Climate Technology matured in 2024 as investors favored larger, later-stage rounds

Climate technology may have seen an overall decline in 2024, but new data also shows a maturing sector with larger deal sizes.

Venture investment in the climate technology sector fell 7% to $12.9 billion, a difference of $1 billion Balance 2023According to new data Pitchbook report. The report found that round size increased in 2024 and investors appeared more eager to back companies that emerged from their seed round.

For many years, investors have favored early-stage companies, investing large amounts in pre-seed and seed-stage startups. This is partly due to the relative youth of climate technology. After a short winter that followed the cleantech collapse combined with the Great Recession that began in December 2007, founders and investors reshaped their approach, addressing new markets and technologies.

This shift has fueled early stage opportunities. As those startups matured, they began getting larger, later-stage rounds at higher valuations, PitchBook data shows.

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

Climate technology numbers from last year also reflect broader market trends. The number of deals declined across all sectors, though deal value rose near 2023 levels largely on the strength of AI-related investments in companies like Anthropic, Databricks, OpenAI, xAI, and Waymo, which combined accounted for 43.2% of total deal value in the fourth quarter. .

The lull in climate technology investments comes as investors process something of a hangover after the glut during the pandemic. As venture money has flowed into climate technology (and many other sectors), deal sizes, numbers, and valuations have soared.

Now, while some early-stage companies are looking to raise money again, they are Facing a harsher environment As investors take a closer look at unit economics. Investors tell me that those struggling startups have a hard time raising money, while companies that crack the code are rewarded with bigger deals.