The State of
Climate Tech 2020
The next frontier for venture capital

www.pwc.com/climatetech

Foreword
Even as the COVID-19 pandemic holds society’s attention, the pressing challenge of climate change remains.
With a view out beyond the current pandemic, arguably the greatest innovation challenge humankind has
ever faced is staring us in the face: the world has 10 years to halve global greenhouse gas emissions andavoid global warming of above 1.5°C, an amount beyond which scientists warn dangerous impacts will kickin.1 To achieve this, every sector of the global economy needs to transform in just over two business cycles.
Before 2050 the global economy needs to be at ‘net zero’ carbon emissions. Some of the technologies andsolutions critical to enable this transformation are proven but need rapid commercialisation. Others are still ina lab. Many are not yet even conceptualised.

Entrepreneurs – the instigators ofinnovation and transformation – arecritical players in making the art ofthe impossible, possible. They area proven cohort for bringing novel
technologies and disruptive approaches
to industry, and in doing so inventing
a new future. Markets as diverse
as Internet search, e-commerce,
smartphones, ride-sharing and electricvehicles (EV), have become mainstream
through the success of founder-led
companies backed, at some point,by venture capital. Together with theearly stage investors that pump in thefunds to enable scaling of these new
approaches and technologies, they will
be key to transforming sectors to a net
zero future.
The reality of the startup world,
however, is that venture capitalists
look for companies that have massivecommercial viability, can monetise
solutions as quickly as possible, andhit returns measured in multiples not
percentage points. This world is not
driven by impact, but by investing
opportunity.

There is a history here: ‘Clean Tech’remains a dirty word for many venture
capitalists, who lost out in the boom
and bust of the late 2000s. Are founders
and their backers suffering from ‘once
bitten, twice shy?’
Roll forward twenty years, as wedemonstrate in this report, ‘climate
tech’ is emerging, with promising signsof high quality entrepreneurs tackling
more scalable businesses, enabled
by supportive venture capital. We seea new generation of investments thatcovers a broader range of sectors, anddistinctively has (in the main) lower
startup costs and clearer paths to scale.
The first class of climate tech unicorns2
have emerged – with companies
like Tesla, Beyond Meat, and Nest
showcasing how disruptive companies
delivering critical sustainability gains
can also become billion-dollar brands.
In PwC’s inaugural release of what
will be an annual look at the state ofclimate tech investing, we have brought
together a first-of-its kind analysisof the startup ecosystem critical toaddressing climate change. Partneringwith Dealroom, we look at seven yearsof global startup, from 2013 to 2019,
investing market data to evaluate howmuch capital is going to climate tech
ventures, which segments attract themost capital, who is investing, where
the biggest gaps in capital exist andwhy. We have asked some of theleading founders and investors in themarket for their views of what the datatells us.
The big headline is that early stage
investment into climate tech is growing
fast. Over the past seven years, total
funding for climate tech companies,
rate of startup creation, and the average
size of funding has continued to rise.
For perspective, this research showsthat in 2013 the early-stage venture
funding for climate tech companies
was about $418 million. However, in
2019, total venture funding increased to$16.1b, a more than 3750% increase.
This is on the order of 3 times thegrowth rate of VC investment into AI,
during a time period renowned for its
uptick in AI investment.

1 IPCC Special Report on the impacts of global warming of
1.5°C (IPCC, 2018)2 
The standard definition of a unicorn is a privately held
startup valued at more than US$1 billion

Investor participation in climate tech isfundamentally different to the noughties
clean tech era. Climate tech funding
seems to be coming from every cornerof the market. More traditional venture
capital firms are today at the table,
growth stage investors including
government backed asset managers
and Private Equity players are getting
involved in earlier stage deals to get
exposure, and corporate players fromoil majors and global consumer goods
companies to Big Tech are playing
important roles as strategic investors toscale approaches.
The COVID-19 pandemic has not
slowed investment activity. Since thecrisis hit, major firms have pledged
billions of dollars into this including
Amazon’s $2 billion ‘Climate Pledge’
venture fund, Microsoft’s $1 billion
Climate Innovation Fund, andUnilever’s €1 billion climate funds.3 In
addition, close to 300 companies now
have a commitment to achieve net
zero emissions before 2050.4 Every
commitment represents a demand
signal—a new customer—in the market
for a solution that helps them achievethat call. In many cases, the solutions
are not yet available, and will need
to be delivered by technologists andstartups over the coming decades.

