A key factor in the slowdown was a sharp drop in funding from mega-rounds ($100M+ deals), which dropped 47% year-over-year (YoY) in 2024. This coincided with high-profile bankruptcies of established climate tech startups like battery manufacturer Northvolt.

However, this turbulence wasn’t limited to the private markets — public players like Lilium and Arrival also filed for insolvency/bankruptcy over the period, highlighting the commercialization challenges facing capital-intensive industries like climate tech.

Download the full report to access comprehensive data and charts on the evolving state of climate tech across sectors, geographies, and more.

Key takeaways from the report include:

• Climate tech investment activity continues to contract. Global climate tech funding fell for the second year straight in 2024, dropping by 40% YoY, with mega-round funding falling by 47%. However, the space still saw notable mega-rounds. This included deals to players modernizing the power grid, drawing participation from tech giants racing to secure clean energy for computing infrastructure.
• Grid tech and nuclear are gaining momentum to meet AI’s energy needs. Within climate tech, markets targeting the grid and power generation show the strongest growth potential, according to CB Insights Mosaic startup health scores. This momentum is driven in part by the massive energy demands (and expected continued demand) of AI data centers.
• Electric vehicle technology sees record pullback in deals. After years of steady growth, electric vehicle (EV) tech deal activity plunged 61% YoY in 2024 — its steepest decline on record. This points to broader challenges in the sector, like lower consumer demand for EVs and increased capital costs for scaling manufacturing operations.
• Climate tech M&A exits decline once again. Climate tech M&A exits dropped by 25% YoY to hit 284, the lowest count since 2020. At the quarterly level, M&A exits steadily declined over the course of 2024, falling from 104 in Q1’24 to 39 in Q4’24. Growing skepticism around environmental, social, and governance (ESG) initiatives could be a contributing factor.

We dive into the trends below.

Climate tech investment activity continues to contract

Global climate tech funding dropped for a second consecutive year in 2024. It fell by 40% YoY, with mega-round funding falling by 47% over the same period.

The funding slowdown played out differently across the globe. US climate tech showed resilience YoY with relatively steady funding despite fewer deals. Meanwhile, other countries saw steep declines in climate tech dollars, with China experiencing the sharpest drop (-66% YoY).

Amid the overall funding decline, climate tech still saw several notable mega-rounds. This included deals in Q4’24 for companies modernizing the power grid:

• Crusoe secured $600M at a $2.8B valuation to support its efforts to use waste natural gas to power large-scale data centers
• X-energy received $500M as it works to build small modular reactors (SMRs) capable of generating more than 5 gigawatts of electricity by 2039
• Form Energy secured $405M to accelerate production of its iron-air batteries capable of 100-hour energy storage

Notably, some of these deals drew participation from big tech companies racing to secure clean energy for computing infrastructure. For example, Amazon (via the Climate Pledge Fund) invested in X-energy’s nuclear development, and Nvidia invested in Crusoe’s sustainable computing infrastructure, reflecting big tech’s interest in solutions that can help meet rising AI data center demands.

Grid tech and nuclear are gaining momentum to meet AI’s energy needs

Comparing median CB Insights Mosaic scores (a measure of private tech company health and growth potential on a 0–1,000 scale) for climate tech companies that raised equity funding in 2024 reveals the most promising markets in climate tech.

Grid tech and nuclear markets — covering technologies directly integrated into and operated by utilities to enhance power system reliability, flexibility, and clean energy integration — dominate the top 10 climate tech markets by median Mosaic score, highlighting their growth potential.

Surging energy demand from AI data centers is in part responsible for these markets’ momentum. For example, nuclear fusion and small modular reactors could provide continuous clean power generation, grid storage enables reliable renewable energy delivery, and virtual power plants help optimize massive power loads.

See 100+ high-potential climate tech companies

Electric vehicle technology sees record pullback in deals

Electric vehicle tech deals experienced their steepest decline on record in 2024, with deal count plunging 61% YoY to 243.

