As climate change accelerates, venture capital climate companies are stepping up, directing billions into technologies that promise a sustainable future. However, climate tech funding experienced a significant decline in the second quarter of 2024, reaching its lowest quarterly level since Q2 2020, according to CB Insights report.
Funding dropped by 20% quarter-over-quarter (QoQ) to $4.9 billion, continuing a downward trend in the sector. Despite the decline, the number of deals saw a slight rebound, with 397 deals closed in Q2 2024, although this figure remained well below the quarterly totals observed in 2023.
Investors in climate tech are increasingly cautious, favoring smaller mid- and late-stage deals. However, they continue to seek opportunities in the early stages of funding, where strong prospects exist.
Notably, Q2 2024 marked the second consecutive quarter without any new unicorns (private companies reaching valuations of $1 billion or more) in the climate tech space. This absence of new unicorns coincides with the decline in late-stage deal sizes, further emphasizing the current caution among investors.
The overall decline in climate tech funding and the shift towards smaller deals reflect broader trends in the market, where investors are becoming more selective and cautious in their approach. Venture capital (VC) remains the largest group (25%) investing in the industry quarterly since 2020.
Here are the top four venture capital climate companies according to the CB Insights Report, which are worth noting in boosting green technologies that help in the fight against climate change.
SOSV: The Accelerator Driving Deep Tech and Planetary Health
Location: United States
SOSV is a global venture capital firm known for investing in early-stage deep tech startups with a focus on human and planetary health. Founded in 1995 by Sean O’Sullivan, SOSV has grown its assets under management to over $1.5 billion, supporting more than 500 startups worldwide. The firm operates several accelerator programs, including IndieBio and HAX, which provide startups with access to laboratories, office spaces, and mentorship.
Through these programs, SOSV has backed over 1,000 startups across various sectors, including health, food, and sustainability.
SOSV is deeply committed to environmental sustainability. The firm has made significant strides in supporting companies that are working to reduce carbon emissions and address climate change. For instance, it has invested in companies developing alternative proteins, carbon capture technologies, and other solutions aimed at reducing the carbon footprint of industries. SOSV’s portfolio companies have collectively raised billions in follow-on funding, and several have achieved unicorn status.
The VC firm created the “Climate Tech 100”, which highlights top climate-focused startups from SOSV’s portfolio. The 2024 edition features 30 new companies, with an aggregate valuation of $11.1 billion and $3.68 billion raised in total, including $151 million from SOSV itself.
SOSV 2024 Climate Tech 100 Portfolio
SOSV’s commitment and leadership in climate tech investment have been recognized by PitchBook, which ranks SOSV as the most active investor in climate tech, agtech, and carbon emissions technology since 2018.
Sean O’Sullivan, the Managing General Partner of SOSV, emphasizes that despite the recent downturn in climate tech funding, the sector is poised for a resurgence driven by critical global needs and favorable trends in industrial sustainability and reshoring U.S. production capabilities.
The investor is also increasingly focusing on critical minerals, recognizing their essential role in the renewable energy transition. The firm invests across the entire critical minerals value chain, from exploration to extraction and processing. These minerals are vital for the production of batteries, electric vehicles, and other clean energy technologies, making their sustainable sourcing a key priority for SOSV.
Global Brain: Fostering Global Innovation for a Greener Tomorrow
Location: Japan
Global Brain is a leading venture capital firm with a mission to foster innovation by investing in startups worldwide since 1998. With over $1.9 billion in assets under management, Global Brain has backed more than 1,000 startups, covering industries such as technology, sustainability, and critical minerals.
The firm is particularly focused on supporting the transition to renewable energy, investing in companies that work on eco-friendly technologies and the sustainable sourcing of critical minerals essential for the clean energy sector.
Global Brain Climate Tech Portfolio Companies
Global Brain operates globally, with a presence in key innovation hubs like Tokyo, Silicon Valley, and London. The firm collaborates closely with large corporations through its corporate partnership programs, facilitating open innovation and helping startups scale more effectively. This collaboration has enabled Global Brain to drive advancements in critical industries, including the sourcing and processing of critical minerals crucial for renewable energy technologies such as batteries and electric vehicles.
The firm’s notable investments include companies Orbital Marine Power, known for its pioneering tidal energy technology that promises to generate clean, renewable energy from ocean currents.