The bottom line is that demandfor climate tech is only going toaccelerate. With global corporations,investors, and governments pledging
to transition to net zero value chains,
portfolios and jurisdictions, they are
all betting on climate technology
breakthroughs to be found, scaled andto transform industries and society.
Demand is not yet at a stampede but
the market is heating up and it’s time
for all stakeholders to help back theinnovations the world really needs.

Still, despite the substantial growth
rates we find in this market as awhole, it is a nascent sector. Capital,
for example, remains thin rather thanbountiful. Founders talk of a shortageof choice of investor, and investors are
finding strong deals but are keen to
see this segment attract more of thebest founders. Whilst the policy andregulatory environment is moving in theright direction, companies pioneering
the high-risk capital-intensive
breakthrough technologies still struggle
to get through the valley-of-deathand be market competitive without
policy incentives.

Dr. Celine Herweijer
Global Leader, Innovation &Sustainability, Partner, PwC UK

Azeem Azhar
Senior Advisor to PwC UK, andFounder, Exponential View

3 
See announcements from Amazon, Microsoft, and Unilever,respectively.
4 
See Science Based Targets for example. Other companies
have also pledged to become net zero before 2050, but may
not have signed up to the Science Based Targets group.

Table of contents
Executive summary

1

Introduction

5

Approach11

Key findings: Investment

13

Key findings: Investors

37

Key findings: Drivers and Barriers

41

Recommendations and Conclusions

48

Acknowledgements

52

Appendix

54

Executive summary

The State of Climate Tech 2020 The next frontier for venture capital

1

Executive summary
The world of venture capital has seen huge changes over the past decade. Ten years ago there were fewer than
20 known unicorns in the US5; there are now over 2006. Annual investment of global venture capital has increased
more than fivefold over the same period, rising to $264 billion by 2019. This investment has been dominated by thetech sector harnessing digital frontiers to disrupt traditional industries – including cloud computing, mobile apps,
marketplaces, data platforms, machine learning and deep tech.7 It is an ecosystem that acts as the birthplace forinnovation and brands that can shape the future of consumerism, sectors and markets.
As COVID-19 has taken hold of theworld, the question of whether venture
capital, and early stage investing more
broadly, is backing and scaling theinnovations our world really needs has
never been more pertinent. Life scienceand biotech investing is an asset classperhaps most resilient and relevant tothe short-term impact of COVID-19,
but there is another impact-criticalinvestment area that is emerging as
an increasingly important investment
frontier: climate tech.
This research represents a first-ofits-kind analysis of the state of global
climate tech investing. We define what
it is and show how this new frontierof venture investing is becoming astandout investing opportunity for the
2020s. Representing 6% of global
annual venture capital funding in 2019,
our analysis finds this segment has
grown over 3750% in absolute terms
since 2013. This is on the order of 3
times the growth rate of VC investment
into AI, during a time period renowned
for its uptick in AI investment.8
Looking forward can climate tech in the
2020s follow a similar journey to theartificial intelligence (AI) investing boomin the 2010s? The substantial rates ofgrowth seen in climate tech in the late
2010s, and the overarching need for
new transformational solutions acrossmultiple sectors of the economy,suggests yes. The stage appears set
for an explosion of climate tech into themainstream investment and corporate
landscape in the decade ahead.

‘

What is climate tech investing?
‘Climate tech’ encompasses a
broad set of sectors which tackle
the challenge of decarbonising the
global economy, with the aim ofreaching net zero emissions before
2050. This includes low-to-negative
carbon approaches to cut key sectoral
sources of emissions across energy,
built environment, mobility, heavy
industry, and food and land use; plus
cross-cutting areas, such as carbon
capture and storage, or enabling bettercarbon management, such as throughtransparency and accounting.

Every sector of the
global economy
needs to transformand radicallydecarbonise in justover two businesscycles.

