Driven by more diversified investment and high levels of mid-year dealmaking, climatetech VC activity remained strong in 2023, according to the latest edition of Pillsbury’s Climatetech report series, produced in partnership with PitchBook. Climatetech: 2023 Year in Review finds that, although venture dealmaking has faced headwinds since 2021’s historic peak, the sector continues to outperform pre-2021 metrics, with global investment exceeding $25 billion for the third straight year.

In addition to compelling data covering VC and M&A trends, exit activity, and top-performing verticals, the report features a conversation with Pillsbury partners Don Lonczak and Steven Tepera covering strategic considerations for climatetech stakeholders amid a rapidly developing innovation landscape under pressure to achieve time-sensitive decarbonization objectives.

In the Q&A, Tax partner Don Lonczak notes that government incentives like those available under the Inflation Reduction Act are helping enable climatetech innovation. “Tax credits are being taken into account in the financial modeling of projects,” he said, “and in some cases, their value can mean the difference between a feasible project and one that isn’t economically sustainable.”

The report’s key findings include:

  • Driven by expanding opportunities related to renewable fuels technologies, the oil and gas vertical grew 22.7 percent. The manufacturing vertical, which showed resiliency amid broader market challenges in 2022, also remains a strong driver of sector activity.
  • Although buyouts still represent just a handful of climatetech exits, they have doubled in number since 2021, underscoring the growing interest from nontraditional players and shifting corporate strategies.
  • Median VC deal values and valuations remained steady or elevated at almost every maturity level, though venture growth stage deal size decline.
  • A few large IPOs signal liquidity prospects may be rosier in climatetech than in other sectors.
  • Stymied by integration challenges and a crowded market, the mobilitytech vertical saw the fewest number of deals closed in nearly a decade.

The research is based on Pitchbook’s proprietary Venture Monitor data, along with Pillsbury’s extensive experience counseling Climatetech startups and investors.

Click here to read the full report.

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