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After years of acceleration, investors may be tapping the brakes on mobility startups.
Funding for climate tech was relatively flat from 2021 to 2022, compared with investment slowdowns in other sectors, but a more granular look at the data suggests that resources have begun to shift away from previously dominant segments like transportation toward emerging technologies, according to Climate Tech VC (CTVC).
Transportation, which has historically been the single largest climate-tech startup segment, was one of the categories driving this trend. Companies in transportation, energy, and food and land use made up 80% of the $100 billion invested in climate tech since 2020, according to CTVC.
Mega deals cool off
Startups in transportation (CTVC’s definition includes EVs, batteries, EV charging, low-carbon fuels, and zero-emissions aviation and shipping) attracted nearly $12 billion in investments last year—a 31% decrease from 2021. At the same time, the total deal count for transportation rose by 35%, according to CTVC.
The decline in deal value could be because companies in this sector are more mature than many other types of climate tech, and later-stage deals saw the most significant slowdown over 2022. In fact, the dropoff in “mega rounds”—those greater than $100 million—within the transportation and food and land use categories resulted in an overall decline in capital deployed for climate tech, as all others grew, according to CTVC.
There were still some massive deals:
- Swedish battery maker Northvolt raised a $1.1 billion round last year after raising $2.75 billion in 2021;
- Fleet-charging company TeraWatt Infrastructure raised a $1+ billion Series A round;
- Croatian auto company Rimac Group raised a €500 million round;
- Puerto Rico-based EnergyX, which is developing technology for advanced lithium extraction and next-generation batteries, raised $450 million.
But the rounds in 2021 were bigger, especially in transportation, which made up more than 40% of total funding last year despite accounting for just ~20% of all deals, according to CTVC.
Overall, investors poured more than $40 billion into climate-tech companies last year across ~1,000 deals, according to analysis from CTVC. While total climate-tech funding fell by 3% from the record investments in 2021, the number of deals grew by ~40%, reflecting an increase in early-stage activity as funding for more mature climate-tech companies declined.
Zoom out: It makes sense that transportation has historically captured so much climate-tech capital since it is responsible for the largest segment of greenhouse-gas emissions in the US. But there has been a mismatch in the amount of financial backing for other major emitters, like heavy industry and the built environment, over the last few years, according to CTVC.
In 2022, investments in industrial decarbonization startups increased by 18%, built environment funding more than doubled, and dollars deployed for carbon-focused companies nearly quadrupled, according to CTVC.