The investment opportunity ofclimate tech: a moment in time
There is arguably no greater innovation
challenge for today’s founders,technologists, industry leaders andinvestors: the world has 10 years tohalve global greenhouse gas emissions
before we reach 1.5°C of global
warming, beyond which scientists
warn that dangerous impacts will kickin.9 To achieve this, every sector of the
global economy needs to transformand radically decarbonise in just overtwo business cycles. Many of thetechnologies and solutions critical toenable this ‘net zero’ transformationneed rapid commercialisation, withmany more needing to be accelerated
out of the lab or even conceptualised.

5 A Decade of ‘Unicorns’Ends With a Little Less Magic(WSJ, 17 Dec 2019)6

MoneyTree Report (PwC/CB Insights, Q2 2020)

7 The Decade in Technology and Venture Capital: Looking
Back on the 2010s (Nnamdi Okike, Dec 2019)8 Source: PwC and Dealroom analysis
9 IPCC Special Report on the impacts of global warming of
1.5°C (IPCC, 2018)

2

The State of Climate Tech 2020 The next frontier for venture capital

The number of countries, cities,businesses and investors that havecommitted to transition to net zero
emissions before 2050 is creating asnowball-effect demand signal for net
zero breakthroughs. This is just oneof several trends which are driving
increased investments and heightened
investor interest in climate tech,including:• New and cheaper technologies:
technology advances andinfrastructure investment haveshifted the cost curve down, andpowerful new technologies – like AI,
cloud, blockchain, and advanced
sensors – are not only enabling
solutions to be optimised andscaled, but are offering entirely new
business models.
• Greater consumer demand:sustainability is the new disruptor
for the consumer goods segment,with consumers demanding morefrom brands and sustainableproducts starting to demonstrate
higher growth rates than their nonsustainable rivals.10 A new class of‘climate tech unicorns’ such as Tesla,
Nest, Oatly and Impossible Foods
have also emerged showcasing theviability of disruptive approaches in
the consumer market that deliver
substantial sustainability impact.
• More supportive policies andregulations: with over one hundred
countries committing to net zero
emissions economies before 2050,
we can expect to see continued andrapid strengthening of policymaking
over coming years, including carbon
pricing, subsidies, standards,
bans and phase-outs, publicfinance mechanisms and green
infrastructure investment.

• Growing corporate demand: close
to 300 major global companies11 (andrising weekly) have made net zero
before 2050 pledges, since the push
for this target began in mid 2019.

• Increases in investment: investors
that represent over $45Tr assets
under management (AUM) havesigned on to drive action on climatechange across their portfolios, from
portfolio decarbonisation to climate
risk disclosure and the use ofshareholder levers.12

Key takeaways and recommendations
What are the key takeaways from the data on the state of the investment
landscape?
1. Startups leverage capital well and don’t need trillions to make a difference.
2. Talent is starting to align with breakthrough technologies and innovative
business models. Where this happens, investors are lining up and we see anincreasing number of larger funding rounds with high potential deals.
3. The growth rate of climate tech from 2013 has been sizable, with more than
3750% increase over the 7 year period (2013-2019).
4. But circa $60 billion as of 2019 is too low given the scale of the challenge, andmore early stage investment needs to be stimulated, and the area needs toattract and support more top founders.
5. There are non-financial barriers, from talent to regulations, which might get in
the way of firms having as much of an impact as needed.
6. Individual great founders can make an outsized difference in climate action.
The startups they create will take some time to reach scale however, and so
the startups creating most impact in this business cycle (over the next 5-7
years) will likely be those founded in the 2010’s.

10 
Research: Actually, Consumers Do Buy Sustainable
Products (Harvard Business Review, Jun 2019)11 
See Science Based Targets for example. Other
companies have also pledged to become net zero
before 2050, but may not have signed up to the
Science Based Targets group
12 See Climate Action 100+

The State of Climate Tech 2020 The next frontier for venture capital3

60B 84% 1200+$

VC invested in climate tech
between 2013-19

compound annual growth rate

climate tech startups identified(approx. 3750% increase
between 2013-19)

16B

In 2019$of VC was invested in
590 climate tech deals(representing 6¢ of every VC
dollar in 2019)

