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With climate venture capital down, industrial investments had a ‘breakout year’ in 2023

Sightline’s Kim Zou says megarounds for steel startups drove investment growth in industry, while alternative protein and vertical farming startups underperformed.

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January 16, 2024
Green steel production

Photo credit: H2 Green Steel

Heavy industry reached the top three verticals for climate tech investment in 2023, rising 10% from 2022 to $5.3 billion. Meanwhile, land and agriculture fell 55% from 2020, to $3 billion, according to a new report from market intelligence firm Sightline Climate.

  • The current take: “The biggest surprise in terms of verticals this year was really the decline in food and land use,” said Sightline’s CEO Kim Zou, talking to Shayle Kann on a recent episode of Catalyst. “I don't think the numbers or the milestones necessarily matched a lot of the valuation expectations or the funding rounds.” 
  • The market grounding: “I think a big theme throughout this report…is that we started seeing almost, like, replacements on the leaderboard,” Kim added. Mega-rounds for steel startups, like $1.6 billion for H2 Green Steel and $262 million for Boston Metals, drove industry’s “breakout year,” buoyed by tailwinds in EU policy, including the Carbon Border Adjustment Mechanism. 
  • The outlook: “I think the overall climate tech ecosystem and investors are starting to wake up to the opportunity in industrial decarbonization. There's a lot of excitement for solutions like industrial heat pumps in those areas. Obviously, we talked about there's a lot of excitement for green steel and cement.”

The top three verticals were transportation, energy and industry, reaching $10.7, $7.7 and $5.3 billion, respectively. The other verticals were food and land use, climate management, built environment, and carbon removal and avoidance.

Food and land use had the toughest year. “The performance of Beyond Meat and some of these other alternative protein [companies], as well as a pretty significant trail of bankruptcies in indoor and vertical farming, have led to a pretty significant drop off in food and land.”

Sightline’s 2023 Climate Tech Investment Trends report tracked early stage and venture investment, not non-equity financing, which has been growing

Investment, meanwhile, was down in 2023 across all climate tech verticals, except industry. Sightline found that global venture and early stage capital shrank 30% from 2022. 

“That number isn't a surprise to most investors and founders that are operating in this space,” Zou said. “Both because of the macro downturn that we've seen impact all of venture [capital], so it's not specific to climate tech.”

Listen to the full episode of Catalyst:

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