High-profile bankruptcies underscored the sector’s capital-intensive manufacturing challenges in 2024. Battery manufacturer Northvolt filed for bankruptcy a year after raising $1.2B, as it struggled to scale production efficiently. Electric van maker Arrival — which went public in 2021 at a $13B valuation — also filed for bankruptcy last year amid mounting production costs and the inability to raise funding.

Even the auto industry’s most prominent EV champions scaled back their electric ambitions throughout the year:

• GM delayed its Orion Assembly EV truck plant by 6 months and cut 2024 EV targets by 17%
• Toyota postponed US EV production to 2026
• Ford canceled plans to produce an all-electric three-row SUV, pivoting to a hybrid approach instead
• Volvo dropped its 2030 all-electric goal

Climate tech M&A exits decline once again

In 2024, climate tech M&A exits fell by 25% YoY to hit 284 — the lowest count since 2020.

At the quarterly level, M&A exits steadily declined over the course of 2024, falling from 104 in Q1’24 to 39 in Q4’24.

The decline in M&A activity coincided with key changes in market conditions, including the rise of economic headwinds, political uncertainty, and growing skepticism around environmental, social, and governance (ESG) initiatives.

For example, ESG tech markets collectively saw equity funding decline 54% YoY in 2024. On the corporate side, mentions of ESG in earnings calls have trended down since peaking in Q1’22.

As skepticism toward ESG initiatives grows, some companies appear to be placing lower priority on climate tech acquisitions that were previously considered strategic imperatives.

See recently funded climate tech companies with high M&A probabilities

MORE CLIMATE TECH RESEARCH FROM CB INSIGHTS

• Data centers are reshaping nuclear development, driving billions in new power infrastructure investment
• Why fleet management leaders are racing to acquire next-gen telematics capabilities — and which M&A targets could be next
• The AI data center value chain: 12 high-momentum technologies powering the future of AI
• The top 25 utility companies by AI readiness
• Big Tech in Energy: How Amazon, Google, Microsoft, & Nvidia are advancing the global energy transition
• Sodium-ion batteries are poised for a breakout moment — energy players should prepare

For information on reprint rights or other inquiries, please contact reprints@cbinsights.com.

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While AI copilots — which work alongside humans to speed up their workflows — currently comprise 90% of company activity, the tech will serve as a stepping stone to more autonomous solutions in the coming years. Eventually, AI agents could manage entire industrial processes, shifting human roles from operational tasks to strategic oversight.

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By 2029, SDVs could account for as much as 90% of auto production, up from just 3% in 2021, per Morgan Stanley. However, the transition comes with steep challenges, such as the technical complexity involved and the need for strong cybersecurity measures to protect connected vehicles.

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Despite the declines, global regions like the US and Europe have made gains in median deal sizes this year, and both the US and EU continue to provide government grants and loans to climate tech solutions. China, on the other hand, has rolled back some of its clean energy subsidies, and VC enthusiasm has waned in the country this year.

Globally, governments are focusing more on early-stage technologies that are ready for commercialization. Two prime examples in the US are nuclear fusion energy and direct air capture of CO2, both of which have received substantial funding from the US Department of Energy this year.

Download the full report to access comprehensive data and charts on the evolving state of climate tech across sectors, geographies, and more.

Below, we cover key shifts in Q3’24.

• Climate tech funding falls to $4.8B in Q3’24, marking the lowest point since Q2’20. Venture capital has shifted away from the sector as high interest rates impact climate tech’s capital-intensive projects and as investors pivot toward AI, which tends to feature more rapid developments and shorter commercialization timelines.

• M&A activity drops dramatically in Q3’24, with only 43 deals completed — a more than 50% decline from the previous quarter. While notable exits like Kyte Powertech ($277M valuation) and SRE Power ($72M) suggest a steady appetite for grid infrastructure solutions, the overall slowdown signals a more selective M&A environment, potentially limiting exit opportunities for highly valued climate tech companies.

