Bear Market Hits Climate Tech

Raising money is hard these days. Even climate startups, a VC darling, are starting to feel the pinch.

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From a Pitchbook report:

In Q1, climate tech startups raised $5.7 billion across 279 VC deals, according to PitchBook data. That’s a 36% decline in deal value and a 31% decline in deal count from the previous quarter. From its peak in Q3 2021, quarterly deal value has fallen more than 50%. 

Overall US venture funding fell only slightly in the last quarter. But it too is down over 50% from the peak in 2021.

The bear market hit most startups hard in 2022. But climate tech held up better — until now.

Bad practices purged from the market in 2022 continued in climate tech until recently.

In February, I saw an uncapped note in a climate company. Even generative AI startups don’t seem to be getting away with that.

These notes are a terrible deal for investors. You don’t even know what you’re paying for your shares!

Running a financing like this will attract poor quality investors.

Savvy founders wouldn’t do it, even if they could. They want the best people around the table, period.

In a hot market, loosey goosey business practices proliferate. That sloppiness kills companies once the downturn hits.

I expect to see numerous climate companies go bust soon. That said, they’ll have plenty of company.

Long term, the outlook for climate tech is bright.

The US wants our own energy, produced here, cleanly. That’s true regardless of the business cycle.

Businesses and individuals also want to reduce their energy use. Energy costs money!

If you can produce clean energy or save energy, you can find customers.

I’m still excited about investing in climate tech. I’m mostly looking for SaaS products that can track and reduce energy use.

That product should be easy to sell.

The customer doesn’t believe in climate change? No problem.

You believe in saving money, right? If you don’t believe in saving money, you’re not a businessman.

I encourage climate founders to keep at it! Don’t worry about the macro environment — just build something great.

What do you think of climate tech? Leave a comment and let me know!

Have a great weekend everyone!

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