The state of climate tech in 2021 - 2022

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Increasing temperatures, increasing funding. State of climate tech

Increasing temperatures, increasing funding: climate tech is hot

The twenties of this century sure have been quite interesting so far, with global events stirring up the markets. The side effects are rippling through the economies and affect investors' decision-making. But what about climate tech? How have investments been for these start-ups the past two years, and what does the future look like? Let's take a look at the numbers.

Exponential growth and less prone to recession

Investors are becoming increasingly interested in fighting climate change, with funding growing year by year. New fundraising mechanisms, such as SPACs (special purpose acquisition companies), and dry powder are important fundraising systems for climate tech.

2021 was a great year for climate tech. A total amount of $39.2 bn across 605 venture deals was raised. Megadeals became more common: the average deal size quadrupled in the first half (1H) of 2021 from $27m in 2020 to $96m. More than 60% of the investments went to Seed and Series A deals. According to the 2021 report of PwC, every 14 cents per venture capital dollar went into to climate tech. In Europe, 13% of all European venture funding went to climate tech start-ups. After a hesitant start 10 years ago, investors are now fully going for environmental technology.

Bar chart about venture funding in climate tech between 2010 and 2022 in billion dollars and in percentage
Venture funding in climate tech has known a steady growth over the past years and will continue to do so in 2022 (Source: HolonIQ)

2022 isn't over yet, but looks promising. In the first half of the year, $19 bn was raised across 500 venture deals. If it stays on track, it could match the amounts of 2021. However, not every stage of funding gets as much as the other. Growth (late-stage) funding have taken a hit and have fallen back from $10 bn in 1H 2021 to $3.9 bn in 1H 2022, a decrease of -39%. Seed and Series A rounds on the other hand are doing great, with almost double the amount in comparison to 1H 2021.

Unlike other sectors, climate tech is expected to suffer less from the recession than in 2008. Because of the urgency of the climate crisis (and its very visible effects), investors are less inclined to pull their funding. Nevertheless, they are cautious with their money, and funding rounds will take more time to close in 2022. There won't be as many megadeals as before and founders will have to be a bit more patient, but Seeds and Series A will probably continue the upward trend.

Geographical differences: California's future gold mines

The United States remains dominant when it comes to climate tech. Not only has the country raised most of the funding (65% between 2H 2020 and 1H 2021), it's also home to 3 of the top 5 investment hubs (San Francisco Bay Area, New York City, and Boston).  According to CTVC, 54% of the climate tech companies are based in the US, with California alone responsible for 24%!

Market map with locations of climate tech companies in percentage and amounts
Location of climate tech companies (Source: CTVC)

Europe had long been lagging behind when it came to investing in climate tech. In 2020, it still came 3rd in terms of investments, after the US and China, but it has been doubling down on its efforts since. Since 2017, when only $1.1 bn was invested in climate tech, the number has increased to $11 bn in 2021, pushing Europe to the 2nd place in the continent ranking. London, Berlin, Paris and Stockholm have become influential investment hubs. Climate tech has become the fastest growing vertical in Europe, seeing 10x growth in a mere four years. Since 2020, the value of the sector has doubled to $100 bn (see graph). Most of the investments come from Europe itself, which means there is the potential for even more growth with international investors. However, it is expected that in 2022, European start-ups might not reach their investment levels of 2021.

Bar chart showing growing amount of climate tech startups in Europe between 2010 and 2021
The European climate tech ecosystem witnesses a steep growth in value (Source: Dealroom)

Asia holds 10% of the market when it comes to climate tech start-ups, with 500+ start-ups. The majority of the most promising ones have been founded between 2010-2014. Thanks to Singapore's status as an innovation center for alternative protein sources, the largest portion of Asian climate tech focuses on plant based foods, ahead of energy and mobility. China is the 3rd biggest investor in climate tech worldwide, coming after the US and recently Europe. Despite its reputation as the largest carbon emitter, China has been heavily investing in climate tech and is world leader in wind and solar energy. Their goal is to have a third of their electricity come from renewable energy by 2025, causing them to be one of the biggest investors in this field.

HolonIQ projects that China and India are set to exceed their 2021 funding volume this year, with the United States and Europe falling slightly short.

Bar charts about climate tech venture funding between 2010 and Q1 2022 for the United States, Europe, China, and India in billion dollars
Investment projections of 2022 for the US, Europe, China, and India (Source: HolonIQ)

Maturing versus growing sectors

Albeit a young field, climate tech is becoming a maturing asset class. Over 3000 climate tech start-ups have been identified globally, including 47 unicorns since 2015. 28 of those unicorns reached this status in 2021 alone!

Some sectors raise more funding than others. The top 3 sectors are Mobility & Transport, Energy, and Food & Water (including Agriculture and Land use).

Bar chart showing the amount per quarter between Q3 2020 and Q4 2021 and the ratio of funding for each sector
90% of the funding in 2021 went into 3 sectors: Transport & Mobility, Energy, and Food & Water, with a median deal size of >$10m (Source: CTVC)

These graphs from CTCV show the amount of climate tech start-ups and the proportion of funding that went into the different (sub)sectors, from Q3 2020 until Q3 2022. The three biggest fields have the most funding, although Transport and Energy have received more megadeals per company than Food & Agriculture. Food & Agriculture on the other hand had the highest number of unique investors in 2021, with many investments made by climate-curious first-time investors.

Charts showing the amount of climate tech companies per industry and sector and in which sectors most venture funding has gone to since Q3 2020
In the past 2 years, the focus of investors has been mainly oriented towards Energy, Transport and Food (Source: CTCV 2022)

While funding used to be highly concentrated on top industries, with 90% going to Transport, Energy, and Food in 2021, diversification is increasing. Their share has already dropped to 70% in 2022, benefitting a broader range of ventures in other areas. The emerging sectors of 2022 are Carbon, Climate Management, Industry, and Built Management. Carbon, which includes carbon capture, removal and storage, has already closed 25 deals in the first half of 2022, accounting for a total worth of $397.6m or 8% of climate tech funding. In 2021, this was less than 2%. Climate Management and Industry accounted for 8% and 11% of 2022 funding respectively.


Climate change is here to stay, but climate tech start-ups might make the future brighter with their solutions. To enable this, investors have increased funding for these companies, with a great year for 2021 and a predominantly positive 2022 as a result. Transport, Energy, and Food remain dominant, but investments are increasingly diversified across emerging industries, the strongest of which are Carbon, Climate Management, and Industry.

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