• US and European deal sizes show resilience despite the slowdown in global funding. In the US, the median deal size has reached $6M in 2024 YTD (up from $4.3M in 2023), while Europe’s median deal size has grown to $4.9M (up from $3.7M in 2023), indicating sustained investor confidence in these markets.

• Despite declines in overall climate tech funding, companies commercializing solutions in carbon capture, utilization, and storage (CCUS) continue to secure significant capital, as demonstrated by Twelve‘s $200M Series C round in September. Twelve is using the funding to finish building its Washington state facility, where it will produce sustainable aviation fuel (SAF) that it claims can deliver up to 90% emissions reduction compared to conventional jet fuel.

Source: CB Insights — Twelve Funding Insights

• Electric vehicle technology funding reaches a critical low of $0.6B in Q3’24, marking its lowest point since early 2020. However, the sector still attracted notable deals, including 24M Technologies‘ $87M Series H round at a $1.3B valuation, pointing to selective investor appetite for more mature EV tech companies.

More energy resources from CB insights:

• 5 climate tech markets gaining momentum in 2024
• The grid tech market map: The companies tackling the growing need for reliable electricity
• The energy impact of generative AI: 3 technologies transforming the future of data centers
• Analyzing 15 oil & gas leaders’ tech priorities: Here’s where incumbents are buying, investing, and partnering
• Sodium-ion batteries are poised for a breakout moment — energy players should prepare
• Why energy giants should have green ammonia on their radar

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From predictive maintenance and grid optimization to smart metering and customer service chatbots, AI solutions are already helping utility companies enhance operational efficiency, improve reliability, and deliver better customer experiences.

To determine which utility companies are most prepared for the shift, CB Insights has launched the Utility AI Readiness Index.

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However, semiconductor manufacturing is immensely complex, extending across a vast value chain from the production of ultra-high-purity raw materials to chip design, assembly, and testing.

This complexity, coupled with geopolitical tensions, has made semiconductor manufacturing a focal point for national security and economic policy. Governments and industry leaders are racing to build more resilient supply chains to support critical technologies like high-performance computing and defense systems.

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These tech leaders are collaborating with energy incumbents and startups alike to tap into renewable energy sources and decarbonize their operations.

While these big tech players are competing in the energy space, they are also developing unique strategies:

• Amazon is working to decarbonize its transportation and fulfillment center operations, with a focus on hydrogen tech.
• Google is pioneering new models for clean energy procurement as it works to boost the sustainability of its data center network.
• Microsoft is focusing on renewable energy sources — like solar and fusion — and carbon capture technologies to meet the growing energy demands of its AI-driven operations.
• Nvidia is enhancing data center energy efficiency and investing in the development of a green and reliable power grid.

This report uses CB Insights datasets like investments, acquisitions, business relationships, company scouting reports, earnings transcripts, and more. Learn more about our data here.

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It’s estimated that robots and other smart machinery will make up as much as one-third of US military presence in the next 15 years, according to Mark Milley, a retired US Army General and former chairman of the Joint Chiefs of Staff.

Unmanned systems already dominate in some areas — like aerial drones — while significant development is underway in bringing autonomous tech to the ground, ocean surface, and underwater domains.

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Amid the funding decline, investors are favoring smaller mid- and late-stage deals. However, they are still willing to place early-stage bets where they see strong opportunities.

Based on our deep dive in the full report, here is the TL;DR on the state of climate tech:

• • Global climate tech funding declines by 20% QoQ to $4.9B in Q2’24 — the lowest quarterly total since Q2’20. While deal count rebounded QoQ to 397 in Q2, it still came in well below 2023’s quarterly totals.

• • Climate tech doesn’t see any unicorn births (private companies reaching $1B+ valuations) in Q2’24, marking climate tech’s second straight quarter without any new unicorns. This coincides with a decline in late-stage deal sizes — the median deal size at that stage is $38M in 2024 YTD, down 16% vs. full-year 2023.

