2022 was a big year for Climate Tech, particularly in the U.S. The Inflation Reduction Act, also known as the Climate Bill, was a shot in the arm for investors at all stages. This national support joins seemingly unstoppable global momentum.
But what emerges from the flood of money, and what doesn’t make the cut?
Here’s our take on the major climate tech trends we’ll see emerge in the year ahead:
- Getting Hotter: The number of newly-funded climate tech startups will be the highest in history, backed by a slew of new venture capital funds focused exclusively on climate, with at least $40B in dry powder.
- Come Together: Environmentalists as well as solar/wind advocates will link arms with nuclear. Fusion in particular will capture mind- and VC-wallet-share. At least five fusion companies will have valuations over $1B. (Commonwealth Fusion Systems, Hellion Energy, TAE Technologies, Avalanche)
- Liquid Market: The megadrought in the western U.S. is the worst drought in over 1,200 years (other parts of the world are also seeing record droughts and record floods). More companies will pay attention to controlling and managing water resources leading to more innovation. (ZwitterCo, Waterplan, SOURCE)
- Carbon Dating: Carbon credit verification institutions will tokenize over 50% of their projects. Institutional investors will trade carbon as an asset, with the secondary market overtaking the voluntary market. (Toucan*, Senken, BeZero*, Pachama)
- Cow Tipping: The livestock industry will run the risk of becoming “the new coal,” leading to more regulation of methane, and more interest from consumers for “climate-friendly beef” and dairy.(Alga Biosciences, Blue Ocean Barns, ArkeaBio)
- Anti-Fragile: Catastrophic climate events will accelerate and adaptation to climate change will increasingly show up as a top story. Look for more investing in resilience and change management—particularly in the supply chain and insurance. (SINAI*, Cloud to Street, Altana)
- Trailer Hitch: Enough electric trucks are in the market to prove viability, creating a massive push and strain on supply chains of OEMs. (Forum Mobility*, Range)
- Electric Wave: The number of electric boats sold this year will exceed the total number sold to date. Following the large-scale maritime mandates taking effect now, look for more regulation on ICE motors in markets like California and Scandinavia. (Candela, Arc, Pure, SES-X)
- Connect the Watts: The start of the EV charging network centralization will lead to the first significant roll-up attempts in the US and Europe. (EVgo, Mobility House)
- Low-Carb Freight: Pressure from customers will further impact retail and transportation companies, who will become the biggest spenders on decarbonizing, insetting and offsetting efforts in the coming year. (aifleet*, Parallel Systems, Einride)
(* we’ve invested, as a firm or personally)