Key Points:
- Clean energy startups tightened spending and focused on revenue in 2023.
- Venture investing in the cleantech space was slow in the first half of the year but picked up in the second half.
- Cleantech financing ended the year on a positive note with Congruent Ventures raising a $275 million new fund.
- Early-stage cleantech startups are receiving healthy funding, but later-stage companies are struggling.
- 2024 is expected to be a busy year for new investments in the climate sector.
2023 proved to be a challenging year for venture investing in clean energy startups. The year began with a sense of uncertainty due to economic factors such as interest rates, inflation, and supply chain disruptions. Tech giants like Amazon, Google, and Microsoft were shedding jobs and corporate budgets were being reined in. Cleantech startups responded by tightening their spending and preparing for a potentially tough sales environment with no new funding opportunities.
In March, the cleantech space experienced setbacks with the collapse of venture lender Silicon Valley Bank and the bankruptcy of electric bus-maker Proterra. Despite these challenges, the second half of the year saw a change in fortunes with an increase in high-quality investment opportunities. Investor Zach Barasz predicts that 2024 will be a busy year for new investments in the clean energy sector.
The year ended on a positive note with Congruent Ventures raising a $275 million new fund. The oversubscribed fund indicates a strong interest from larger financial institutions to invest in early-stage climate solutions. This interest is seen as a positive sign for the industry as a whole.
While early-stage cleantech startups are finding healthy funding, later-stage companies are facing more struggles. There is a lack of dedicated venture firms for late-stage funding, leading to a gap in funding for companies at this stage of development.
Looking ahead to 2024, there is an expectation of a fundraising bonanza as startups seek to replenish their funds and investors have money to spend. However, the high volume of startups seeking capital presents its own challenges. Startups are advised to focus on revenue and commercial relationships and to be prepared for a longer fundraising cycle.
Overall, 2023 served as a reset for the cleantech market, prompting a focus on financial discipline and the need to size operations to the opportunities. With venture investors emphasizing risk management and financial discipline, cleantech startups should have no problem coming up with their New Year’s resolutions.
