In a webinar Tuesday on the future of climate tech, Alan Neuhauser of Axios kicked off the questions by asking what it means to succeed in a burgeoning market where simply surviving is challenging enough.
Mark Cupta, managing director at Prelude Ventures, said an essential win for a climate tech startup is having sufficient funds to buy enough time to get traction. Capital is flowing into mature sectors, Cupta said, but budding ventures need investments to stay afloat while they grow.
The online event focused on a recent report by Silicon Valley Bank (SVB) that explores the state of venture capital investing in the climate tech sector. The news was mixed. While deal activity in the climate tech industry was down 14% last year from a peak in 2021, it’s doing much better than the broader tech market, which fell by 24%.
Within climate tech, trajectories vary between sectors. Cupta noted that food and agriculture is “taking an absolute beating” after years of instability, whereas carbon capture and removal companies, and climate data startups have surged ahead in recent years.
The dip in funding for climate tech can create growth and longevity issues for companies with big dreams and high costs. But the report’s authors said the situation isn’t a cause for panic. They noted many hopeful trends in the data, and said that government incentives, particularly the Biden administration’s Inflation Reduction Act, continue to bolster growth in the sector.
Panelists at the event, hosted by SVB, said companies that know how to get creative with funding sources and incentives stand out.
“They are using all the resources they have access to,” said Milo Werner, an investor and industrial strategist at NextGen Industry Group.
All three panelists said that early stage companies should work with a target market in mind.
“If you can guarantee that someone’s going to buy your product at a price, it’s a little easier to justify a factory to make it,” said Joshua Posamentier, managing partner and co-founder of Congruent Ventures.
They also highlighted how important it is for companies to partner with financial backers who understand their vision and timeline, which can be a challenge for some hardware-intensive climate tech startups. Investors need to be more patient than they would be with faster-moving software companies.
In the Pacific Northwest, climate innovators are finding a foothold. A report out last month put the Seattle area among the top U.S. cities for climate tech startup hubs. Companies in this region received $240 million in funding last year, according to PitchBook data analyzed by the venture firm Revolution.
Here are a few Seattle companies with recent investments to keep an eye on:
- Banyu Carbon, which aims to reduce the cost of carbon capture using light-based technology, has raised $8.5 million from investors so far this year.
- Recurrent raised $16 million earlier this year to fund its shopping platform that provides buyers and dealers information about batteries in used electric vehicles.
- In 2023, Omnidian announced that it landed $25 million for solar power development projects; LevelTen Energy, a platform for renewable energy transactions, raised $10 million; and Electric Era raised $13 million from Chevron Technology Ventures for their quick EV charging stations.
