May 2024

Ready for Designer

Review.

5 Macro

10 Capital

15 Financial Benchmarks

19 Sector Deep Dives

24 Exits

TITLE OF REPORT | 2
 While the challenges to avert climate change remain considerable, the long-term technology trends are
clear and bright. It is now cheaper to develop new renewable energy than it is to maintain fossil fuel
Despite near-term capital generation. Roughly 88% of global carbon emissions are now covered by a net zero goal, and policies
such as the Inflation Reduction Act (IRA) are beginning to have a meaningful impact on advancing
challenges, the stage is set for climate tech solutions and businesses. Entrepreneurs and investors are increasingly turning attention
long-term adoption of climate to hard-to-abate emissions sources. For instance, we see significant progress in technologies — such
as thermal storage to supply industrial heat at over 1400°C and rapidly improving hydrogen electrolysis
tech solutions. In a world where and fuel cells which help enable decarbonization of previously hard-to-electrify sectors.
climate risk is increasingly Tailwinds for climate tech abound, but the sector is impacted by the decline of overall venture capital
inherent, the technologies that (VC) investment, which witnessed the most significant correction since the dot-com bubble burst in
2000. But climate tech has outperformed, with deal activity falling just 14% compared to the 27%
mitigate that risk will likely witnessed in the overall market. And investors remain committed to the sector. Amongst the most
flourish by necessity. active corporate venture capitalists (CVCs), climate tech now accounts for 11% of deals, up from 2% in
2020. As VC investment declines and runway shortens, our proprietary data suggests climate tech
companies are turning toward profitability with more companies seeing improving EBITDA margins year-
over-year (YoY) than at any point in recent history.
As the pace of VC fundings slow and exits remain elusive, there is an increasing focus on finding capital
Dan Baldi
for late-stage companies in the form of less dilutive solutions, including corporate debt and project
National Head of Climate
finance. Many late-stage companies in 2021 had the opportunity to tap public markets for capital, but
Tech and Sustainability
Silicon Valley Bank that window is mostly closed given many of the now-public companies have struggled to meet
shareholder expectations of sales and profitability growth. M&A markets have not fared much better,
with climate tech M&A deal activity down 35% YoY. But so far in 2024, the US innovation economy is
showing signs of stability and normalization, late-stage valuations are stabilizing, Series A deal activity
is starting to pick up and exits may be on the horizon.
Despite near-term capital challenges, the stage is set for long-term adoption of climate tech solutions.
In a world where climate risk is increasingly inherent, the technologies that mitigate that risk will likely
flourish by necessity.

FUTURE OF CLIMATE TECH 3

Outlook Outlook Outlook Outlook
While climate tech was initially The IRA is having a measurable impact on Heavy industries account for about 25% There is a growing backlog of climate tech
sheltered from the VC correction, the climate tech unit economics. The effect is of global CO2 emissions3 — more than companies approaching an exit, with 97
market has moved from a period of felt across the clean energy landscape passenger vehicles and trucks combined. unicorns globally. But exit windows are
capital abundance to capital scarcity. from solar and storage markets to But unlike the auto industry, which is mostly closed, reflecting the overall
Lower VC investment, higher interest hydrogen. Investment in clean being transformed by electric vehicles market. Poor performance from recent
rates and low valuations all increase manufacturing is up 156% YoY in 2023.1 (EVs), heavy industry has remained SPACs and IPOs, high interest rates and
capital costs and make it harder for Tax credits have jump-started the mostly untouched by climate tech. That’s continuing uncertainty have hampered
companies to finance their operations. carbon capture market, prompting 427 beginning to change. Government public exits. On the M&A side, activity has
As a result, most companies must new carbon capture utilization and incentives are creating momentum to cut back significantly since 2022, but the
focus on plotting a path to storage (CCUS) project announcements tackle hard-to-mitigate carbon sources. seeds of opportunity have been sown.
profitability and efficiency to ensure in the last two years. The IRA has US VC activity for industrial materials Corporate appetite has been consistently
runway doesn’t come up short. Our improved the business case for many and recycling is up 3% from 2021, growing for climate tech. The largest
data shows continuing declines for the startups but it has also opened access to compared to overall VC activity, which corporations have the cash to scoop up the
VC-backed climate tech company direct funding. Increased US Department is down 24%. As incentives gain traction, growing number of companies in the
runway, and as a result, we expect an of Energy (DOE) loan program funding has we expect VC to grow in promising areas sector. Purchasing will likely be fueled by
investor-favorable funding environment created record demand for DOE project such as industrial heat, sustainable the accelerating adoption of emerging
in 2024. financing with a 2x increase in requested aviation fuels (SAFs), green cement and technologies and companies which will be
capital YoY.2 steel, and cleaner baseload power. available at attractive price points.

Notes: 1) According to Rhodium and MIT’s Clean Investment Monitor, which tracks manufacturing investment in technologies eligible for IRA incentives.
2) From $118B in requested project funds in March 2023 to $262B in March 2024. 3) For energy-related emissions tracked by the IEA as of 2022.
Source: Preqin, Rhodium Group, MIT CEEPR, DOE, PitchBook Data, Inc., Clean Tech Group, S&P Capital IQ, SVB proprietary data and SVB analysis. FUTURE OF CLIMATE TECH 4
As the impacts of climate change are increasingly visible, the
solutions are increasingly backed by advantageous policies.

FUTURE OF CLIMATE TECH 5

 1.5
1.3°C
global temperature
increase above
pre-industrial levels
in 2023
1.0
Temperature Anomaly (°C)

6.7x
increase in the number
0.5 of $1B disaster events
in the US since
the 1980s

0.0
66%
of Fortune Global 500
companies have
developed plans
to mitigate the risks
-0.5 of climate change
1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2010

2020
on their business

Notes: 1) Anomaly compared to average temperatures from 1960-1990.