• • Late-stage deal sizes decline, while early-stage sizes show strength. The median late-stage deal size is $38M in 2024 YTD — down 16% from full-year 2023. In contrast, median early-stage size is up 39% YTD, suggesting that investors are still willing to place bets where they see strong early-stage opportunities. Two of the largest early-stage deals in Q2’24 went to Cylib and Aether Fuels. Both companies intend to use the funding to scale and support commercialization initiatives — goals that are generally communicated by later-stage companies.

• • $100M+ mega-rounds continue to trend down in Q2’24. Climate tech mega-rounds dropped from 17 in Q1’24 to 9 in Q2’24. The majority of Q2’24’s mega-round recipients are focused on scaling operations and achieving full-scale commercialization. For example, one of the quarter’s largest deals ($375M Series G) went to battery materials developer Sila, which plans to use the funding to ramp up silicon anode production.

Source: CB Insights — Sila Funding Insights

• Climate tech funding drops yet again in Asia. Climate tech startups in the region raised a total of $0.4B in Q2’24, down 33% QoQ and 89% YoY. China suffered the sharpest funding decline (-90% QoQ) among highlighted countries in the region. India and Japan watched funding fall by 28% and 57% QoQ, respectively.

More energy resources from CB insights

• 5 climate tech markets gaining momentum in 2024
• The grid tech market map: The companies tackling the growing need for reliable electricity
• The energy impact of generative AI: 3 technologies transforming the future of data centers
• Analyzing 15 oil & gas leaders’ tech priorities: Here’s where incumbents are buying, investing, and partnering
• Sodium-ion batteries are poised for a breakout moment — energy players should prepare
• Why energy giants should have green ammonia on their radar

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Enter sodium-ion batteries.

They’re cheap to build, temperature-resilient, and could soon shake up the global energy storage market — which is projected to grow to $77B within the next 10 years.

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Major players like BP and Shell are aiming to become net-zero emissions energy businesses by 2050, with Shell targeting a 50% emissions reduction by 2030 compared to 2016 levels.

These ambitious goals are driven in part by shifting regulatory frameworks. The EU, for instance, plans to require oil & gas companies to buy carbon credits to compensate for offshore activities, while in the US, the Inflation Reduction Act has incentivized sustainable aviation fuel (SAF) production.

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While Nvidia initially developed its graphics processing units (GPUs) for gaming, these chips turned out to be ideal for powering AI tasks. Now, the company is focusing its efforts on providing the computing hardware — notably its A100 and H100 GPUs — and the software infrastructure required for developing generative AI applications.

Amid the generative AI rush, Nvidia has grown rapidly. In fact, it recently surpassed Microsoft and Apple to become the world’s most valuable company. To bolster its leadership position and keep ahead of AI computing competitors like AMD and Intel, Nvidia has forged relationships with companies across the AI landscape.

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Threats to grid stability are escalating due to more extreme weather events and sophisticated cyber attacks. Increasing electricity demand due to data centers and electric vehicles exacerbates these challenges, while the global push toward sustainable — yet intermittent — power sources like solar and wind adds further complexities.

There is an urgent need for more power generation diversity and delivery system reliability, as exemplified by incidents like the 2021 Texas freeze and the 2022 California heatwave.

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Funding to the space set a new record in 2023 — bucking the broader decrease in venture funding for the second year in a row.  

While still a nascent technology, startups are pursuing a broad range of potential use cases for quantum computing (which process information in a fundamentally different way to typical computers) across numerous industries — from training AI models more efficiently to simulating otherwise hard-to-model chemical reactions to quickly solving complex logistics problems, among many others.

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The company maintains a robust internal combustion portfolio, but it has aggressively invested across the entire vehicle electrification ecosystem. Despite scaling back its EV production goals to account for fluctuating consumer demand, GM remains committed to electric vehicles and plans to have the capacity to produce 1M EVs by 2025.

