioned for growth as a
necessity."
Leveraging SVB's proprietary data and insights, the 2024 Future
of Climate Tech Report reveals the outlook on climate tech and
the broader innovation economy. Amid a substantial contraction in
the innovation economy, climate tech has shown notable resilience
despite an overall drop in VC funding. While deal activity has
stayed robust compared to other sectors, invested capital has
decreased by over 50%, primarily due to a decline in deals
exceeding $100 million.
SVB's Future of Climate Tech report provides an in-depth
look at current fundraising activity and challenges, macro trends
and emerging technologies. The 2024 report also analyzes four
themes shaping the future of climate technology:
- Startups have less capital available: Lower VC
investment, higher interest rates, and low valuations all increase
capital costs making it harder for companies to finance their
operations. As a result, most companies must focus on plotting a
path to profitability and efficiency to ensure the runway doesn't
come up short.
- Incentives matter to climate tech: Tax credits have
jump-started the carbon capture market, prompting 427 new CCUS
project announcements in the last two years.
- Hard-to-mitigate emissions are in focus: As incentives
gain traction, VC growth is expected to continue to promising
technologies such as industrial heat, SAFs and green cement and
steel, and cleaner baseload power.
- Sector posed for exit activity: Exit windows are mostly
closed reflecting the overall market. Poor performance from recent
SPACs and IPO, high interest rates, and continuing uncertainty has
hampered public exits.
Key 2024 Report Findings:
Climate tech fundraising remains resilient
- While overall venture capital fundraising in the US hit a
six-year low, climate tech fundraising has remained steady,
settling at a level similar to 2020. Among the most active CVCs,
climate tech now accounts for 11% of deals up from 2% in 2020.
Companies are running low on cash
- The decline in investment, coupled with climate tech's
capital-intensive business models, have left 60% of climate tech
companies with less than 12 months of cash runway, relative to 53%
for all tech companies. As a result, companies are putting a
greater emphasis on profitability. Seventy-six percent of climate
tech software companies are seeing improvements in EBITDA margin
year-over-year and 65% of climate tech hardware companies are also
seeing gains.
Climate tech enjoys long-term tailwinds
- About 88% of global carbon emissions are subject to a net-zero
goal. Appetite for climate tech solutions continues to increase and
advancements have brought down the costs of sustainable technology.
It is now cheaper to develop new renewable energy than to stick
with fossil fuels.
Learn More
To read the complete Future of Climate Tech report, click here:
The Future of Climate Tech Report | Silicon Valley Bank
(svb.com)
SVB is a leader in providing market insights on sectors across
the innovation economy. For the complete library of SVB's signature
reports, please visit Market Research Industry Trends &
Insights | Silicon Valley Bank (svb.com)
About Silicon Valley Bank
Silicon Valley Bank (SVB), a division of First Citizens Bank, is
the bank of some of the world's most innovative companies and
investors. SVB provides commercial banking to companies in the
technology, life science and healthcare, private equity and venture
capital industries. SVB operates in centers of innovation
throughout the United States,
serving the unique needs of its dynamic clients with deep sector
expertise, insights and connections. SVB's parent company, First
Citizens BancShares, Inc. (NASDAQ: FCNCA ), is a top 20 U.S.
financial institution with more than $200
billion in assets. First Citizens Bank, Member FDIC. Learn
more at svb.com
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SOURCE Silicon Valley Bank