Sources: NOAA, Climate Action Tracker, IEA and SVB analysis. FUTURE OF CLIMATE TECH 6
 Pledged Reductions by 2050 Gap to Reach Net Zero Sectors: Electricity/Heat Industry Transport Buildings

Emissions Reductions (GtCO 2 per year) Needed by 2050 Share of Net Zero Reductions Already Pledged
-1.7 -9.2 Coal 84%
-1.3 -1.8 Gas 57%
Organizers of the Paris Olympics have set a symbolic goal -0.1 Oil 79%
By tonnage, coal and
for the 2024 Summer Games: to go green while going for -1.1 -1.4 Cement 56%
natural gas are the
gold. A typical Olympics can release as much as 3.5M largest sources of -0.9 -1.5 Iron and Steel 63%
metric tons (mt) of CO2 into the atmosphere — equivalent carbon emissions not -0.5 -0.9 Chemicals 66%
fully addressed by Passenger Cars
to the annual output for a city the size of Austin. But this policy pledges
-0.8 -2.1 73%
As a share of each
year, by slashing construction and harnessing -0.9 -1.3 Heavy-Duty Trucks 58% sector’s emissions,
renewables, Olympic planners have promised to cut that -0.8 Aviation 44% aviation fuel,
9.5 Gt gap Shipping commercial buildings
carbon footprint in half. They’re not alone. Global pledges -0.3 -0.7 72%
between pledges and cement remain
to curtail greenhouse gas emissions are stacking up, with -0.6 -1.3 Residential Buildings 67% largely unaddressed by
and net zero
-0.5 Commercial Buildings 50% current policy pledges
current national plans expected to curtail 6.1 gigatons scenario
(Gts) of emissions by 2030. Commitments to renewables
would remove 84% of the global annual emissions from
burning coal, the heaviest source of man-made
emissions. But current pledges aren’t enough.

While climate policies have helped the US and Europe

turn the corner on emissions, the rest of the world, led by 20B 20B 20B
rampant growth in China and India, is still dangerously off +235% +41%
16B 16B 16B
course. Technology can’t create the will to change, but it 35%
In
Development
can help to bridge the gap. The International Energy 12B 12B 12B
Agency (IEA) estimates that most of the CO2 -17%
reductions by 2030 will come from existing 8B 8B 8B
In
technologies, but nearly half of the reductions in 2050 65%
Market
4B 4B 4B
will come from tech that is only being demonstrated
now. The biggest white space is in hard-to-abate 0B 0B 0B

1998
2001
2004
2007
2010
2013
2016
2019
2022
1998

2003

2008

2013

2018
1998

2002

2006

2010

2014

2018

2022
industries such as cement and steel production and 2023
Projection
aviation fuels. Pledges only cover half of the reductions
needed for these sectors by 2050.
Notes: 1) The announced pledges scenario includes all major national carbon mitigation announcements regardless of whether they have been
anchored in legislation or in nationally determined contributions; emissions in gigatons of CO2 2) Mitigation efforts needed to reach net zero CO2
emissions by 2050, according to the IEA World Energy Outlook.
Source: International Olympics Committee, Global Carbon Budget, IEA and SVB analysis.
FUTURE OF CLIMATE TECH 7
 GHG Emission Current Policies 1.5°C Path

Behavioral Changes: Eating less meat, reducing air

60
travel and recycling more are some of the individual
choices that could reduce 11% of unaddressed
GHG emissions by 2050.
Behavioral Changes
50
Energy Efficiency: Delivering the same services with
Energy Efficiency fewer resources could make a big difference in curbing
unaddressed emissions. Technology advancements
will help by developing more durable materials, lighter
40
products and higher-yielding manufacturing processes.
Shift to Renewables
Shift to Renewables: A near-total shift to renewable
energy sources for electricity and heat production is
30
required to meet net zero emissions targets. So far,
current policies fall far short of the mandates that will
Electrification be needed.

20 Electrification: The transition to electric vehicles

Other Fuel Shifts2
and building upgrades will drive the largest share
of electrification, though an overhaul of global electric
CCUS
grids is needed to enable this shift. Under an net zero
10 emissions scenario, annual investment in grids must
1.5°C Path
double to $750B by 2030 and keep growing.

CCUS: Technologies such as direct air capture (DAC)

0 and other nature-based carbon capture solutions hold
1990 2000 2010 2020 2030 2040 2050 great promise for carbon reductions, but these projects
must be massively scaled to make a difference.

Notes: 1) The 1.5 C path is consistent with the goal of reaching net zero CO2 emissions by 2050, the threshold needed to avoid catastrophic warming.
2) Other shifts include switching from coal and oil to other sources such as natural gas, nuclear, hydropower or marine energy.
Source: UN Emissions Gap Report, IEA and SVB analysis. FUTURE OF CLIMATE TECH 8
 Retail Energy and Industry Manufacturing
Total $240B
+73% $119B Manufacturing Energy and Industry Retail
$101B
The IRA was passed nearly two years ago, and the impact Total $139B
is already being seen and felt among climate tech $74B $72B
49% Solar Zero
70% Batteries 65%
companies. Investment in public and private energy Emissions
$54B $53B Vehicles
projects has jumped 73% from 2021 as incentives for $45B $51B $49B
renewable energy production spur the manufacture of 24% Storage
$35B Zero
technologies to produce clean energy. Solar installations $50B 18% Distributed
$19B 13% Emissions
$14B 15% Electricity
jumped 51% in 2023, driven by IRA tax credits and an $8B
11%
Vehicles Wind
$3B Solar 13% 16%
enhanced ability to trade tax equity. Retail investment 7% Other Other Heat Pumps
from households and businesses in heat pumps, electric 2019 2020 2021 2022 2023 Production Consumption of Manufactured Products
stove tops and electric vehicles has continued to steadily
rise since 2020.

