From a deals perspective, BNEF’s Climate-Tech VC/PE Investment Database shows a 15% decline in the number of deals completed in 2023 compared to 2022. For the same timeframe, Pitchbook reported a 27% decrease in deal count for the global market.
The overall market had 34% of investors abstain from dealmaking in 2023, as per Pitchbook. In contrast, within climate-tech, BNEF has tracked a 26% growth in the number of active investors, defined as those participating in two or more deals.
Irrespective of this strong performance, there is cause for concern for climate investors. Public markets – the route to exit for many startups – saw a much bigger decline in activity. Funding for initial public offerings slumped by 65% as many startups raised growth-stage equity to avoid undervaluation in the public market (Figure 2). Battery makers Northvolt and Envision AESC, as well as energy-services provider Redaptive, raised large rounds from VC/PE investors in anticipation of potential future public listings. Should interest rates continue to remain high for longer periods of time, investors may struggle to successfully exit their portfolios and return a profit.