Regional findings

Top investment hubs
1. San Francisco Bay
2. Shanghai

Top 3 Regions

3. Beijing(including mobility)

1. San Francisco Bay
2. Boston
3. Berlin(excluding mobility)

3. Europe:$7B

1. NorthAmerica:$29B

2. China:

$20B

13

Area with the most funding:
Mobility and Transport

63%...of total climate tech
investment

37B 151% 43
30$

Total invested in this area

78%

Unique investors identified

Investors with 2 or
fewer climate techdeals in total

Investors with 3+ deals
per year on average...of which Mobility andTransport startups(Figures have been rounded for brevity)

2700 10(approx)

Climate tech startups
valued at $1B+

Compound annual
growth rate (CAGR)

Investors

4

Unicorns

The State of Climate Tech 2020 The next frontier for venture capital

13 
Our data coverage is stronger in European and North
American markets, and this analysis may therefore bea conservative estimate of the relative levels of Chinese
investment and of overall investment.

Introduction

The State of Climate Tech 2020 The next frontier for venture capital

5

Introduction
Why climate change is the defining crisis of the next decade
The world is in a race to limit climate change. The events of the past year have put on stark display the
deep-rooted vulnerabilities of the global economy to a systemic global shock. With the global shut-down
and crippling human and economic impact from COVID-19, we’ve seen a preview of just how powerfully thenatural world can impact our lives, economy, and broader society.
The United Nations (UN) Secretary-General has labelled climate change ‘the defining issue of our time’.14
In response, the world has increasingly committed to ‘net zero’ greenhouse gas emissions. The 2015 Paris
Agreement saw world leaders agree to limit a global temperature rise by the end of the century to well
below 2°C, and to pursue efforts to limit the temperature increase even further to 1.5°C. Since then, over
120 nations – representing nearly half the world’s GDP ($39 trillion) – have set or are proposing to set a net
zero target before 2050 which is aligned to the 1.5C threshold.15 This has been supported by an upswellof business action, with close to 300 global companies making the commitment to transition to net zero
emissions before 2050.
Even so, actual progress to net zerohas been slow. PwC’s Low Carbon
Economy Index analysis shows thatthe world is moving at just a fractionof the decarbonisation rate required,and a seven-fold increase in the rateof climate action is needed to keep
warming to 1.5 degrees – beyond which
we face dangerous climate impacts.16
There is, therefore, a huge gap between
the rhetoric of the ‘climate emergency’
and the reality of an inadequate global
response. The startup world has acritical role to play in bridging this gap:
there is a key window over the 2020s
to channel the best entrepreneurs, andcrucial venture capital, into developing
the transformational solutions needed
to decarbonise our industries.
In a time of disruption, such as theone the world finds itself in now, thetemptation for investors and corporates
is to try and return to the way things
were. It would be wrong to think the
supply chains, the working practices,and the investment decisions of thepast are the right ones for the future,
however. Organisations need to rethink
and reconfigure to set themselves up
for the greatest chance of sustainablegrowth in the future. The role of startups
in resetting and reconfiguring for an
inclusive net zero future is vital.

6

Critically, while net zero commitments
are growing – from nations, cities
or major global companies – manyof these commitments are part-way
contingent on bets that technological/
business model breakthroughs forsome of the tougher emissions
reductions will arrive or scale in time.
This is where the role of the startup
is pivotal.
Startup founders across the globe
have already begun turning theirattention towards the huge challenge
of decarbonising our economies, withrecent years seeing palpable growth in
the number of founders and investors
looking to tackle the fundamental
problem of climate change. The main
focus is on preventing greenhousegases, in particular CO2, from being
released into the atmosphere, andsome more novel approaches arealso focussing on eliminating or
capturing these gases that cause
climatic changes.

This ‘resurgence’ in innovation,
startup formation, startup growthand investment we are currently
witnessing is coalescing in an areathat is increasingly being referred toas ‘climate tech’.17 This umbrella term
typically encompasses:• approaches towards low-greenhousegas (GHG) energy generationand storage, transport, the built
environment, industrial processes,
and food and land use;
• shifts towards less resourceincentive business models, including
circular models of consumption or
micro-mobility;• better resource usage throughanalytics and data; and• active carbon capture and storage.

