Climate technology matures in 2024 as investors favor bigger rounds, later stages

Weather technology may have had a down year in 2024, but new data also show a maturing sector with larger business sizes.

Venture investment in the climate technology sector fell 7% to $12.9 billion, shy of $1 billion. Account of 2023according to the data in a new PitchBook Report. The report found that the size of the round increased in 2024 and investors seemed more eager to support companies that had emerged from their seed round.

For years, investors have favored early stage companies, pouring significant sums into pre-seed and seed stage startups. That was due, in part, to the relative youth of climate technology. After a brief winter following the cleantech implosion alongside the Great Recession that began in December 2007, founders and investors have reframed their approach, tackling new markets and technologies.

This change fueled the opportunity of the first phase. As those startups matured, they began to capture larger rounds, later with higher valuations, PitchBook data shows.

In 2024, the average deal size was $7 million, up $1 million from the year before, while median pre-money valuations rose to $44.5 million from $31.5 million last year. previous year. The number of deals decreased by 27% to 568. In 2023, climate technology startups raised a total of $13.9 billion in 782 deals.

Last year’s weather tech numbers also reflect broader market trends. Deal numbers declined across all sectors, although deal value edged closer to 2023 levels largely on the strength of AI-related investments in companies like ‘and Anthropic, Databricks, OpenAI, xAI and Waymo, which collectively gained 43.2% of all deal values ​​in Q4. .

The lull in climate tech investments comes as investors are nursing something of a hangover after exuberance during the pandemic. As venture dollars flow into climate technology (and many other sectors), business sizes, accounts and valuations have all increased.

Now, as some of these early-stage companies try to rise again, they are facing a tougher environment in which investors pay attention to the unit economy. Those startups that are struggling find it harder to grow, while those that have cracked the code are rewarded with bigger deals, investors told me.