Stop us if you’ve heard this before: 2022 was a rough year for startups.
Here are a few numbers to illustrate just how sharp of a turn things took…
In 2021, there was a total of $681 billion invested in startups. In 2022, that number fell to $445 billion.
In 2021, there were 613 special-purpose acquisition (SPAC) IPOs. 2022 saw just 83.
In 2021, 340 new companies earned a billion-dollar valuation and, as a result, their unicorn horn. In 2022, that number fell to 174.
And the pace of this deceleration only got worse as the year went on. While the first half of 2022 saw $285.5 billion invested, the second half saw roughly $160 billion.
From 10,425 venture capital (VC) deals in Q2 2022 to 7,817 in Q3 – the lowest amount in close to half a decade.
Pretty much no matter how you slice it, the investment landscape was particularly down on early-stage companies.
However, while the downturn effected close to every industry, there were some that saw momentum and interest increase while everyone else struggled.
There may be no better example of this phenomenon than clean energy startups.
In 2021, when practically every sector experienced booming investment prospects for early-stage companies seeking capital, climate startups raised $18 billion – just shy of 3X the amount raised in 2020.
But 2022 didn’t bring the same doom and gloom to climate startups as it did the rest of the world. In fact, they actually raised more – up to almost $20 billion.
As things stand now, 83 different climate startups currently sit with a valuation north of $1 billion. This doesn’t figure to decrease anytime soon, as evidenced by BlackRock CEO Laurence D. Fink predicting back in October 2021 that there would be 1,000 more climate unicorns on the way.
“There is no line of business that will not be impacted by climate,” Lowercarbon Capital, a climate-geared VC firm, co-founder Chris Sacca said at a conference in October. “That’s also the opportunity.”
Pressure has never been greater on corporations to right their environmental ship. As it stands, according to the nonprofit website Net Zero Tracker, 91% of the global economy has made a “net zero” pledge to decrease their footprint.
With the Securities and Exchange Commission proposing a rule requiring companies to report emissions, the Inflation Reduction Act earmarking $370 billion for climate spending, and the cost of renewable energy falling precipitously, this boom doesn’t figure to be short lived.
And while startups across the world are forced to undergo “down rounds,” raising money at a lower valuation than before, climate startups have grown their valuations by 2.5X in the past two years in many cases.
All of that is to say that climate-geared companies are better bets during this bearish market, and investors would be wise to look for opportunities in this space.
We’ll be sure to do just that for you.