Amid growing climate-change concerns, venture capitalists are increasingly making significant investments in green initiatives.
- Venture capitalists are becoming a major source of funding for startups with goals of reducing carbon emission.
- In 2020, funding from venture capitalists for climate technology companies reached $22.6 billion.
- By 2021, that number had risen to $37 billion—a 64% increase—Akshat Rathi reports for Bloomberg.
- Some experts believe that a growing sense of urgency is behind the change.
- Of course, VC firms also see profits in these fledgling industries.
Why it’s news
Until recently, much of the funding from venture capitalists went toward software and Internet companies. The change in direction could be another indicator that attitudes toward climate change are shifting.
Venture capitalist Gabriel Kra explained that his firm Prelude has more than its fair share of clients.
“People are beating down our doors. The market size has just increased,” he says.
Some businesses that did poorly in the past are starting to gain momentum, thanks in part to changing technology. Battery startups are one example of this, Kra explains.
A growing awareness among individuals, corporations, and governments may have contributed to the new urgency in funding. More environmentally minded startups are receiving funding both in the early and late stages of growth.
New legislation like the Inflation Reduction Act may affect sentiments as well. The bill contains funding and tax credits for American manufacturing of things like electric-vehicle batteries.
More regulations within the bill also increases the demand for batteries, giving the startups more business.