The CHIPS and Science Act has also helped to spur

growth in clean energy by bolstering domestic production
of energy-efficient semiconductor production for EVs and Utilities Commercial Residential Loan Applications Capital Requested
other GHG-reducing technologies. Another essential
technology bolstered by the IRA is battery production. 35 203
IRA becomes law, 200
Batteries have received 70% of clean manufacturing 30 $300B
increasing DOE loan
investment in 2023. +51% capacity by 10x
25 150
Gigawatt (GW)

$200B
Climate-friendly policies aren’t just creating better 20 23.7
77 100
unit economics; they are also opening more paths for 15 17.8 13.9
direct funding of energy projects. An influx of funding 15.0 $100B
50

$262B
10

$81B
from the IRA expanded the DOE’s loan capacity from 9.3
6.9
~$40B to $400B. As a result, loan applications for clean 5 $0B 0
energy spiked last year. While the approval process can Jan Apr Jul Oct Jan Apr Jul Oct Jan
0
take time, there are over 200 active applicants that have 2018 2019 2020 2021 2022 2023 2022 2023 2024
requested a total of $263B in funding.
Notes: 1) US Investment in the manufacture and deployment of GHG emission-reducing technologies. “Retail” includes purchase and installation of GHG-
reducing technology by individual households and businesses. “Energy and Industry” includes the deployment of GHG-reducing technology to produce
clean energy and reduce industrial emissions. “Manufacturing” includes investment in the manufacture of GHG-reducing technology.
Source: Rhodium Group, MIT, DOE Loan Program Office and SVB analysis. FUTURE OF CLIMATE TECH 9
In an environment of increasing capital scarcity, climate tech
fares better than the overall innovation economy.

FUTURE OF CLIMATE TECH 10

 Climate Tech All Tech
Capital Closed
111 112 129%
Funds Closed 106
89 92
105 87
83 81
79
Climate tech VC fundraising has settled at a robust level, 68
72 72
similar to 2020, far outpacing overall US VC fundraising, 57 61%
51
which hit a six-year low. We are seeing relative 41 43 44
46 80%
41%
38 37 32%
fundraising resilience despite the headwinds caused
by anti-ESG narratives. Enthusiasm for sustainability 47%
0%
efforts have waned, as greenwashing coupled with a rise

$11B
$10B
$10B
$14B
$16B
$21B
$17B
$15B
$16B
$11B
$13B
$10B

$12B
$11B
$11B
20%

$9B
$4B
$5B
$4B

$8B
$3B
in skepticism over the merits of carbon credits undermine
0%
the confidence in companies’ sustainability claims. This Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -15%
effect is felt especially in the public markets where net
2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023
flows into ESG equity funds were negative for all of 2023.

Despite all this, significant funding dollars are continuing

to be raised. Chevron Ventures is doubling down on its
venture strategy as it launches a new $500M Future
Energy Fund. Future Energy Fund III is their largest Sustainable Equity Funds All US Equity Funds LPs with an Interest in Climate Tech
commitment yet to clean energy technologies — the LPs with No Disclosed Interest in Climate Tech
10% 2021 Net Flows
previous Future Energy Funds raised a combined $400M. +$69B
100%
8%
90%
Limited partners (LPs) also have sifted through the noise.
6% 80%
Over the last several years, LP interest in climate 70%
4% 2022 Net Flows
solutions has steadily increased. As of the first quarter +$3B 60%
of 2024, 86% of LPs in the innovation economy claim to 2% 50%
have an interest in the climate tech sector. This could 40%
0%
30%
likely be a significant factor in mitigating the funding
-2% 20%
downturn for climate tech. -$13B 10%
-4% 2023 Net Flows
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019 2020 2021 2022 2023 2024
2021 2022 2023

Notes: 1) For US funds with a stated interest in climate tech and related sectors; including generalist funds investing in climate tech. 2) Data from
Morningstar report: Global Sustainable Fund Flows: Q4 2023 in Review. Equity Funds include Mutual Funds and ETFs.
Source: Preqin, Morningstar Inc. and SVB analysis. FUTURE OF CLIMATE TECH 11
 Capital Invested by Series Total Deals Share of Capital Going to Deals Over $100M
$57B 14%
decline in climate
2,093
tech deal activity
2,228 compared to 24%
While the innovation economy is in the midst of the most 37% $42B
1,916
in overall US VC
significant contraction since the dot-com correction, 1,759
61%
climate tech has remained relatively resilient. Deal
activity in climate tech is down only 14% since 2021, with
1,569
1,639
$28B
31% 52%
$27B Seed-Series B deal
21%
many subsectors bucking the trend. Carbon tech, for $24B $22B activity’s share of
53% 23%
example, boomed in the last three years as the 45Q tax Series D+ 38% 25% capital invested, the
50% 34% highest since 2019
credit for CCUS rolled out and the SEC worked on Scope 32% 23%
Series C 14% 13% 47% 19% 23%
1 and 2 emissions reporting. But it isn’t all rosy. Some 23%
sectors like transportation and logistics or food and
Series B
Series A
22% 45% 28% 22%
15%
44% 26% 3%
24% 20% 14% 17% 16% of deals in 2023 were
agriculture have fallen out of favor after mega deals into Seed 6% 7% 7% 4% 6% 10% at least $100M
EV startups and alternative protein companies have not 2018 2019 2020 2021 2022 2023
resulted in lucrative exits for investors. Graduation rates
are better for climate tech too — 55% of climate tech
companies that raised in 2021 have raised again, vs. only Carbon
75%
45% of all VC-backed companies. Tech
70%
Climate Tech Climate and
Deal activity has remained robust, yet the capital 60% Earth Data
invested has dropped over 50%, driven by a decline in 47%
50%
deals over $100M. These mega deals comprise just 3%
of deal activity, but they make up a whopping 44% of all 40%
Industrial
Materials and
capital invested today (sliding from 61% in 2021). By 30% Recycling
Transportation
contrast, seed activity has increased to 56% of all deals and Logistics
20% Grid Intermittent Dispatchable Clean Fuels
done in 2023, up from 45% in 2021, signaling investors Infrastructure Renewable Energy Renewables 9%
are still placing bets on new climate tech companies. 10% Agriculture US VC Enabling Built and 3% 3%
and Food Market Technologies1 Environment Power
Anecdotally, bankers are seeing more convertible notes, 0%
which generally skew smaller than the priced rounds. This
-10%
is yet another reason capital invested has fallen more -9%
-20% -14% -13% -12%
steeply than deal activity.
-30% -25% -24% -20% -20%
-27%
Notes: 1) Enabling technologies are not explicitly climate tech, but play a key role in enabling climate tech, such as certain edge computing, which could
enable enhanced demand response.
FUTURE OF CLIMATE TECH 12
Source: SVB proprietary taxonomy, Clean Tech Group, PitchBook Data, Inc. and SVB analysis.
 Seed Series A Series B Series C+ Middle 50% of Deals Median

