Climate tech matures in 2024 as investors favor longer rounds, later stages

Climate tech may have declined in 2024, but new data also shows a maturing sector with larger deal sizes.

Climate tech venture capital fell 7% to $12.9 billion, $1 billion less than the 2023 tally, data in a new PitchBook Report. The report found that round size increased in 2024 and investors appeared more willing to back companies that had emerged from their first round.

For years, investors have favored early-stage companies, plowing significant sums into start-ups and startups. This was due, in part, to the relative youth of climate technology. After a brief winter following the collapse of cleantech alongside the Great Recession that began in December 2007, founders and investors have revised their approach, facing new markets and technologies.

This shift fueled early-stage opportunities. As these startups have matured, they’ve started to raise larger later-stage rounds at higher valuations, PitchBook data shows.

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

Climate tech numbers from last year also reflect broader market trends. Deal numbers declined across the board, although deal value rose closer to 2022 levels, largely due to the strength of AI-related investments in companies such as Anthropic, Databricks, OpenAI, xAI and Waymo, which collectively accounted for 43.2% of the total value of the E4 deal.

The lull in climate tech investing comes as investors nurse a hangover from exuberance during the pandemic. As venture dollars flowed into climate technology (and several other areas), deal sizes, metrics and valuations increased.

Now, as some of these early-stage companies try to grow profits again, they face a tougher environment in which investors are scrutinizing the units’ financials. Those struggling startups struggle to scale, while those that have cracked the code are rewarded with bigger deals, investors told me.