VCs invested $8B in clean-energy startups in Q1 2023, representing a 40% YoY drop.
The figure was the lowest quarterly total since 2020. The sector showed resilience to the venture funding pullback last year, buoyed by the introduction of the Inflation Reduction Act. However, rising interest rates and market volatility have started to impact the sector this year, per the WSJ.
- The funding slump is further compounded by the fallout of Silicon Valley Bank, which was one of the prominent climate tech backers.
- WeaveGrid CEO and angel investor Apoorv Bhargava witnessed financing rounds being downsized or canceled entirely in recent times.
- Dealogic's data shows that larger organizations reduced debt financing for climate projects to the lowest levels in over two years.
- Meanwhile, a Pitchbook report shows that corporate VC divisions of oil and gas companies participated in one-fifth of the venture deals inked with climate tech startups in 2022, representing deals worth $6.79B out of the total $36.47B.
- Accepting funding from oil and gas corporations created a dilemma for founders since many had to grant them preferential conditions, such as the right of first refusal, and their existence possibly scared off other prospective investors.
