Climate tech is the fastest growing vertical in Europe – report
Climate tech is the fastest-growing vertical in Europe, with funding soaring tenfold from $1.1bn (£840m) in 2017 compared to $11bn (£8.4bn) in 2021.
In the same period, climate tech was the second outright largest investment vertical behind fintech.
The data, compiled by Dealroom for Talis Capital, shows that in 2021, 13% of European venture funding went to climate tech startups.
The European climate tech ecosystem is estimated to be valued at more than $104bn (£79.5bn) at the end of 2021 – more than double the previous year.
‘The Rise of European Climate Tech’ report states that venture capital firms are providing the most money at 41% of all investment, shadowed by corporate investment (29%) and private equity (18%).
There was also an increase in capital in 2021 raised by specific European climate tech funds at $2.6bn, twice the amount of 2020.
In the UK, several funds have recently launched to invest in climate technology startups, suggesting the trend is set to continue.
Last week, impact venture fund Climate VC launched to invest in 120 UK-based early-stage climate startups over the next three years.
Climate VC is not alone, with other impact funds including Elbow Beach Capital’s £20m venture vehicle and SIS Venture’s Scottish Impact First fund both looking to invest in climate tech startups.
Despite the high levels of investment across Europe, climate and energy tech startups in the UK have struggled to secure later-stage funding compared to other verticals, according to a Tech Nation report published earlier this year.
One UK climate tech company to make it to the unicorn stage is Infarm, a London and Berlin-based vertical farming company.
It is one of the 16 climate tech unicorns in Europe, with 11 of those reaching the $1bn valuation last year. Among them are Voi, Wallbox, Enpal and Freyr.
“We’re in the midst of a perfect storm of opportunity for innovators in the climate space to succeed. Technological innovation is enabling superior unit economics; more supportive policies and regulation are enabling commercialisation; corporate and consumer demand is at an all-time high; and, in turn, investors are waking up to the opportunity now more than ever,” said Matus Maar, co-founder and managing partner at Talis Capital.
Investment in Series A rounds saw the largest increase with $201m invested in total in 2017 and $390m in 2021.
The details of the report follow a record year of investment for impact and climate tech startups. In 2021, UK impact tech startups raised £2bn, up from £1.7bn in 2020.
Recent investments suggest that investor appetite for climate tech companies remains strong. This week impact tech startup Again secured £2.55m in pre-seed funding to build a decentralised network of automated, micro-cleaning facilities.