Meanwhile, GM has also pulled back from fully autonomous driving by reducing spending on Cruise — its autonomous vehicle (AV) subsidiary — and moved investments away from AV companies. However, the company has retained its focus on its advanced driver assistance system (ADAS), Super Cruise.

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However, as deal sizes have gotten smaller, the space has seen a corresponding shift toward early-stage dealmaking. In 2023, 69% of climate tech deals went to early-stage companies — an increase of 14 percentage points vs. 2022.

Using CB Insights data, we break down the climate tech landscape and the markets and startups seeing the most traction.

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New possibilities have emerged thanks to the proliferation of satellite launches — with SpaceX alone conducting a record 98 launches during 2023 — combined with the affordability of drones and advancements in imaging technologies.

This progress opens opportunities for startups and incumbents, helping expand geospatial use cases and capabilities across industries like agriculture, automotive, construction, defense & national security, insurance, manufacturing, mining, oil & gas, and more.

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Despite equity funding to the space dropping 39% YoY to $41B in 2023, deal counts actually ticked up 4% to over 2,700. This was driven by an increase in early-stage deals, which represented 69% of all deals in 2023 — up from 55% in 2022.

To see where climate tech is heading in 2024, we looked at the tech markets with the most early-stage investment activity in 2023:

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As industrial businesses look to improve their sustainability profiles and operational efficiency, they’re adopting a range of solutions from climate tech vendors. This has been accompanied by a surge in VC activity: In 2022, venture capital funding to climate tech reached a record high of over $70B.

These technologies range from carbon capture and storage — which helps industrial firms reduce and sequester their emissions — to more sustainable materials and fuels for specific industries like construction and aviation. They also include platforms to manage energy use, recycling, and more across industrial sites.

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This financial upswing is prompting oil and gas producers to seek tech solutions from startups to enhance operational efficiency. Oilfield asset management solutions, for instance, can make the oilfield more productive and profitable.

O&G producers are also focused on the pressing issue of sustainability. Technologies like flaring reduction and carbon capture are helping them reduce and capture stray emissions, as well as turn emissions into new revenue streams.

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It has backed 25+ tech startups via its venture arm, Caterpillar Ventures, since 2015. Additionally, its internal innovation team actively employs new technologies, such as autonomous heavy equipment and additive manufacturing.

Caterpillar maintains a particular focus on boosting the sustainability and connectivity of its machinery. The company has set ambitious goals to reduce operational greenhouse gas emissions and enhance the energy efficiency of its products. For instance, Caterpillar has developed hybrid and electric machines that produce fewer emissions and consume less fuel than traditional equipment.

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This system not only enables industrial companies to collect data but also helps them analyze it to boost efficiency and sustainability. These functionalities are particularly notable for manufacturing plants given that vast quantities of their data typically go unused. 

In the market map below, we identify 112 IIoT vendors operating across 11 categories.

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These technologies are redefining planning, maintenance, and operational cost strategies while encouraging sustainability. For instance, HVAC systems — which account for 40% of a building’s energy usage — are now more manageable and efficient thanks to digital sensor technology.

The industry has also been shaped by the SEC’s mandatory climate disclosure ruling. Publicly traded Real Estate Investment Trusts (REITs) now report on climate-related risks and greenhouse gas emissions, leading many to adopt ESG monitoring platforms to meet the new standards.

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In 2023, global drone shipments are expected to reach 2.4M. Insider Intelligence estimates this total is increasing at a 67% compound annual growth rate (CAGR).

Already this year, funding to the inspection & job site mapping drone market has reached a 5-year high. Percepto, a startup in this space, recently raised a $67M Series C (in equity and debt), following 4 other equity funding rounds from its peers this year.

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It is now cheaper than ever to send satellites into orbit, in part thanks to SpaceX‘s innovations, which have helped bring the price of launching rockets down by 10x vs. a decade ago.

At the same time, satellite technology continues to improve. Today’s satellites feature better imaging systems, more powerful sensors, and faster data processing than ever before.

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