PitchBook News - New pledges boost carbon tech

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The Research Pitch

September 10, 2022

Presented by Dynamo Software

Last call: Join our analysts Wednesday for a live discussion on Europe's first half of 2022, with updates on PE & VC deals, exits, fundraising activity, and more. Register here.

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Carbon pledges continue to create new opportunities for startups

VC investment in carbon technologies—carbon removal, carbon accounting, carbon fintech, etc.—had its strongest ever quarter in Q2 this year, attracting $2 billion in funding.

And the current landscape for carbon technologies provides more support than ever before.

A key driver of this growth is the sharp increase in carbon reduction pledges at the country level but also at more granular levels of sub-country regions, cities, and individual companies.

Click to dive into our newly launched carbon tech research

Country-level pledges are critical in informing national policies for carbon emissions—which then strongly influence the viability of carbon technologies.

At the sub-country level, these pledges provide more assurance to the carbon tech space that if the governmental stance regarding emissions changes (for example, following a change in leadership), there is still support for carbon technologies.

These pledges have grown substantially in the last three years—now, most countries have made carbon reduction pledges of some kind (varying from loose objectives to policy codified into law).

The recent signing of the Inflation Reduction Act in the US also enhances the 45Q tax credit, determining the federal incentive for carbon capture projects, increasing the value of the credit from $50 per metric ton to $85 in most cases, with direct air capture technology (in which CO₂ is captured directly from the air) benefitting from an increase to $180 per metric ton.

This kind of federal support for carbon technologies shifts the value proposition for many carbon emitters and creates a better opportunity for carbon tech startups in the future.

For more data and analysis, download the full report: Carbon & Emissions Tech Launch Report

Feel free to reach out with any questions or feedback, or if you would like to discuss the research.

Best,

John MacDonagh
Senior Analyst, Emerging Technology

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Market Updates

Venture capital activity in the UK and Ireland defied expectations in H1 despite the economic downturn, while private equity dealmaking flattened.

In our 2022 UK & Ireland Private Capital Breakdown, we delve into the numbers behind the region's PE and VC markets, providing insight into dealmaking, exits, and fundraising. Key takeaways include:

VC deal activity in 2022 is on track to match last year's record numbers, with £15.4 billion invested across 1,879 deals in H1.

PE deal count and value failed to reach 2021's halfway mark in the first six months of the year, registering 762 deals worth £75.6 billion.

Fundraising activity in both private markets fell slightly as conditions become more challenging.

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Venture activity in Greater China dropped significantly in the first half of 2022, continuing a slowdown since late last year.

According to our latest Greater China Venture Report, the region has faced many hurdles over the past year, including regulatory headwinds, supply chain issues, and macroeconomic challenges. Other takeaways include:

Only 56 mega-rounds of $100 million or more were completed in the first six months of 2022, off the pace of 2021's regional record of 261.

Exit value totaled just $40.6 billion across 64 deals—a significant year-over-year slowdown, especially for IPOs.

Fundraising continued to fall, with the region's dry powder ebbing to $122.7 billion. This has raised concerns about long-term capital availability, especially if investors outside the region face more hurdles to entering the market.

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Emerging Tech Research

VC funding slid 27.8% quarter-over-quarter for AI and machine learning startups in Q2.

Of the 70 product categories that we track, only 21 are on pace to grow in venture funding in 2022—driven by vertical applications including information security, drug discovery, and sales & marketing.

Our Q2 AI & Machine Learning Report features updated market size estimates and spotlights on companies including Databricks and DataRobot.

The report also tracks key industry trends—covering AI struggles in code completion, developments in streaming data pipelines, and how synthetic data is being used for robotics and autonomous vehicle training:

read a free preview

Commentary

Senior emerging tech analyst Alex Frederick weighs in on Neutral Foods' recent close on $12 million in Series A funding led by Breakthrough Energy Ventures:

"Neutral's latest venture round comes as the carbon footprint of ag and livestock farming is under increased scrutiny. Livestock farming is the largest emitter of methane by volume.

"Neutral is among a growing number of food companies that are commercializing and marketing environmentally-friendly dairy or meat products.

"The Inflation Reduction Act included a charge on methane emissions ("$900 per metric ton of methane, increasing to $1,500 after two years") in the oil & gas industry, although it notably failed to include livestock, which is the greatest emitter of methane emissions.

"Instead, the bill carves out $25 million to $50 million for Conservation Innovation Trials, with the USDA prioritizing proposals that 'utilize diet and feed management to reduce enteric methane emissions from ruminants.'"

Alex Frederick

Senior Emerging Technology Analyst
Foodtech & Agtech

In the News

Our insights and data featured in the press:

Climate tech is a hot investment in 2022—the next five years could be even hotter. [TechCrunch+]

PE's average global returns for Q3 2021 fell to 6.8% from almost 15% in Q1, the strategy’s lowest quarterly IRR since the pandemic rocked public markets in Q1 2020. [Private Equity Wire]

Venture capital funding slid more deeply in AI & ML than the broader IT industry in Q2. [Crowdfund Insider]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.

ICYMI

Highlights from our other recent research:

Market updates

Thematic research

Emerging Technology Research

Coming next week (subject to change)

US PE Middle Market Report
US PE Lending League Tables
ETR: Supply Chain Tech*

A Message from Dynamo Software

Webinar | Allocation Planning & the Science of Over-commitments

Dynamo Software, in partnership with Northfield Information Services, is hosting a 30-minute webinar on Wednesday, September 14th, 2022, at 11 AM PT | 2 PM ET: Market Checkup: Allocation Planning & the Science of Over-commitments.

Lower valuations. Market volatility. Evolving risk and return profiles. To say that today’s financial environment poses challenges for asset allocation planning is an understatement.

Join this 30-minute webinar, featuring Emilian Belev, a leading FinTech industry expert, to discover:

The latest private investment forecasting methodologies
How FinTech technology can help
Ways to automate the manually-intensive processes

Register today

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PitchBook News - New pledges boost carbon tech

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Our debut carbon tech report

AI startups face market realities

China's VC dealmaking extends slowdown

UK & Ireland's tale of two markets

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