Major financing rounds raised by startups are increasingly rare. However, for startups working on the future of energy, the market is surprisingly strong.
The slowdown of companies and their late glaciation do not prevent companies that want to reinvent energy from raising large rounds. Given what we are seeing around the world, it is a welcome development, even if it seems a decade or more too late.
Turning on
Nine-figure rounds are often called “megarounds” due to their enormous weight. During the first two months and the first days of March last year, about 12 deals met our “energy” criteria, tracking companies working in energy generation and distribution using Crunchbase data. This includes projects such as solar power generation, batteries and electric vehicle charging. However, we did not include OEMs that make electric vehicles like Lucid or Fisker in our analysis.
From the beginning of 2023 to March 4 of the same year, 11 deals met our criteria. Of that group, seven were based in China. During the same part of the first quarter of 2024, we saw 12 deals that met our standards. However, this time only one was a Chinese company.
A reformed global venture capital market
As the global venture capital market adjusts to persistently higher interest rates, the flow of capital to tech startups has slowed. The slowdown in private market investment in private technology companies has been especially pronounced in the later stages of new company formation, thanks to a limited exit environment and less enthusiastic public market valuations for many software companies.
Late-stage startup trading has changed so much in recent quarters that it's easy to forget how optimistic private market investors were in recent years. CB Perspectives reported That from Q1 2019 to Q4 2022, more than 100 nine-figure deals, or seed rounds, worth $100 million or more occurred each quarter. By contrast, only 78 were registered in the fourth quarter of 2023, the worst result since at least the end of 2018.
The latest data underscores a continuing trend. A TechCrunch analysis of Crunchbase data found that from January 1 to March 4, 2023, about 115 rounds met our criteria for nine-figure private market deals (excluding private equity, all post-transactions). the IPO, certain debt rounds, etc.). During the same part of this year, the number fell to 75.
If the number of energy-focused megarounds remained largely stable year over year, why highlight the metric? Because energy-focused megarounds accounted for a larger portion of the nine-figure deals TechCrunch analyzed, from just under 10% in the 2023 period we're examining to 16% in the same portion of 2024. That's more than 60%. gain in relative share, a massive change for any sector in just one year.
That is why the 12 rounds of venture capital that we saw in the energy sector stood out to us like a beacon; There aren't that many to see, period, which makes the density in a sector that isn't as popular (as is the case with ai) even more notable. And with a huge geographic shift underway at the same time, it's clear that something is heating up on the energy front.
Internal power surge
In 2023, China dominated the energy megarounds with most of the money going to manufacturers of solar panels and battery materials. Both are sectors where China has lavished incentives and state funding and, as a result, the country has dominated the market for both. In 2021, 75% of the world's solar modules and a whopping 85% of all cells They were made in China, according to the International Energy Agency. The new financing was therefore less about investing in a promising market than about outperforming the competition.
The same could be said for battery materials. Chinese companies have 75% of the graphite supply chain, which covers everything from mining to finished anodes, according to Benchmark Minerals Intelligence. And yet, two Chinese companies attracted a combined investment of $380 million in the first quarter of 2023.
Fast forward to this year, and the picture in energy megarounds looks dramatically different. Diversity is the name of the game. Only one Chinese company made it to the top, and the rest were almost equally balanced between the United States and the EU. This is due to credit industrial policy: the Inflation Reduction Act in the United States and the Green Deal in the EU offered hundreds of billions in incentives for manufacturers and suppliers to set up operations in the country. In return, companies have invested hundreds of billions more. These mega rounds are a reaction to market trends, suggesting that the reshoring of key parts of the climate tech economy will persist for years to come.
Geographic diversity is only part of the picture. While solar and battery materials captured the lion's share of mega deals in 2023, this year the same round sizes have been spread across a variety of technologies. Geothermal energy, industrial heat, e-fuels, battery recycling, electric vehicle charging, lithium mining and geological hydrogen are taken into account. Even heat pumps, a decades-old technology, received a €145 million injection: that's how promising that market has become.
The wide range of industries represented this year suggests that many previously early-stage companies have mastered their scientific or technical risks and have begun their journey toward commercialization. Investors seem confident they will make it too, happy to underwrite a part of the startup's journey that offers smaller but more likely returns. The IPO window for these companies is probably still a few more years away, but the size of the checks suggests investors can see it on the horizon.
With the ocean at record temperaturesnews On the sea ice that looks gloomy and Droughts hit hard worldwide, it's a good time to sit back and consider what we are doing to our little planet. The investment trends mentioned above are welcome, but with carbon emissions. still setting records, we're still throwing glasses of water on a house fire. Faster and faster, please.
