'The new normal': VC funding for climate tech dropped again in 2024

After the 2021 heydays, the climate tech industry had another sobering year in 2024.

Market intelligence platform Sightline Climate has published its Climate Tech Investment Trends report for the fourth year running, and it serves as more evidence that green startups are facing a tougher, well, climate.

The report shows that high interest rates and the uncertain political climate in Europe and the United States took a toll on VC investors’ willingness to put money into climate tech.

After a 24% drop in venture capital and growth investment in 2023, the climate tech sector saw another 14% decrease last year to €29b.

"We’re settling into the new normal," Sightline co-founders Kim Zou and Mark Taylor write in the report. "We’ve seen the first generation of climate tech — wind, solar, batteries — graduate to private equity and project finance, leaving VCs to nurture the next generation of clean fuels, industrial decarbonisation, clean firm power, and more. Alongside the climate transition, we’re in the middle of a funding transition."

Seed investment grew in 2024

It's not all doom and gloom for climate startups, though.

The deal count stayed more or less the same in 2024 – 1,460 compared to 1,468 in 2023. But the average deal size fell 14% to €23 million.

The amount of money put into seed investments grew by 3% despite a lower deal count, as the average deal size grew by 12%

Investment in Series D and below took a big hit, though, falling by 38% while Series C investment remained more or less the same with a 1% drop.

Data centre tech and clean firm power were among the most popular investments for VCs, driven by the developments in AI.

Exits double as oil companies stock up on acquisitions

Exits more than doubled compared to 2024 to a record 178. Most of those were acquisitions, with oil companies Shell and BP leading the buying spree by vacuuming up a combined 15 companies.

So what should one expect when it comes to VC investment in 2025? The report strikes a cautiously optimistic tone.

"Of course, 2024 wasn’t the launchpad investors had hoped for. The slow rollout of IRA funds and guidance meant a lot of projects stayed stalled," the report’s authors wrote.

They also point out that political uncertainty in Europe and the US stunted investment as investors continued to wait-and-see: "With oil prices and demand down and interest rates still high, few groups were eager to spend money. But the uncertainty is mostly over, and while the US may back away from climate commitments, markets anticipating higher EU carbon prices will be transformative for hard-to-abate sectors and unfettered energy demand from AI will create new opportunities for clean firm power and data centre tech."