The year 2021 was an incredible one for startups operating in the climate space. Globally, around 1400 investors are looking for the next generation of companies that address climate change. They deployed more than $40 billion across more than 000 deals, which is more than double the capital deployed from the previous year. Mobility and energy startups are consistently raising the most capital, with great food and water technology a distant third.
Investors focused on the climate sector welcome the additional inflow of capital and suggest that it is about proper sizing of this market segment, rather than a bubble:
“As we invest in the climate and circular economy space, we continue to prove our case and are delighted to see new investors join the space,” said Georgia Sherwin, senior director of Strategic Initiatives and Partnerships at closelooppartners, opinion widely shared throughout the industry. “We have always considered catalysing more investment in the circular economy and climate technology in general, and we welcome the new investors who have joined the space this year.”
One of the reasons for the growth is that capital is becoming more aware of where it deploys its investment. Limited partners (i.e. people who invest in venture capital funds) are becoming more aware of their environmental, social and governance (ESG) impact, and are tipping the scales in favor of the planet in the process.
In the first half of the year, there were some really huge rounds in mobility, with big rounds going to Rivian and Northvolt, and at the end of last year, the energy slice of the pie got a big boost with billions. dollar investments in fusion energy companies like Helion. Much more activity is likely to appear in the fusion space this year as well.
In particular, early-stage deals skyrocketed over the past year, accounting for more than 60% of all deal activity. Seed-stage deals accounted for less than 2% of the cash deployed, but about 30% of the number of deals.
This means a couple of things; in 2022 there will be many companies raising a huge amount of capital in later stages. By definition, these will be lower risk deals for investors, attracting larger amounts of capital and further whetting the appetite for these types of companies.
Best of all, the rise in hopes for continued existence on this pale blue dot of ours means that the amount of attention devoted to climate change solutions is about to increase considerably as well.
It will be exciting to see how climate technology evolves this year; Even in the first few weeks of the year, we've seen investors come out in force with a flurry of new funds raised, some big investments deployed, and a horde of smaller companies attacking the climate challenge we collectively face from every angle.
