Don't call it a comeback, I've been here for years
We are fully in the Climate Tech 2.0 era and things are vastly different from the first Clean Tech boom of the early 2000’s. We, like many investors raising funds to deploy into climate companies, spend considerable energy distinguishing the confluence of tailwinds in the current climate tech moment from the pitfalls of the previous era. Between 2006 and 2011, $25B in venture capital was invested in climate/clean tech companies and most of it did not generate the desired financial return. Clean Tech 1.0 was largely characterized as overly R&D and capital intensive with poor unit economics that took longer to materialize returns than investors could bear. But the investments of 1.0 helped create the positive conditions for our current climate tech generation.
Climate Tech 2.0 is buoyed by multiple factors that are all pushing the cost of climate tech adoption down … which is driving demand and the potential financial outcome up.
Technology and business models have advanced beyond science experiments. There are market-ready solutions across every sector from energy, agriculture, building electrification, and industrials (among others), that are both greener and deliver economic ROI to customers. This isn’t environmental altruism—it’s business efficiency.
Talent is migrating to climate en masse. 64% of millennials say they will only work for a business that has a focus on sustainability and impact. Nearly every day our team speaks with someone who is a superstar in their field that wants to apply their talents and experience to climate (and we work hard to place them in our portfolio companies).
Governments are using both carrots and sticks to drive change alongside economic growth. The USA's Inflation Reduction Act alone has ~$380B in incentives to drive over $1 trillion in economic activity. Since 2015, 53% of the world’s GDP has legally committed to net-zero by 2050, with many already implementing carbon pricing.
Consumers are voting with their dollars and companies are listening. More than 63% of Fortune 500 companies have set net-zero by 2050 targets, which is further driving a surge in demand for technologies that measure, reduce and report emissions.
Private capital recognizes the opportunity and exits are starting to accelerate. Since January 2021, $121B has been raised to deploy specifically into climate tech businesses across 207 new funds. Almost concurrently there has been a 70% increase in climate tech exits each year that have disclosed $400B in enterprise value.
Clean Tech 1.0 gets a bad rap for being a dismal failure that most investors try to forget. But the reality is that much of why the circumstances today are so favourably different is because of the gains (particularly in technology and cost) of the predecessor period. We are grateful for the OG generation of Clean Tech because without it we wouldn’t be so well positioned to take on the climate challenge. But this time isn’t a trial run—this time we have to get the job done.