US Climate Tech Investment Achieves Six Straight Months of Growth; Silicon Valley Bank Releases Annual Report
Rhea-AI Summary
Silicon Valley Bank (SVB) has released its Future of Climate Tech 2025 Report, revealing six consecutive months of growth in US climate tech investments. The sector is outperforming overall VC with a 9% higher internal rate of return (IRR) in the 2020-2024 fund vintage.
Key findings show that 57% of US VC-backed climate tech companies need to raise capital in the next year, while valuations are recovering from 2023 lows. Series B and C+ rounds hit decade highs of $30M and $60M respectively in 2024. Clean energy deals reached an all-time high with 382 deals totaling over $7B in 2024, marking a 15% year-over-year increase.
The report highlights improved profit margins, particularly in software companies, which showed 30% higher profit margins than hardware companies for those with over $50M in revenue. M&A activity has returned to 2020 levels, with financial buyers increasing their share of transactions from 15% to 40% between mid-2023 and early 2024.
Positive
- Climate tech funds outperform overall VC with 9% higher IRR
- Clean energy deals reached record $7B in 2024, up 15% YoY
- Series B and C+ rounds hit decade highs ($30M and $60M)
- Software companies showing 30% higher profit margins
- Financial buyers increased M&A participation from 15% to 40%
Negative
- 57% of US VC-backed climate tech companies need to raise capital within 12 months
- Hardware companies' growth rates declined from 58% to 19% (2021-2023)
- Overall revenue growth rates have fallen despite margin improvements
News Market Reaction – FCNCA
On the day this news was published, FCNCA declined 1.86%, reflecting a mild negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
Climate tech funds show positive trajectory despite fundraising headwinds
"With continued investor interest, the Climate tech sector is showing reasons for optimism this year," said Dan Baldi, National Head of SVB's Climate Technology and Sustainability practice. "Clean fuels, dispatchable renewables and carbon tech are taking the spotlight, sparked by a shift toward electrification and ongoing goals to reduce emissions."
Leveraging SVB's proprietary data and insights, the Future of Climate Tech 2025 Report reveals the current fundraising landscape, sector trends, and explores how the industry is evolving to address challenges across the innovation economy.
SVB's Future of Climate Tech report analyzes key themes shaping the future of climate technology, including:
- Raising Equity is Tough, But Signs of Growth Persist:
57% of US VC-backed climate tech companies need to raise in the next twelve months even as more than half of companies are reducing burn YoY. Yet there are encouraging signs of growth – trailing 12-month venture investment is increasing, company formation remains strong, and early-stage activity is still vibrant. - Early-Stage Resiliency: Early-stage investment has remained more resilient than later-stage activity over the last three years, showing a healthy pipeline of companies fueling future growth of the industry.
- Electrification Continues, Demand Accelerates: By 2030, half of electricity generation will come from renewable resources. Climate tech solutions from storage to demand response and improved transmission are poised to transform the energy and power sector.
Key findings from the Future of Climate Tech Report include:
- Valuations and Rounds on the Rise: After valuations bottomed out in 2023, they are on the rise again with climate tech valuations overtaking VC investment at the later-stage. Aside from seed, where median deal sizes have held steady, rounds are getting bigger. Series B and C+ rounds reached decade highs of
$30M $60M - Extinguishing Burn, Improving Margins: Margins improved, but revenue growth rates fell. Climate tech hardware companies saw growth rates fall from a median of
58% at the end of 2021 to just19% by the end of 2023. While growth rates have since marginally improved, climate tech software companies are seeing higher profit margins than hardware companies. The median climate tech software company with over$50M 30% higher profit margin in 2024. - All-Time High for Clean Power Deals: Bolstered by incentives within the IRA and Chips and Science Act that improve profit margins for many renewable energy producers, clean energy and power companies closed 382 deals and surpassed
$7B 15% YoY and a more than 3x increase over pre-COVID levels. - M&A Back to 2020 Levels: Between mid-2023 and early 2024 deals coming from financial buyers jumped from
15% of transactions to40% of transactions, signaling that financial buyers may be stepping in as VC investment remains low.
Learn More
To read the complete 2025 Future of Climate Tech report, click here: The Future of Climate Tech 2025
SVB is a leader in providing market insights on sectors across the innovation economy. For the complete library of SVB's signature reports, please visit Market Research Industry Trends & Insights | Silicon Valley Bank (svb.com)
About Silicon Valley Bank
Silicon Valley Bank (SVB), a division of First Citizens Bank, is the bank of some of the world's most innovative companies and investors. SVB provides commercial banking to companies in the technology, life science and healthcare, private equity, and venture capital industries. SVB operates in centers of innovation throughout
View original content to download multimedia:https://www.prnewswire.com/news-releases/us-climate-tech-investment-achieves-six-straight-months-of-growth-silicon-valley-bank-releases-annual-report-302433552.html
SOURCE Silicon Valley Bank
FAQ
What are the key investment trends in climate tech for 2024-2025?
How do climate tech funds compare to traditional VC performance?
What is the current state of climate tech valuations and funding rounds?
How has M&A activity evolved in the climate tech sector?
What are the profit margin differences between climate tech software and hardware companies?
