September 08, 2023
It's Friday! We made it.
1 big thing: Growth rounds roar to life
Pent up demand for growth funding, blistering summer heat, continued momentum of the Inflation Reduction Act funds and a post-Labor Day news cycle all contributed to a bonkers week of climate tech deals, Katie reports.
Why it matters: Climate tech deals seem to be picking up pace, amid the much-lamented lack of growth equity, and investors say they're getting ready for a busy fall and winter season.
Yes, but: The deals announced could have closed months earlier — the rollout saved for back-to-school week. So caution is required in terms of reading too heavily into the packed week that was, yet the positive signs are hard to miss.
Catch up quick: This week saw the announcement of multiple equity growth deals, each worth hundreds of millions of dollars, across green steel, batteries, and other climate tech.
- Swedish green steel maker H2 Green Steel raised $1.6 billion.
- Battery materials and recycling startup Ascend Elements raised $542 million.
- Boston-based green steel tech developer Boston Metal raised $262 million.
- Composting-tech company Mill is raising $70 million of a $100 million round.
Meanwhile: There was news of dozens of seed and Series A rounds for digital energy, commercial solar, virtual power plants, sustainable packaging, low-carbon fuels, direct air capture, carbon software and more.
Big picture: The first half of 2023 saw a significant decline in announced climate tech funding deals, largely due to a plunge in growth equity.
- But some investors are predicting a return of growth equity coming soon.
- One reason some investors see a recovery is the continuing effect of the climate bill. Growth equity for electric vehicles and battery companies in particular seems to be a bright spot, partly due to "the IRA cannon" pointed at that sector, as one investor put it.
- Because growth capital was so constrained in the first half of the year, there could be both pent-up demand and backup happening in supply. Allocated funds have to start moving at some point, said another investor.
- At the same time, investors are seeing more attractive deals in growth climate tech companies that have reset their valuations after the market correction.
Be smart: The changing climate has been front and center this summer with record heat, floods and cyclones in strange places. Don't underestimate a powerful narrative keeping the need for climate tech solutions top of mind.
What's next: We'll be watching to see how third-quarter numbers look and if the pace in growth equity climate tech deals remains high in the coming weeks.