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Beware the climate crossover investors

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May 16, 2022

Illustration: Brendan Lynch/Axios

We don't need to tell you that venture capital investment in climate tech is bananas.

  • Such deals soared nearly 50% from 2020-2021, Silicon Valley Bank found in a recent report.
  • That investment last year was roughly eight times the industry's previous peak, in 2008 — aka the top of Cleantech 1.0.

Yes, and: That, combined with the broader tech correction, has got investors talking about a peak.

  • "You’ve seen the Tiger Globals — and SoftBank was already doing it — coming much earlier and downmarket to get into these companies," Silicon Valley Bank market manager Matt Trotter tells Axios.
  • "With what the market is doing and those crossover investors, it does seem that we did hit the top of the market, and there’s a correction happening now as far as valuations and dollars going into venture," Trotter continues.

What we'll be watching: Whether hedge funds and mutual funds start to pull back on follow-on commitments to their climate tech portfolio companies.

  • In short: Look out, founders.

Then again: Even with a correction, climate tech — tied as it is to addressing the climate crisis — may bring a different kind of momentum.

  • "I think there is a looming downturn, of course," Claire Broido Johnson, president and founder of CBJ Energy, tells Axios.
  • "But I think this is a bit different; big funds are finally realizing that climate change exists and there is regulatory forcing that didn't exist before.  Fundamentally, I'm thrilled that big investors are paying attention."
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