A new report detailing venture capital investment in climate tech across the country shows a slight dip in VC capital compared to 2023 but continued climatetech incentives in the Northeast.
The report is a collaborative venture led by Value Creation Labs, with support from Fidelity Private Shares, Latham & Watkins and others.
Despite being the top country for climatetech venture capital fundraising, the total venture capital dollars raised in US climatetech deals for 2024 is on track to fall short of 2023, with $6.7 billion compared to $14.2 billion last year. The total number of deals is also down: As of July 2024, there were 367 VC deals compared to 815 the year prior, according to Pitchbook data cited in the report,
There are myriad reasons venture capital is taking a dip. The uncertainty around the upcoming election and its impact on climate policies is one of the biggest, according to VCL analyst Galen Moore.
“If you look across the board, there's a pullback in the venture. The tech hiring is no longer the feeding frenzy that it was two or three years ago, and technology companies, both public and venture-backed, are being more careful with their dollars and thinking more long term,” Moore said.
Overall, the report suggests that artificial intelligence is one of the biggest drivers of climate tech right now. However, the environmental cost of AI is high as it requires a lot of energy for temperature control and information storage.
“That cost can be measured in carbon, and I think people are more aware than ever of the carbon cost of their computers,” said Moore.
When looking at climate tech development in the Northeast, the influence of AI can be seen in the overall trend of investment in sustainable materials and energy storage.
Boston-based companies like Ascend Elements and Commonwealth Fusion are some of the startups in the report that have received the top VC deals. In February 2024, Ascend, a Boston-based batter company, raised a $621.9 million Series D and Commonwealth Fusion raised a $1.8 billion Series B in December 2023.
Even with a dip in overall VC funding across the country, the report suggests that the Northeast continues to make strides in the climate tech industry.
With policy incentives such as the Mass Leads Act and legislation from Gov. Healey proposing $1.3 billion of investments in climatetech and Greentown Labs, one of North America's most prominent climate tech startup incubators, the Northeast continues to be a hub of climate development.
“If you're looking for the long term, I think there are long-term trends and narratives worth pursuing,” Moore said. “The question then becomes where to focus, what to look into more closely and how do I use my time to understand where the opportunities are effectively.”
