Climate tech matured in 2024 as investors favored bigger rounds, later stages

Climate tech may have a down year in 2024, but new data shows a maturing sector with larger deal sizes.

Venture capital in the climate technology sector fell 7% to $12.9 billion, just shy of $1 billion Calculation of 2023According to a new data Pitchbook Report. The report found that round size increased in 2024 and investors seemed more interested in backing companies emerging from their seed rounds.

Over the years, investors have favored early-stage companies by plowing significant amounts into pre-seed and seed-stage startups. This was due, in part, to the relative youth of climate technology. After a brief hibernation following the Great Recession that began in December 2007, as well as the explosion of clean tech, founders and investors reconfigured their approach to address new markets and technologies.

That shift fueled early-stage opportunities. As those startups matured, they began capturing larger, later-stage rounds with higher valuations, PitchBook data shows.

In 2024, the median deal size was $7 million, up $1 million from the previous year, while the median pre-money valuation rose to $44.5 million from $31.5 million the previous year. The number of contracts fell by 27% to 568 In 2023, climate tech startups raised a total of $13.9 billion in 782 deals.

Last year’s climate technology numbers also reflect broader market trends. Deal numbers remained low across all sectors, although deal value rose to near 2022 levels largely on the strength of AI-related investments in companies such as Anthropic, Databricks, OpenAI, xAI and Waymo, which collectively captured 43.2% of all deal value in Q4.

The lull in climate tech investing comes as investors are nursing something of a hangover following the euphoria during the pandemic. As venture dollars have flowed into climate technology (and several other sectors), deal sizes, counts and valuations have all increased.

Now, as some early-stage companies look to scale up again, they are Facing a harsh environment Where investors are keeping a close eye on unit economics. Startups that are struggling are finding it hard to scale, while those that have cracked the code are being rewarded with big deals, investors told me.