100% $18M $60M $250M $875M

Change since 2020
As investment has declined and many companies have $15M $50M $200M $700M
struggled to raise, deal dynamics have swung in investors’ $12M $40M
favor to the tune of lower valuations, higher liquidation $150M $525M
50% $9M $30M
preferences and smaller checks. Mirroring overall tech,
$100M $350M
later-stage companies have seen the most significant $6M $20M
valuation contraction. For example, the median Series $3M $10M $50M $175M
35%
C+ valuation has fallen 22% below 2021 levels while seed above 2020
0% $M $M $M $M
remains 21% above. There are a few reasons for this
2020 2021 2022 2023 2021 2022 2023 2021 2022 2023 2021 2022 2023 2021 2022 2023
trend. First, later-stage companies are easier to value
Seed Series A Series B Series C+
based on performance and growth. Second, they are
generally closer to an exit and easier to compare to
other recent exits.

While climate tech founders overall may be frustrated

with recent declining valuations, they are raising more Down/Flat Rounds Up Rounds Undisclosed Rounds
capital while at the same time taking less dilution Median Percent Acquired 2018 2023
Early Stage Late Stage
than they were five years ago. Increase in Median Deal Size 2018-2023 100% 100%
90% 90%

32%
Commentary on valuations in recent years needs to be 29% 80% 80%
70%
27%
qualified given the growing number of undisclosed 70%

27%

24%
valuations. The proportion of later-stage companies 60% 60%

21%

19%
19%
reporting valuations has been cut in half since 2018. The 50% 50%
40% 40%
uptick in undisclosed valuations coincides with fewer up
30% 30%
rounds, suggesting that down rounds may be hiding from
20% 20%
the public eye.
Seed Series A Series B Series C 10% 10%
0% 0%
$1M $3M $12M $16M

Source: SVB proprietary taxonomy, Clean Tech Group, PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 13
 I. Discovery II. Prototyping III. MVP IV. Full Product V. Scaling VI. Expansion
100%
A promising idea Working device is Minimum Partnerships. First FOAK project Tech is established.
becomes built. Proof of commercial meaningful revenue. financing to fund Risk is low.
80% product is built.
a viable plan. concept. new plants

Technology Risk
Office/Plant
Over the last five years, at least 74 high-value1 US climate University/Lab University/Lab Co-working/Lab Office/Plant
60%
FOAK Typically a Project Finance,
tech hardware companies have raised capital from Grants, Friends and Grants, Pitch Accelerator combination of
VC/PE Growth, Public Markets, PE
infrastructure funds. These companies are at an inflection 40% Family, Angels Competition, Grants, VC, Venture Grant, capital sources:
point in their journey down the capital cost curve from highly funding Angels, Seed, Debt Infrastructure including Debt,
Venture Debt Funds, Project Equity, Tax Equity
dilutive and expensive equity to off-balance sheet financing 20% Equity, Debt
of projects. This journey down the cost curve parallels
the declining risks through proven contracts and 0%
Project Funding from Primarily Equity Project Funding from Primarily Debt
deployments. Most importantly, it drives unit economics Year 1 Years 1-2 Years 1-3 Years 2-5 Years 4-7 Years 5-10+
that benefit customers. As these companies approach
High Marginal Cost of a Dollar Raised Low
scale, they will need to raise “first-of-a-kind” (FOAK)
bank project financing. At this stage, companies seek non- Low Amount of Capital Required High
dilutive long-term asset financing instead of equity. Many
climate tech companies need to build manufacturing
infrastructure to create their products, but many don’t want
to own the assets those plants produce, so the shift from
IPO
on-balance-sheet to off-balance-sheet is imperative to their Total Deal Value Number of Deals
Later-Stage VC
business models to scale. But getting to project finance is a Conv. Debt
$18B 180
long journey requiring significant capital and innovative 2014: The company has Series G3
financiers to fully understand the technology and risks. $16B 160 raised $932M in equity Series G2
Some climate tech solutions hit most standard project $14B 140 FOAK First-of-a-Kind Financing:
Series G Off-balance-sheet financing
finance characteristics, but require various credit $12B 120
2009: Unicorn via a special-purpose vehicle
enhancements for banks to support the finance. $10B 72% 100
Series E
Series F
(SPV), which raised debt and equity
to buy fuel cells from Bloom Energy
$8B Of these companies 80 Series D predicated entirely on the cash flows
With large VC rounds >$100M decreasing, this type of have raised capital from Series C
$6B 60 generated by the assets. After the FOAK,
financing may become more important — especially given an infrastructure fund Series B low-cost, off-balance-sheet financing
$4B 40 becomes core to project finance.
the underperformance of many recent climate tech de- Series A
SPACs, which perhaps isn't the best path for financing pre- $2B 20
2001 2005 2010 2015 2020
revenue climate tech hardware companies. $B
2019 2020 2021 2022 2023 Operated in Stealth Mode

Notes: 1) Companies that have raised at least $500M or are valued north of $1B. 2) Produced using data from PitchBook Data Inc. and press releases.
Source: SVB proprietary taxonomy, Clean Tech Group, PitchBook Data, Inc., New Energy Risk and SVB analysis. FUTURE OF CLIMATE TECH 14
Unpacking the typical burn, profitability and growth metrics
for climate tech companies.

