Global Cleantech Trends

Key Findings

• Between H1 2020 and H1 2023 Cleantech Series A funding has increased 73% and Series B funding has increased 166%.
• In Q2 2023, Cleantech increased its share of Series A funding to 25% compared to all other tech startup sub-sectors, up from 14% in Q4 2022. Cleantech’s share of Series B funding increased from 10% to 20% over the same period.
• Cleantech has the highest number of Series A deals from Q4 2022 to Q2 2023 compared to all sub-sectors, and the second-highest number of Series B deals (after AI & BD).
• Despite the global decline in VC funding, Cleantech’s Series A funding has increased 15% in absolute terms between Q4 2022 and Q2 2023 — the biggest increase among all sub-sectors. Cleantech’s Series B funding has also increased 34% over this period — the biggest increase among all sub-sectors.
• Thanks to strong investment in 2022, Europe leads all regions in terms of its share of Series A funding from H1 2020 to H1 2023.

Since Startup Genome’s first Cleantech report in 2021, the conditions surrounding this sub-sector have changed dramatically. When that report was published, Cleantech was experiencing a decline in early-stage funding, and the world was primarily focused on the impact of COVID-19. However, two years can make all the difference in the startup world. Soon after the release of that report, the sub-sector reached new funding heights and also started receiving more global attention as many policymakers and business leaders recognized the need for technological solutions to the climate crisis.

Like most tech startup sub-sectors, Cleantech funding peaked in early 2022. Series A funding declined 36% from H1 2022 to H1 2023, but this decrease was significantly less drastic than the one experienced by similar Deep Tech sub-sectors. Advanced Manufacturing & Robotics was down 64% and Agtech & New Food down 77% over the same period.

Looking at the long term, Cleantech funding is considerably up: 73% for Series A and 166% for Series B from H1 2020 to H1 2023. It is also up over the most recent three quarters, and while it may take time to reach the remarkable funding heights of H1 2022 again, Cleantech has shown strong indicators of health over the first half of 2023. By Q2 2023, Cleantech had experienced a 15% increase in both Series A deal count and funding compared to Q4 2022 levels. For all Deep Tech sub-sectors tracked by Startup Genome, Cleantech was the only one to experience growth in either deal count or funding over this period. And notably, looking at Q2 2023 alone, only AI & Big Data had more total Series A funding than Cleantech, meaning Cleantech secured more funding in that quarter in absolute terms than larger sub-sectors such as Life Sciences and Blockchain.

Cleantech also led all Deep Tech sub-sectors in Series B funding amount growth, at 34% over the period Q4 2022 to Q2 2023. Other than Life Sciences, Cleantech was the only Deep Tech sub-sector tracked by Startup Genome to experience an increase in Series B funding amount during these three quarters.

Looking at the amount of Series A and B funding secured by Cleantech startups over the last three quarters, it is evident that some investors, particularly in Europe and China, are increasing their Cleantech investments even as VC funding retreats broadly. As a result, Cleantech’s funding share continues to increase. What was one of the tech startup world’s smaller sub-sectors in 2021 captured 25% of Series A funding amount and 20% of Series B funding amount in Q2 2023.

Regional Trends: Europe Leads in Cleantech Funding

Thanks to strong investment in 2022, Europe leads all regions in terms of its share of Series A funding from H1 2020 to H1 2023.

Collectively, North America, Europe, and China represented over 90% of Series A and Series B funding share for Cleantech by H2 2023. Europe has built on its lead over the U.S. as the Cleantech regional funding leader, generating a 28% funding share lead over North America by the first half of 2023. Meanwhile, China has increased its share of Series A funding by 125% since 2020, while the rest of Asia has fallen -45% over that same time.

The rise in European Series A funding share is largely driven by its number of deals — the region saw 56% more Series A deals than North America in H1 2023.

Despite being the leader in share, Europe’s median Series A deal amount is almost 25% lower than those in North America, although it is rapidly catching up. These lower round sizes are to be expected given the smaller VC fund sizes in Europe versus the U.S. 

However, Europe’s median round sizes are catching up with North America’s median Series A deal, experiencing a slight decline (-9%) from 2022 to 2023, while Europe was the only region to experience an increase in median funding amount, at 12%. Again, we can infer that Europe's policies to address climate change have contributed to it being the only region where the median Series A amount has gone up from 2022 to 2023, helping explain why valuation as a revenue multiple has also gone up. While receiving much less overall funding for Cleantech than Europe and North America, MENA shows promise with a 56% growth in early-stage funding for Cleantech from 2018 to 2022.

However, looking at Series B deals tells a slightly different story. For Series B deals, Europe’s funding share has actually declined by 36% from H1 2020 to H1 2023, falling below North America. Meanwhile, China’s rise for this round has been meteoric, increasing 225% between H1 2020 and H1 2023, nearly catching up with Europe. 

How these trends play out over 2024 and beyond will be fascinating. It is hoped that the growth in Series A in Europe and China translates into more Series B funding rounds, showing a stable or growing scaleup success rate.