PitchBook News - Christmas for climate tech

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The Weekend Pitch

August 7, 2022

Presented by ATLAS

(Jenna O'Malley/PitchBook News)

When tech investor Abe Yokell heard about the $369 billion bill to fund climate investment in the US, he almost fell out of his seat.

Yokell, a managing partner at Congruent Ventures, wasn't alone. Climate tech investors and advocates were shocked by the agreement between Senators Joe Manchin and Chuck Schumer that, if passed, would be the largest investment in decarbonization the US has ever made.

Just weeks ago, the Democrats' push to fund climate initiatives seemed dead. Now, with Arizona Senator Kyrsten Sinema's support, the bill appears poised to pass.

If it does make it all the way to President Biden's desk, the package will supercharge an already strong environment for climate tech investment. US VC funding for climate tech has been on a tear in recent years, topping $16 billion in 2021, more than double the prior year, according to PitchBook data. And leading private equity firms from TPG to Brookfield Asset Management have raised billions to finance green projects.

"The Inflation Reduction Act is probably a bigger deal for our actual climate than it is for the climate tech community. But it's still a very big deal for the investing community," Yokell said.

This is the Weekend Pitch, and I'm James Thorne. You can reach me on Twitter @jamescthorne or by email at james.thorne@pitchbook.com.

Investors say the bill will reduce the green premium on pricey technologies, speed up the network effect of electric vehicles and renewable electricity, and provide capital that goes where VCs won't. In short, it's Christmas for climate tech.

Here's what three VCs have to say about the bill.

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Quote/Unquote

"Everybody's hurting, so of course CVCs are pulling back, but they are behaving more similarly to their institutional peers than ever before. A few will quietly 'press the pause button,' but they are not abandoning ship like they did in previous downturns."

—Touchdown Ventures President Scott Lenet, on whether corporate venture capitalists will slow investments amid a downturn in global markets.

Deal flow

São Paulo (Caio Pederneiras/Shutterstock)

SoftBank is a notable example of a retreat among investors that last year pushed startup investment in Latin America to new highs. Since 2019, the Japanese firm was involved in more than a third of LatAm VC deals by value and was a lead investor in 15% of them, according to PitchBook data.

VC investment in the region fell to $2.04 billion in Q2 2022, a 71% decline from a quarterly high of $7.12 billion in Q3 2021. SoftBank participated in LatAm VC deals worth $1.57 billion in the first half of 2022, down from $4.31 billion in the preceding two quarters.

Did you know ...

(MirageC/Getty Images)

… In the first half of 2022, nine Asia-focused PE funds raised $10.6 billion, a roughly 64% decline from the $29.6 billion gathered by 39 vehicles during the same period last year, according to PitchBook data. Through the end of July, only $18.5 billion was raised, setting a pace that, if sustained, is unlikely to surpass last year's total fundraising value of nearly $41 billion.

Datapoints

Rolling one-year IRRs through Q4 2021 were robust, though lower than in prior quarters due to macroeconomic headwinds, according to our latest Global Fund Performance Report, which includes preliminary 2022 figures.

One-year returns for PE funds leveled off at 46.6% as of Q4 2021, illustrating the impact of inflation, rising interest rates and other global factors. VC registered a 50.5% return in the year through Q4 2021.

Recommended reads

The best road trips in the US may be off the map for most electric cars. [Bloomberg]

How Tesla lost the race for affordable EVs to an unexpected rival. [Forbes]

A terrorist's Afghan hideout has chilled efforts to free up $3.5 billion in humanitarian aid. [Bloomberg]

These veterans have found a post-service mission: beekeeping. [Texas Monthly]

Throwing things, bugs and pointing—the secret to a great founders photo. [Sifted]

This edition of The Weekend Pitch was written by James Thorne and Ryan Prete. It was edited by Chris Noble and John Moore.

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