FUTURE OF CLIMATE TECH 15

 Climate Tech Software Climate Tech Hardware Climate Tech Software Climate Tech Hardware
94% Enterprise Software Frontier Tech/ Deep Tech
87%

$50M
$46M
Real science takes time. Disrupting major markets takes
time. Many emerging technologies in climate are in deep 52% 75%

$30M
$29M
tech where meaningful scientific discovery has to occur 63%
to develop a minimum viable product. Given the longer

$18M
product and go-to-market cycles, many companies take 29%

$13M
years or even decades before achieving meaningful revenue.

$9M
$7M
34%

$7M
$5M
$0.8M
$0.6M
$0.4M
$0.2M
$0.0M
$0.0M
In fact, by Series C only 63% of climate tech companies with

$3M
$3M
$2M
11%

$2M
a hardware component have achieved meaningful (>$5M 4% 13%
annually) revenue. But this challenge is not entirely unique
to climate tech; life science and semiconductor companies Seed Series A Series B Series C Series D+ Seed Series A Series B Series C Series D+
often face similarly long development cycles.

The differences between climate tech hardware (or full-

stack solutions) and climate tech software companies are
visible in growth rates as well. Software companies Climate Tech Software Climate Tech Hardware Climate Tech Software Climate Tech Hardware
generally see higher growth rates earlier in their progression. 116% Indicates the median
5.7x company is burning $4.60 to
For example, the median Series B climate tech hardware 108% grow revenue by $1.00
company is growing at 87% YoY compared to climate tech
112% 4.6x
software companies that are growing at 108% YoY.
86% 3.7x
3.6x
3.4x
The costs are different, too. Climate tech hardware
companies are less efficient than climate tech software 87% 2.7x

at turning capital into new revenue. The typical Series C 62% 2.1x
hardware company spends $3.60 to grow revenue by $1 70% 1.6x
compared to a climate tech software company of 60%
the same stage that burns $2.70.

Series A Series B Series C Series D+ Series A Series B Series C Series D+

Notes: 1) A hardware company includes any company with a hardware component; thus it includes full-stack hardware/software companies.
Revenue at time of round for companies that have raised in the last five years.
Source: SVB proprietary data, SVB proprietary taxonomy, Clean Tech Group, PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 16
 Climate Tech Software Climate Tech Hardware

$0-$10M $10M-$25M $25M-$50M $50M+ Climate Tech Software Climate Tech Hardware
80% 74% 76%

-32% -29% 70% 61%

The high product development costs and longer go-to- -69% -64%
-109% -98% 60% 55% 54%
market cycles of climate tech hardware can not only 64% 65%
manifest in lower revenue at the early stage, but lower 50% 52% 57%
53%
profitability as well. At the median, climate tech hardware -288% 40%
companies with less than $10M in revenue have EBITDA While EBITDA for software companies COVID-19 burn Declining VC
is 2.6x better than hardware for early- 30% reduction investment
margins lower than software companies, but hardware stage companies, by the time induced burn
companies quickly achieve parity with software as companies achieve scale, the
20%
reduction
revenue grows. It takes scale to offset the fixed costs of discrepancy is negligible. 10%
building manufacturing capacity. While these economics 0%
can be daunting, the market opportunity for many -743% 2019 2020 2021 2022 2023
hardware companies is huge.

Today, both hardware and software companies are

increasingly focused on improving profitability as many
companies have reduced headcount and are concentrating Climate Tech Software Enterprise Software Climate Tech Software Climate Tech Hardware
on core product offerings. This has resulted in 76% of
climate tech software companies seeing improvements 45% $0-$10M $10M-$25M
26%
in EBITDA margin YoY and 65% of climate tech 40% 7% 3%
hardware companies also seeing gains. 35%
-13% -9%
30% -26%
But while margins are improving, fewer companies are $25M-$50M $50M+
25%
meeting the “Rule of 40,” which states that a software
company’s combined profit margin and revenue growth 20%
The Percentage of Companies Where Hardware catches up to software
rate should equal or exceed 40%. This decline has resulted 15%
Revenue Growth Rate + Profit Margin ≥ 40% -144% as companies mature due to:
from slowing revenue growth as sales cycles increase, 10% • reduced product development costs
churn rises and companies reduce burn, thus slowing as a percentage of overall burn
5% • better unit economics and
growth efforts. economies of scale are achieved
0%
2017 2018 2019 2020 2021 2022 2023 -245%

Notes: 1) A hardware company includes any company with a hardware component; thus it includes full-stack hardware/software companies.
2) Revenue at time of round for companies that have raised in the last five years.
Source: SVB proprietary data, SVB proprietary taxonomy, Clean Tech Group, PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 17
 Climate Tech Software Climate Tech Hardware $0-$10M $10M-$25M $25M+

100 $45M
$40M

Cash and Equivalents

80 $35M
Climate tech VC investment doubled between 2020
$30M
and 2021, and with more capital flowing in, climate 60
Indexed to 100
at market peak $25M
tech companies held more cash on their balance
sheets than ever before. This trend continued into 2022 $20M

when investment, while falling, remained historically

40
~20% $15M
high. With most companies having plenty of cash on of climate tech $10M
20
companies are software
their balance sheet, burn remained high through H1 $5M
2022. In H2, companies began reducing OpEx, but 0 $0M
these changes didn’t immediately show up in financial 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Q1 2024
2024
statements. Runway began to fall in 2022 and has
declined steadily since.

