The Future of Climate Tech
2023
Key takeaways
01
Government support
Massive federal spending is creating momentum for clean energy projects and improving the economics for climate tech investors and founders.
02
Climate tech diversification
Opportunities to optimize, decrease costs and develop new markets arise when coupling clean tech innovations with artificial intelligence and software, creating a more diverse cohort of climate tech companies.
03
Measurement of data
Capturing and synthesizing massive amounts of data from climate tech innovations generate new revenue streams opening the door for both hardware companies and software companies.
VC investment remains robust
VC investment in climate technology has slowed 21% since the beginning of 2022, but it has not fallen as quickly as VC investment in other technology sectors, which fell 41% in the same period.
As VC investment slowed, the median cash runway began to level and fall. Most companies do not have the 18-24 months of runway. However, climate tech companies with 12 months of runway may have enough to weather the continued slowdown.
Source: PitchBook, Cleantech Group i3 Connect, SVB proprietary taxonomy and SVB analysis.
Note: YTD as of 4/30/2023.
Source: PitchBook and SVB proprietary data.
Sustained valuations despite the slowdown
Valuations in climate tech have remained flat or up, compared to general tech. This is likely due to the large market opportunity for climate tech companies.
Climate tech investors are willing to pay higher valuations for companies that are developing innovative solutions to climate change.
Financing capital intensive tech
Moody's data shows that global green infrastructure projects have a lower default rate than non-green projects. Green projects are often backed by government mandates or subsidies, which can help to reduce the risk of financial losses.
In 2022, the IRA expanded the DOE’s loan authority from $40B to more than $400B over the next decade. As a result, loan requests have spiked by 74% since January 2022. In 2010, Tesla used a $465M DOE loan to produce the Model S.
Note: Based on Moody's analysis.
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