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Featured image of a fire burning on Sunset Boulevard in Los Angeles fires by Apu Gomes/Getty Images

Startups

Climate-tech VC deals fell for 3rd straight year

Startup deals were up this year—but AI is eating everything, including climate tech

The total amount of VC funding for climate-tech startups fell more than 17% year-over-year in 2024, marking the third annual decline in a row—a signal that AI is continuing to siphon venture dollars away from other sectors.

Climate-tech startups raised $24 billion in 2024 across 1,314 total VC deals in North America and Europe, according to the Q4 2024 PitchBook-NVCA Venture Monitor. That’s well off 2021’s peak of $41 billion across 1,984 total deals.

Pre-seed and seed rounds were particularly slow last year, dropping from 246 deals to 152 deals in the US. For a climate-tech startup, raising a seed deal is a particularly tough ask, especially for hardware businesses that require a huge amount of capital expenditure before they can even get to a pilot product.

Climate tech is seen as a risky area to invest in even when money is cheap, and the sector took heavy blows in 2024 that may be turning some investors off the space. Northvolt, a lithium EV battery developer that had raised a cumulative $9 billion in equity and convertible debt, spiraled into bankruptcy in November. Universal Hydrogen, a startup that was looking to develop a fully hydrogen-powered plane, similarly ran out of cash.

The political climate has also scared off VCs.

“I think that there are people who said, ‘I’m not going to do anything in climate tech for four years because the regulatory environment is hostile to it, even my LPs aren’t demanding it as much as they were,’” said Peter Barrett, managing partner at early-stage deep-tech VC Playground Global.

“But then a major US city burnt down,” Barrett added, referencing the wildfires that have swept across Los Angeles over the past week.

Clean energy investors expect the next few months for startups to be particularly tough as the energy industry adjusts to a new administration. Some VCs are even advising companies to hold off on launching a fundraising process until the project financing and regulatory landscapes are clearer.

Climate-tech deals are falling, even as overall dealmaking is up. Almost 30% more VC dollars were invested in startups in 2024 than the previous year, and the AI industry accounted for a huge share of that.

AI has undoubtedly shifted the priorities of the industry: High-profile firms like Greycroft and Kleiner Perkins have doubled down on their AI bets even as prices have kept climbing.

At the same time, there’s a growing awareness among VCs that large investments in clean energy are needed to keep up with the AI industry’s energy demands.

Featured image of a fire burning on Sunset Boulevard in Los Angeles fires by Apu Gomes/Getty Images

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  • rosie-headshot.jpg
    Rosie Bradbury is a senior reporter covering startups and venture capital for PitchBook News. Based in New York, she previously reported for the Bureau of Investigative Journalism, Business Insider and Wired. Rosie studied history and politics at the University of Cambridge.
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