How climate tech startups can survive and thrive in the downturn

By Katie Fehrenbacher

The climate tech startup bubble has popped. At least that’s what it’s starting to feel like for many entrepreneurs and investors. Didn’t know there was a bubble? The last two years have been climate tech boom times. Startups tackling climate sectors such as energy, transportation and carbon removal have achieved sky-high valuations and had access to tens of billions of dollars of cheap, easy(ish) money. 

In 2021, thousands of climate tech startups collectively raised over $50 billion from venture capital and private equity investors, according to analysts at Bloomberg Energy Finance. The same year, Silicon Valley Bank reports a record 104 climate tech exits valued at $114 billion. A bunch of those exits were thanks to the go-go SPAC craze, where private firms used "special purpose acquisition companies" to go public more swiftly, easily and with minimal transparency than ever before.

But now the overall tech market has turned. Spooked by an era of post-stimulus, inflation and a war in Europe, the stock market recorded its worst first half-year performance in decades. Not surprisingly, investors are responding by moving away from risk and into safer investments. 

Climate tech startup funding numbers for the first half of 2022 are just coming in and are a lagging indicator. According to the Climate Tech VC newsletter, venture capital dollars in climate tech startups dropped by over 20 percent compared to the second half of 2021, although the amount actually rose compared to the first half of 2021. The biggest hit from the 2022 numbers was for later stage climate tech companies, which saw funding drop by 39 percent between the first half of 2021 and 2022….