Global Brain has also played a significant role in expanding its portfolio internationally. The firm’s global reach includes investments in high-growth markets such as the U.S., Europe, and Southeast Asia, contributing to its robust track record of successful exits and partnerships.
Global Brain is actively involved in supporting technologies that contribute to sustainability and carbon footprint reduction. The firm invests in startups that focus on renewable energy, energy efficiency, and environmental conservation. For example, their investment in TerraCycle, a company dedicated to recycling hard-to-recycle waste, reflects their commitment to tackling environmental challenges and promoting a circular economy.
Lowercarbon Capital: Fast-Tracking the Low-Carbon Revolution
Location: United States
Lowercarbon Capital is a prominent venture capital firm dedicated to accelerating the transition to a low-carbon economy. Founded by Chris Sacca and his team, the firm focuses on investing in innovative technologies and business models that address the climate crisis and reduce global carbon emissions.
Their portfolio includes startups pioneering innovations like zero-carbon cement, methane reduction in computing, fully electric planes, and advanced carbon removal technologies. Lowercarbon Capital is committed to supporting scalable solutions that can significantly reverse climate change while also delivering strong financial returns. This top VC company focuses on these three main areas:
Since its inception, Lowercarbon Capital has raised over $1 billion to invest in breakthrough climate technologies. The firm’s portfolio includes pioneering companies in sectors such as carbon capture, renewable energy, and sustainable agriculture. Notable investments include companies like Charm Industrial, which is developing direct air capture and bioenergy with carbon capture and storage (BECCS) technologies with the potential to sequester millions of tons of CO2 annually.
Another key investment is in Nori, a platform focused on carbon removal through regenerative agriculture, aiming to sequester 10 million tons of CO2 per year.
Lowercarbon Capital’s strategic approach includes both early-stage and growth-stage investments. The firm’s support has been instrumental in scaling technologies that have the potential to achieve significant emissions reductions. For instance, Lowercarbon Capital has helped fund innovations that could potentially reduce global carbon emissions by up to 5% over the next decade.
The firm’s investment strategy is centered on high-impact climate solutions with a focus on scalability and effectiveness. Lowercarbon Capital targets technologies with the potential to cut carbon emissions across various industries, including energy, transportation, and agriculture. Their portfolio features technologies that aim to reduce carbon footprints by capturing and storing CO2, enhancing renewable energy integration, and promoting sustainable practices, which are crucial for achieving net-zero goals.
Breakthrough Energy Ventures: Billion-Dollar Bets on Net-Zero Technologies
Location: United States
Breakthrough Energy, founded by Bill Gates and a coalition of influential investors, is at the forefront of advancing technologies aimed at reducing global carbon emissions. The firm is dedicated to funding and scaling innovations that drive sustainable development and address climate change.
Breakthrough Energy Ventures (BEV), the firm’s investment arm, has invested over $2 billion in more than 60 high-impact startups. BEV has committed over $3.5 billion in capital to support more than 110 innovative companies, spanning from seed to growth stages.
Key investments include QuantumScape, which has developed a solid-state battery with the potential to increase energy density by 50% compared to conventional lithium-ion batteries, and Twelve, a company turning CO2 into valuable chemicals with a goal to reduce emissions by up to 50 million tons annually.
BEV’s investment strategy is guided by its focus on the Grand Challenges, which aim to:
- Develop Scalable Climate Solutions,
- Attract Additional Investment, and
- Address Critical Gaps in Climate Technology.
Breakthrough Energy Catalyst, another arm of the organization, supports large-scale projects with an investment goal of $15 billion to accelerate the commercialization of clean technologies. Catalyst projects include direct air capture systems and advanced hydrogen electrolyzers, with the potential to remove up to 1 billion tons of CO2 from the atmosphere annually by 2030.
Breakthrough Energy’s portfolio emphasizes substantial carbon footprint reduction. Investments target areas with significant impact potential, such as energy storage and low-carbon fuels. Through strategic partnerships and collaborative efforts, Breakthrough Energy is driving systemic change and working towards a net-zero future.
Climate tech funding experienced a downturn in Q2 2024, with investor caution leading to fewer large deals and no new unicorns. Despite the decline, early-stage opportunities remain promising.
Top venture capital climate companies like SOSV, Global Brain, Lowercarbon Capital, and Breakthrough Energy Ventures continue to invest in innovative technologies that could shape the future of climate solutions. These firms are pivotal in driving progress towards a low-carbon economy through strategic investments and global partnerships.