Despite lowest global fundraising figures in years, exit activity in Climate Tech suggests rapidly maturing market
LONDON/PORTLAND, Ore. — July 26, 2023 — While supporting the widespread consensus that the global economic downturn has finally caught up with the Climate Tech sector, new data from Net Zero Insights, the leading market intelligence platform for climate tech in Europe and North America together with Alder & Co., a purpose-driven climate tech marketing agency, highlights one significant financial bright spot: mergers & acquisitions (M&A).
Globally, Q2 2023 quarterly funding showed an astonishing decline of 38% compared to the same quarter last year (for a total of $14.3B USD), and deal activity declined by 32% (for a total of 1,006 deals). However, this quarter also witnessed 66 exits (all but two being acquisitions), indicating a significant (22%) QoQ growth. In 44% of these transactions, the acquiring parties were corporations, the majority of which are headquartered in Europe or the U.S.
Among exits, energy solution companies stood out as the most acquired (25), representing a 56% increase YoY, with the built environment (8) and food & agriculture (9) sectors also seeing massive increases in global acquisitions. Overall global investment continued to favor the energy ($9.21B) and transportation ($3.95B) sectors, with a notable and somewhat surprising performance by the circular economy category in the U.S. specifically.
Bas Hendriks, Director at IMPROVED Corporate Finance, commented: “The market for climate tech has matured rapidly in the past few years. On our projects, we see continued interest from strategic/financial buyers to acquire companies that have mature technology stacks and proven product-market fit. Especially strategics continue to have cash available for executing well-defined M&A strategies to acquire technologies complementing their portfolio.”
“Despite challenging times for the economy and society, the urgency to address climate change keeps growing,” said Federico Cristoforoni, Co-founder & CEO, Net Zero Insights. “While technology alone won’t solve the issue, the need for action grows every day, and investments in the solutions remain insufficient.”
Despite the temporary decline in funding, the growing acquisition activity may signal that businesses are realizing the importance of taking action and embracing a broader range of solutions to combat climate change.
“We see this M&A activity as a sign of a maturing market, which also leads us to believe that corporates are looking to innovate and meet their aggressive sustainability targets”, said Melanie Adamson, partner & chief marketing strategist at Alder & Co. “While the US typically leads on VC funding, the European market is acting swiftly to acquire commercial-ready climate tech companies.”
Some of the largest funding rounds raised this quarter include:
- €430 million for German solar panel company 1KOMMA5°, granting the not-yet two-year-old company Unicorn status
- $142 million for Chinese nuclear fusion startup, Neo Fusion
- $195 million for U.S. mining company KoBold Metals
Interestingly in Europe, water and greenhouse gas (GHG) capture sectors experienced wide QoQ variations in funding, recording remarkable growth rates of 574% and 200%, respectively. In the U.S., water and natural environment also saw notable QoQ surges with growth rates of 908% and 258%, respectively.
For more information, read the full report.
About Net Zero Insights
Net Zero Insights operates the Net0 Platform—today probably the most comprehensive database of climate tech startups and SMEs operating in Europe and North America. Investors, corporates and decision-makers work with us to gain insight into financial and tech trends by accessing data on funding rounds, activity sectors, technology, patents, contact details, and much more. Find out more: netzeroinsights.com
About Alder & Co
Alder & Co. is a leading, global strategic brand marketing agency with the mission to drive the adoption of climate technologies until they become universal. Alder partners with forward-facing, innovative climate tech companies that need progressive brand & marketing strategies to drive growth, secure investment, and make the impact needed to address our generation’s most urgent crisis—our environment. Find out more: alderagency.com
Whitney McGoram: [email protected]