The climate change technology industry may have slumped in 2024, but new data also shows it is a mature sector with larger deal sizes.
Venture investment in climate technology fell 7% to $12.9 billion, $1 billion short of the 2023 tally, according to data from a new Pitchbook report. According to the report, round sizes will increase in 2024 and investors appear to be more keen to back companies emerging from seed rounds.
For years, investors have favored early-stage companies and poured large sums of money into pre-seed and seed-stage startups. Part of the reason for this was that the field of climate change technology is relatively young. After a brief winter following the collapse of clean technology during the Great Recession that began in December 2007, founders and investors reconsidered their approach and took on new markets and technologies.
This change facilitated early-stage opportunities. As these startups mature, they're starting to attract larger late-stage rounds at higher valuations, according to PitchBook data.
The median deal size in 2024 was $7 million, an increase of $1 million from the previous year. Meanwhile, the median pre-money valuation jumped to $44.5 million from $31.5 million a year ago. The number of transactions decreased by 27% to 568 transactions. In 2023, climate change technology startups raised a total of $13.9 billion across 782 deals.
Last year's climate tech numbers also reflected broader market trends. Although the number of deals declined across all sectors, deal values ​​approached 2022 levels, primarily due to strong AI-related investments in companies such as Anthropic, Databricks, OpenAI, xAI, and Waymo, which have obtained 43.2% of the total transaction amount. Q4.
The lull in climate technology investing comes as investors feel hungover after the frenzy during the pandemic. As venture capital flows into climate technology (and several other areas), the size, number, and valuation of deals have all increased.
Some early-stage companies are now looking to refinance and facing a tougher environment with investors looking more closely at unit economics. Investors told me that struggling startups are finding it harder to raise money, while those that crack the code are being rewarded with bigger deals.