Where does climate investment currently stand?

Venture capital’s role in fostering climate-tech innovation is more crucial than ever. In our third episode of Science on a Mission, we dive into the current state of venture capital in climate tech and discuss trends and expectations for the coming years.  

Recorded live at SXSW, Activate Director of Investments Calvin Cupini moderates a conversation with journalist and investor Molly Wood, Matthew Nordan of Azolla Ventures, and Craig Lawrence of Energy Transition Ventures.

Wood says she realized in 2017 that climate tech was going to be “the biggest tech and business story in the world.“ Since then, there’s been “hockey-stick growth,” especially around 2020, which saw a huge spike in interest in climate-tech innovations and in investments and valuation of these companies. 

But now in 2024, she says we are in a moment of reevaluation. “Where are we and what are the incentives? At this round, is it gonna work?”

Looking back at past cycles of climate-tech investing, Lawrence says many of the companies formed between 2005 and 2008 raised a lot of money and reached key technical proof points, but couldn’t find the additional hundreds of millions of dollars in capital to build factories and keep growing.

What’s different today: there’s now a mature and diverse capital stack to support climate-tech founders—including corporates, government funding, nonprofit funding, private capital, accelerators, and incubators.

Nordan agrees that “it feels like this is the right time” now, in part because of the robust capital stack. ”It gives these companies a path to get to impact at scale that just didn't exist 10 or 15 years ago,” he says.

He also thinks that today’s unique challenges have cultivated a different type of founder. “There is a generation of CEOs and founders that were born into hardship,” he says. “They were born into having difficult competitive landscapes that they had to beat on their own merits.”

In their discussion of the evolution of funding strategies, the panelists also tackled topics like derisking, shortening timelines, keeping climate investments in play, preventing the climate-tech ecosystem from collapsing, and increasing time to commercialization.

The three investors also busted myths, including that venture capital shies away from capital-intensive businesses, and why VCs should pay attention to first-time founders in this sector. They also shared plenty of advice for climate-tech founders, including how to succeed in spaces that might not even exist yet, and why—or why not—to pursue VC investment.

For more advice, trends, and insights from climate-tech investors, listen to the full episode here. Available on Spotify and Apple Podcasts.