Currently, a majority of climate tech companies

have less than 12 months of runway with 60%
projected to be cash out in the next 12 months Median: $0-$10M $10M-$25M $25M+ Climate Tech All Tech
relative to 53% of all tech companies. Climate tech
17 65%
companies generally have shorter runway than overall
15 15
tech given many generally have higher CapEx for 14 14 14 60%
equipment costs and the added costs of developing 12 13 13
12 12 12 12 12 55%
physical technologies. While some companies are able 11 10
10
to rely on debt capital to finance their CapEx (e.g., 9 50%
many later-stage hardware-as-a-service (HaaS)
45%
companies), this is not the case for all.
40%

35%

30%
2019 2020 2021 2022 2023 Q12024
2024 2017 2018 2019 2020 2021 2022 2023 Q1 2024

Notes: 1) A hardware company includes any company with a hardware component; thus it includes full-stack hardware/software companies.
Source: SVB proprietary data, SVB proprietary taxonomy, Clean Tech Group, PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 18
Electrification and new generation sources, the
decarbonization of industry, and a rapidly growing
carbon capture market.

FUTURE OF CLIMATE TECH 19

 50%
50,000
41% 45,000
Wind and Solar
40,000
To reach our net zero goals, it’s clear that electrification of 30% 35,000
65%
our homes, cars and factories using zero carbon generation 30,000 of total

TWh
20% 15%
must occur. According to BloombergNEF data, based on 18% 25,000 of total
what is economically likely, electricity generation will jump 20,000
nearly 60% by 2050. Anticipated growth in wind and solar 15,000
should drive them to become the primary generation 10,000 All Other Generation
sources — making up 65% of all generation by 2050.
5,000
2015 2023 Base Case Country Net Zero
Pledges
A decade ago, the now infamous duck curve was introduced

2010

2015

2020

2025

2030

2035

2040

2045

2050
by CAISO, the entity responsible for overseeing about 80% 2050

of California’s electricity supply. Today, the duck curve is

deeper than ever as solar comprises over 60% of generation
capacity, meaning that during the day, over-supply is
increasingly common, but as solar goes offline in the
evening, other generation resources must ramp up quickly
to meet demand. The dynamics of this market have 30GW
2-Hour Battery
created opportunities for climate tech companies to 200GW
25GW
provide grid flexibility and load shifting. For example,
2014 4-Hour Battery
OhmConnect (just merged with Google Nest to form Renew 150GW
20GW
Home), Stem and Leap work on demand response, while
Antora Energy and Form Energy that offer storage allows for 15GW
better matching of demand and supply. But in addition to 100GW 6-Hour Battery
enhanced flexibility, there is a need for more clean 10GW
generation to supply baseload power, which can reduce the 50GW 8-Hour Battery
5GW
need for costly transmission build-outs and curtailment. As
2025 10-Hour Battery
we will see on the next page, there are many possible 12-Hour Pumped Hydro
0GW
solutions to provide clean baseload 0GW
0 2 4 6 8 10 12 14 16 18 20 22

2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
power generation. Hour of Day

Notes: 1) Forecast by Wood Mackenzie. 2) Forecast by BloombergNEF.

Source: Wood Mackenzie, BloombergNEF, California Independent System Operator (CAISO), National Renewable Energy Laboratory (NREL),
PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 20
 Nuclear fusion has fascinated physicists for decades but only recently (December 2022) did the
Lawrence Livermore National Lab achieve net energy gain (ignition) for a fusion reaction using an
inertial confinement reactor. Investors with long time horizons and large sums of capital see the
promise in the space, placing large bets on several companies taking diverse approaches to fusion
development. Notable companies include Commonwealth Fusion Systems, Helion, TAE
Technologies, Thea Energy, Xcimer Energy, Realta Fusion and Blue Laser Fusion — all of which have
plans to complete demonstrations by 2027.

$4.9B $190M
Advances in drilling technology have jump-started geothermal technology. The DOE’s
EarthShots Initiative aims to build on these advances and reduce enhanced geothermal
systems (EGS) costs by 90% by 2035. If achieved, this would bring the cost of EGS down to
just $45/MWh according to BloombergNEF, making it a viable component of baseload
supply. This is especially true given the high-capacity factors of EGS plants. Notable
companies include Fervo Energy, Brimstone Energy, Bedrock Energy and Dandelion Energy.

$1.9B $2.0B Smaller, modular form factors; novel coolants and fuels; and passive safety features
characterize innovation in the space. Light water reactors are most common, using water as a
coolant for nuclear fuel rods, with recent innovations enabling reactors less than 50
megawatts (MW) in size. Molten salt reactors (MSRs) use molten fluoride salts as the primary
coolant and do not produce dangerous pressurized radioactive fission gases, as the gasses
naturally absorb into the molten salt. High-temperature gas-cooled reactors (HTGRs) use
helium as a coolant, achieve very high fuel utilization rates and can reduce the amount of
spent fuel. Notable new fission companies include NuScale, TerraPower, Oklo and X-energy.
• Reduces oversupply and curtailment
of renewables
• Increases production of consistent While the current generation from marine power is small, only about 500 MW globally, the
power year-round, reducing the need potential is huge — nearly double the current global electricity demand according to the
for expensive long-duration storage International Renewable Energy Agency (IRENA). However, the technology readiness level,
• Reduces the amount of new high costs and difficult interconnection process to the grid make it uniquely challenging for
transmission needed compared to the
small companies to build projects. But as technologies scale, the price of wave and tidal
scenario of a grid built exclusively
power is expected to become cost-competitive with coal over time according to the EU
on renewables 1
Strategic Energy Technology Plan. That said, it is still early days for marine baseload
technologies.

