A new report shows that carbon- and emissions-tech startups are bucking a national downward trend of venture activity in early 2023. That could be good news for Houston, which has been investing in its clean tech industry through a variety of avenues and organizations.
Pitchbook’s Q1 2023 Carbon and Emissions Tech Report found that across the country, companies logged 212 venture capital deals totaling $3.6 billion in the first quarter. This marks a 13% decline in value from Q4 2022, but a 35% jump year-over-year.
The report highlighted carbon tech’s high valuation in the first quarter thanks to San Francisco-based Generate Capital’s $880.6 million funding round. Other highlighted sectors included green mining and building energy efficiency, both of which saw their highest ever quarterly valuations at $210.9 million and $460.3 million, respectively.
The sector’s resilience comes against the backdrop of declining overall venture activity from the end of 2022 and the beginning of 2023, as shown in the Q1 2023 PitchBook-NVCA Venture Monitor report. Houston’s startup economy was hit by the trend, with an estimated $238.09 million in capital invested across 32 deals in the region in the beginning of 2023. That figure is a decrease from $258.75 million invested in Q4 2022 and $392.89 million in Q1 2022.
Also in Q1, the startup economy also saw the collapse of Silicon Valley Bank and its fallout, though the U.S. Treasury Department took action to insure affected companies. Innovation leaders in Houston called for more protection for early-stage companies who often struggle to find banking partners.
Increased venture activity in Houston is one factor that local tech leaders say needs to happen to position the city as a leader in the clean tech space. A December 2022 report from Deloitte found $250 million worth of deals in Houston in the first three quarters of last year, but venture capitalists such as Eureka Ventures CEO and co-founder Amy Henry told the Houston Business Journal that she would like to see more of those funds go toward pre-seed and early-stage clean tech companies.
“If I’m an innovator, I want to be located in an ecosystem or innovation system where there is capital to fund me at those earlier stages,” she said. “That’s really where innovation is being built.”
Henry also highlighted the need for Houston to change its reputation as a purely oil and gas city and to make sure the opportunities that are currently present are clear for emerging entrepreneurs.
“(Innovators) will say, ‘I don’t know who does what and who can help me and what can they help me with,’” she said. “If we continue to add all these complexities to it, innovators and entrepreneurs will just get more confused.”
One of the largest recent clean tech deals in Houston took place in the hydrogen sector, where Ohmium scored a $250 million Series C round from Texas-based investors TPG Capital and Energy Transition Ventures. The money will help Ohmium open a Houston office.
Meanwhile, two consortiums from the Houston region are bidding for a piece of $8 billion in funding from the U.S. Department of Energy for the creation of a hydrogen hub. Bret Perlman, CEO of the nonprofit Center for Houston's Future — one of the leaders of the HyVelocity bid — said the goal was to create a sustainable marketplace for hydrogen production in the area.
