PitchBook News - 213 climate tech funds: a deep dive

VC investment in climate tech was somewhat lower in the first half of 2024, following a period of high activity in 2021 and 2022.

A significant component of this investment comes from nonspecialist investors, which focus on a broad investment remit, seeking exposure to the various tailwinds in the climate tech space and responding to a growing demand for investments with positive environmental impacts.

Specialist investors—with climate tech companies making up an outsized portion of overall investments—are equally important to the space. Their specialism allows a deeper focus on the nuances of climate technologies, particularly deep-tech engineering challenges.

These GPs typically invest across climate tech, though a percentage have a further level of specialization, focusing on subcategories like low-carbon mobility or clean energy.

 

Incentives and regulatory support are lifting climate tech.

I am Nicolas Moura, EMEA private capital research analyst at PitchBook, and this week we published the Q2 editions of our European PE Breakdown and European Venture Report.

We have started seeing recovery signs across European private markets, with Q2 deal value increasing 27% QoQ for PE and 24% for VC.

 

Valuations are once again rising; on the PE side, we have seen the median EV/EBITDA multiple increase from 10.2x in 2023 to 12.1x for TTM. On the VC side, venture-growth valuations were up 5% in Q1.

We continue to see SaaS, AI & ML, and cleantech drive dealmaking. AI VC deal value doubled QoQ while cleantech is pacing for its best year in PE deal value.

 

However, it remains a challenging exit environment with VC exit activity pacing lower than last year. PE exit activity was given an uplift thanks to large PE-backed IPOs such as CVC and Exosens.

We remain cautious in calling it a full recovery but the ECB's decision to cut rates in June has given a boost to markets. Q2 PE exit value has bounced back noticeably compared to Q1, but we expect both PE and VC to pick up further as the year progresses.

Lower interest rates will help lower borrowing costs for sponsors and ultimately help unclog the exit funnel. In our VC report, we also introduce our venture debt dataset this quarter.

Finally, we point to the diverging fundraising trends between PE and VC.

European PE has had a remarkable H1, pacing for another record year of capital raised, attributable to a select few megafunds closing. VC, on the other side, is pacing for its lowest fundraising year since 2018.

For more data and analysis, download our free reports:

European PE Breakdown

European Venture Report