Funding's cooling while the Earth is heating

Welcome back to The Strawman, the daily climate newsletter that’s a bit like your personal weather forecaster for all things climate - tune in daily, and we won’t disappoint.

Today we’re looking the startup sector - climate startups often need a chunk of cash to get off the ground before they can make real progress. Amidst the wider economic backdrop, it seems like they’ve been falling outta fashion.

Let’s dig in

Is the party over?

Look man, the Strawman has only just got here - if we were to listen to the news, we’d have to pack up our biodegradable glitter and start heading home. Like with most things, it’s complicated.

Funding has dipped in certain sectors, sparking rumors that the climate tech shindig might be winding down - in reality though, not everywhere has been hit the same.

Europe’s like the guy that forgot to wear sunscreen before having a nap on the beach; it’s been burnt far more than the rest of the ecosystem, with funding in climate startups down by over 40% since last year.

The earlier the better

Digging a little deeper, turns out the majority of the funding dry up is in the later stages. See, if you’re a two-person band starting a company from the ground up, there’s still plenty of people willing to invest.

The companies really struggling are those that have already used a chunk of investor cash and don’t have much to show for it - now these very companies are going back to investors asking for more money.

Like a plant deprived of water, the sector's growth has become a tad stunted as a result.

Silver linings

All is not lost. Even when the party starts slowing down and the DJ starts yawning, there's still the person in the corner making balloon animals. And in our case, these "balloon animals" are the sectors of climate tech that still have investors reaching into their pockets.

On the bright side, sectors focused on carbon removal and carbon accounting are experiencing an uptick. VCs are channelling funds into startups targeting emissions mitigation, and the energy sector in Europe has also taken a much gentler blow.

And let's not forget the non-dilutive capital streams that climate tech companies are now tapping into. This shift may not show up in the usual funding statistics, but it's as much a part of the narrative as the more visible ups and downs.

So, like any good shindig, the climate tech funding party has its highs and lows. But it's far from over. It's more like a break to clean up the spilt drinks, before the tunes get turned back up and the party roars back into life.

All I know is, the Strawman’s gonna be dancing in the middle of the dancefloor for a while yet…

See ya tomorrow

The Strawman