Notes: 1) According to analysis by CAISO.

Source: CAISO, Clean Tech Group and SVB analysis. FUTURE OF CLIMATE TECH 21
 Electricity Oil Gas Energy Process Fossil Fuels
Coal/Biomass Geothermal Electricity Renewables

19% Total Emissions Energy Source Breakdown

26% 23%
The production of chemicals, metals and cement accounts 35%
30%
41% 13%
for about 24% of global emissions, yet progress to reduce 15% 0.3 10% 6%
16% 28% 10%
these emissions has been slow. While sectors such as 17% 16% 12%
power and transportation have taken great strides in recent 18% 18%
17% 19% 9%
years, the complexity involved in industrial manufacturing 20% 1.5

GtCO2
20% 19% 0.2
makes these emissions among the hardest and most 51% 2.3 84%
36% 42% 78%
expensive to eliminate. In a recent poll, 95% of heavy 19% 23%
30% 63%
industry executives said they believe it will take more than 1.2
0.8
20 years for net-zero products to approach price parity with 2010 2022 2030 2035 2040 2050
high-carbon alternatives.1 Speeding up that timeline could Net Zero Emissions Path by 2050 Steel Cement Chemicals Steel Cement Chemicals
depend on innovating new materials and new processes.

A net zero scenario calls for more than half of industrial

energy to come from electricity by 2050, up from 23% in
2022. This will require industries to transition away from Cement Chemicals Steel Extrapolated Estimate
fossil fuels. Steel, for example, produces 2.75 lbs of CO2 per 12 Accessible
by industrial $1.2B
1 lb of steel produced, with the majority coming from energy
10 heat pumps
use in heat production. Cement is trickier because not only $1.0B
Quadrillion BTUs Heat storage
do emissions come from energy consumption, but also the 8 Concentrated up to 1300°C $0.8B 51% of investment
chemical reactions involved. Startups are thus taking a two- solar power has gone to green
6 800-1000°C $0.6B cement in 2024.
pronged approach to creating green cement: either by
reducing the heat required in the process or by reducing the 4 Heat storage $0.4B
emissions released from the base materials being heated. Heat pumps over 1400°C
2 up to 215°C $0.2B
While chemicals have garnered the most VC investment
among segments in industrial climate tech, green cement is 0 $0.0B
carrying momentum in 2024 with 51% of industrial VC YTD. 0 200 400 600 800 1000 1200 1400 2019 2020 2021 2022 2023 2024
Temperature (°C) YTD

Notes: 1) Deloitte surveyed 1,000 executives in April and May of 2023. 2) Based on energy consumption and emissions levels in 2019.
Source: IEA, National Renewable Energy Laboratory (NREL), PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 22
 Operational Under Construction Planned Removal Avoidance Carbon Pricing Benchmark

1,400 Direct Air Capture and Storage 585.0

1,200
EU ETS 96.3
In theory, it’s a great idea: offset carbon emissions in one High-quality removal
1,000 18x credits are a small

Mt CO2/year
place by preventing or capturing emissions somewhere else. increase in CCUS Forestry and Land Use 11.2 share of the supply
800 capacity planned
That’s the premise that carbon credits were built upon more
by 2050 Waste Disposal 9.0
than two decades ago, fostering a multi-billion-dollar 600 Cap-and-trade price
industry today. In practice, it’s proven complicated to 400 of carbon paid by
Household Devices 7.3 emitters in the EU
implement. Concerns have mounted around the accuracy 200
and efficacy of avoidance credits, which can be hard or even Agriculture 6.4
0 Lower-quality avoidance
impossible to verify. This understanding has spurred a flight credits that make up the

2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Chemical Processing 4.7
toward high-quality carbon credits in DAC and carbon majority of supply
sequestration, creating demand for new projects. This trend,
coupled with government policies such as the 45Q tax credit
in the US, has put the industry at an inflection point.

The number of announced CCUS projects jumped 4x in 2021

and has stayed at that pace for the last two years. Planned
projects would add 1.1Gt of carbon removal capacity per Company VC Raised Description
End Use of Carbon
222
year by 2030, just shy of what’s needed under the net 207 205 Extracts CO 2 from air and
zero emissions pathway. Most of the capacity is going $384M
stores it underground
toward storage projects, but VC-backed tech companies are Uses microorganisms to turn
Dedicated $366M
leading the way with novel uses for carbon. Charm Industrial, 73% Storage GHG into products
for example, uses carbon to produce hydrogen, while Twelve Transforms CO2 into
$205M
converts it into electrochemicals that can be used in electrochemicals
50
consumer goods like running shoes in place of 36 Converts biomass into green
24 $123M
petrochemicals. Scaling more use cases for carbon could 7 10% Utilization hydrogen
improve the economics and further accelerate development 17% Unspecified Transfers carbon from DAC into
$58M
in CCUS projects, extending a longer plank over the 2017 2018 2019 2020 2021 2022 2023 concrete
emissions gap.

Notes: 1) The net zero emissions path is based on the IEA’s 2023 World Energy Outlook forecast of carbon capture’s role in reaching emissions
targets by 2050. 2) The prices for voluntary avoidance credits are annual averages, while the price of removal credits is based on an estimated range.
Source: World Bank, Ecosystem Marketplace, IEA, PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 23
A backlog of companies approach an exit, but there are
learnings to be had from recent exits.

