New Analysis Finds Carbon Tech Startups Reached Record $7.6B VC Funding Raise In Q3 2023

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The research firm and financial data provider PitchBook released a new analysis confirming the rising interest of investors in new carbon tech startups that reduce and remove CO2 and the green economy amidst a fundraising slowdown in the VC industry. 

The analysis called Q3 2023 Carbon & Emissions Tech Report claims that climate-tech startups specializing in carbon and emissions reduction technologies raised $7.6 billion in VC funding in Q3 2023, beating the sector’s previous record set in Q3 2021 by $1.8 billion.

Green mining startups and those in the space of energy-efficient buildings both set new records in Q3 for deal value – at $394.9 million and $638.7 million respectively. Climate tech startups are proving to be defying expectations of slow growth.

“Eight deals above $250 million is very unusual for this vertical,” said PitchBook emerging technology analyst John MacDonagh.

Some of the funding rounds that have reached incredible valuations are H2 Green Steel ($1.6B) and Redwood Materials ($997M) which will use their investments to help scale up new production facilities. At the start of October, green hydrogen startup Electric Hydrogen (EH2) announced it raised an oversubscribed $380 million Series C funding round and became the first green hydrogen unicorn with a valuation of up to $1 billion. 

In mid-October, the Biden administration also came up with a big boost for hydrogen, announcing the recipients of $7 billion in federal funding for renewable hydrogen hubs at locations across the country.

Relevant: More Than 25% Of All Venture Capital Funding Moved To Climatetech In 2022

As the analysis states, the VCs are particularly energized around low-carbon mineral mining and direct air capture as well, driven by a growing need for mineral resources and scaling the highest potential carbon removal technologies. Several blue-chip companies including Amazon and JP Morgan invested hundreds of millions of dollars in carbon removal credits in 2023.

The EV is also a hot scene as “There is a natural, inevitable scale-up that’s coming from battery technology in response to an industry that’s fully embraced becoming completely electric,” according to Todd Khozein, founder of climate-tech impact investor SecondMuse.

Relevant: Bill Gates-Backed Breakthrough Fund Aims For Third $1 Billion Capital Raise

Q3 followed two depressed previous quarters for climate-tech fundraising, which in combination with the disruption caused by Silicon Valley Bank’s collapse, had raised some fears of a slowdown hitting green emerging technologies. For now, however, the broader VC fundraising slowdown doesn’t appear to be impeding carbon and emissions startups from closing large rounds.

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