FUTURE OF CLIMATE TECH 24

 Active Exited Bankrupt Median Years from Founding to Unicorn Status
Median Years Since Unicorn Status
120
100 The journey to become a unicorn takes a year
80
97 longer for climate tech companies
Climate tech companies don’t get a free pass because Active Unicorns
60
they’re trying to save the world. Compared to a typical
40 Climate Tech 7.7 2.1
tech company, the path from startup to exit can be more
20
difficult for climate tech founders who are generally
further from profitability given the capital-intensive nature 0 31
-20 Exits
of their innovations. The space is still relatively new, so Tech 6.4 2.8
there are few examples of successful exits to draw from, -40 10
Failures
though a new generation of climate tech unicorns is -60
hoping to change that. Enthusiastic investment during 2017 2018 2019 2020 2021 2022 2023 2024 0 2 4 6 8 10

the VC boom nearly tripled the number of global Years Since Founding

climate tech unicorns, bringing the current number to

97 active unicorns. This growing backlog of climate tech
companies is poised to exit on the public markets, as
nearly half of all unicorns are at least 10 years old,
often garnering increased pressure from early investors
for liquidity. 40%
2020 Exits $8B

One barrier for these late-stage companies is the 20% $7.2B

generally poor stock price performance of others who 0% $6B

2021 Exits
have gone public before them. The median share price for $5.3B
companies that exited in 2020 and 2021 is down more -20%
$4.5B $4.2B
than 80% from their first-day closing price. With this $4B
-40%
lackluster performance, the 97 still-private climate tech 2022 Exits
$2.8B
unicorns may be eyeing public markets with -60%
$2B
apprehension. They are likely also considering options to -80%
stay private longer using other forms of financing such as
project finance, infrastructure funds or private equity. -100% $0B
30 Days 90 Days 1 Year 2 Years
2019 2020 2021 2022 2023 2024

Notes: 1) Change is price from close price of listing. 2) Commonwealth Fusion Systems is not included in the chart, but is likely a unicorn. The
company has raised $2B in venture capital but has not disclosed a valuation. Other unicorns not shown due to scale of chart: CGN Wind Energy,
GAC Aion, Huadian New Energy Group and Northvolt.
Source: S&P Capital IQ, PitchBook Data, Inc. and SVB analysis. FUTURE OF CLIMATE TECH 25
 Number of Deals Median Deal Size
Business Product &
Services (B2B) 34%
55 54
Consumer Product &
19%
40 Services (B2C)
Off the highs of 2021 and 2022, M&A deal activity in $130M 35
2023 left something to be desired. However, a buyer- Energy 14%

friendly environment is being cultivated for M&A in 2024.

$37M Information Technology 14%
Looking at CVC activity as an exemplification of corporate $66M
appetite for climate tech, the top CVCs have been $17M Financial Services 9%
significantly increasing their exposure to the sector over the
last four years. Google Ventures, for example, invested in 2020 2021 2022 2023 Materials & Resources 7%

14 climate tech companies in 2022-23, up from three 25% 29% 20% 23% Healthcare 4%
companies in 2018-19. Other corporates are gearing up for Percentage of M&A Deals Disclosing Size
future investment into climate tech. Toyota Ventures
recently announced two funds totaling $300M for frontier
technology and climate solutions.

Corporates may be salivating at the opportunities on the

horizon. Today,1 in 3 climate tech companies will be cash Climate Tech All Tech
out in the next six months — up from 1 in 5 in 2021.
11% 30%
Founders and investors may seek acquisitions if they are
unable to access public capital markets or raise sufficient 25% 25%
8%
equity at acceptable valuations. Factors that may affect 21% 28%
M&A activity include whether corporates are 6%
enthusiastic about the accelerating adoption of
4% 20% 20%
emerging technologies and whether companies are 18%
available at attractive price points. Among Dow Jones, 2% 1 in 3
S&P 500 and Nasdaq companies, total cash and cash climate tech companies will
equivalents stand at $4.2T today. With deep corporate be cash out within 6 months
pockets, a growing interest in climate tech exposure and
technology adoption rates increasing, M&A activity is 2019 2020 2021 2022 2023 Q1 2021 Q1 2022 Q1 2023 Q1 2024
primed to increase.

Note: 1) Top CVCs as measured by deal count over the last 24 months.
Source: PitchBook Data, Inc., SVB proprietary taxonomy, SVB proprietary data and SVB analysis. FUTURE OF CLIMATE TECH 26
 Dan Baldi Jordan Kanis Bret Turner
National Head Managing Director Head
Climate Tech and Sustainability Climate Tech and Sustainability Project Finance
[email protected] [email protected] [email protected]

Dan is the head of the national Climate Tech and Jordan is a managing director of the Climate Tech and As co-lead of the Project Finance practice, Bret and his team craft
Sustainability practice. He and his team manage hundreds Sustainability practice. He provides insights, advice, flexible banking solutions that allow entrepreneurs to advance
of client relationships in low carbon energy, food, banking and financing solutions to innovative companies from the demo stage all the way through to their first commercial
agriculture and transportation technologies. He is that develop and deploy technologies to mitigate climate success and beyond. He finds it particularly rewarding when his
experienced in many aspects of early stage, growth, change. Jordan has dedicated his career to helping early- work helps his clients deploy new energy and infrastructure assets
middle market, corporate and project financing. stage and established private and public companies with and build new business models that disrupt the status quo.
their financial needs.

Danny Donovan
Vice President
Climate Tech and Sustainability
[email protected]
Eli Oftedal Josh Pherigo Timot Lamarre
Senior Researcher Senior Researcher Researcher
Market Insights Market Insights Market Insights Danny covers the New England market for SVB’s Climate Tech and
[email protected] [email protected] [email protected] Sustainability practice, working with dozens of clients from seed
stage and beyond. He helps facilitate clients’ success through
SVB’s comprehensive suite of commercial banking offerings,
creative lending solutions and broader market connections.

FUTURE OF CLIMATE TECH 27

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SVB's Climate Technology & Sustainability practice partners with innovators SVB’s Project Finance practice delivers flexible banking solutions and expertise to
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