14 Secretary-General’s remarks on Climate Change [asdelivered] (United Nations, Sep 2018)
15 ECIU Net Zero Tracker (Retrieved August 2020)
16 The Low Carbon Economy Index 2019 (PwC, 2019)17 See for example: Where’s Silicon Valley’s investment inclimate tech? (Marketplace, 17 Sep 2019); Is Climate Tech
Different Enough From the Cleantech of Old? (Bloomberg,
13 Feb 2020);and Why ‘climate tech’ is the new cleantech(GreenBiz, 5 Feb 2020)

Is climate tech the new cleantech?
We call this epoch a ‘resurgence’
because, famously, there was a widely
recognised boom in investment inthe ‘clean tech’ sector between 2006
and 2011, which quickly turned into
an investment bust. The ‘clean tech’boom (and bust) saw venture capitalists
plough $25 billion of venture capital into
the sector and lose roughly half of it ina handful of years18, which put many
investors off clean energy investing forthe rest of the 2010s.
In this new wave however, climate
tech is much more than the clean techof old. It is a broader concept that
focuses on decarbonisation acrossall sectors of the economy, not solely
the energy sector. This is a deliberate
decision and pivot, which reflects theunderlying complexity and scale of theclimate challenge.
Achieving net zero will require a shift
away from fossil fuels as the firstmover, as well as decarbonisationof our mobility systems, a rethinkingof food, agriculture, land use, retailand consumption more broadly, deepchanges to our approach to the built
environment, novel industrial processes
and materials. It will not be sufficient
merely to hope for technical innovation
in batteries or biochemistry; but instead
the ultimate solutions will require a
broad range of approaches and novel
business models to trigger behaviouralchanges in consumers and enterprises
alike. Furthermore, scalable and safe
carbon removal technologies will alsoneed to play an important role.

Why now for climate tech?
Climate tech is also happening at
a very different ‘moment in time’
than the clean tech movement. Keychanges include:• New and cheaper technologies
are available. Technology advances
and infrastructure investment haveshifted the cost curve down and areenabling solutions to be optimisedand scaled, as well as offering
entirely new business models. The
exponential growth of emerging
technologies is allowing us to do
things in fundamentally new anddifferent ways – whether withadvanced materials, AI, advanced
computing, blockchain, connected
devices, or bio-tech. These solutions
can help decarbonise industries ata much more rapid pace and scale.
PwC/Microsoft analysis suggeststhat just AI, and in just 4 sectors of
the economy, could reduce annual
global emissions by 2.4 gigatons ofCO2e in 2030. This is equivalent to
the emissions of Australia, Canada
and Japan combined, and would
represent an overall reduction incarbon intensity of 4.4 – 8.0%
relative to business as usual.19‘

The events of thepast year have put
on stark display
the deep-rooted
vulnerabilities of
the global economy
to a systemic
global shock.’• Consumer demand for sustainablebusiness practices has rocketed.
The first generation of ‘climate
tech unicorns’ have emerged, withcompanies including Tesla, Nest,
and Beyond Meat showcasing theimportance of disruptive consumer
brands that also deliver substantial
sustainability impact.

18 Venture Capital and Cleantech: The Wrong Model for
Clean Energy Innovation (Gaddy et al., MIT Energy
Initiative, Jul 2016)19 How AI can enable a sustainable future (PwC/Microsoft,
Apr 2019)

The State of Climate Tech 2020 The next frontier for venture capital7• Regulators are increasingly taking
action on net zero. The regulatory
setting has transformed. The world
now has a global deal on climate,20
which is in turn ratcheting carbon
pricing, and rapidly strengthening
national policies, regulation andlegislation, including over one
hundred countries committing tobecome net zero by 2050. Contrast
this with the less supportive policy
environment and heavy relianceon government subsidies thatcharacterised clean tech only adecade ago.
• A robust corporate demand
signal now exists, including net
zero commitments from close to
300 major global corporations overthe past 12-18 months.21 These
pledges include major corporate
greenhouse gas emitters that requiretransformative solutions to makenet zero a reality, including BP,
Iberdrola, Shell, Total, Maersk, Rio
Tinto, Daimler, Nestle and Oneworld

member airlines committed to
becoming net zero emissions
businesses before 2050. To meetthis ambition, companies are notjust looking to develop or buy new
decarbonisation solutions, but also
to invest in disruptive corporate
venture capital plays. Recent months
have seen corporations such as
Amazon, Microsoft, Unilever, Rio
Tinto launch billion dollar plus
investment funds focused on net
zero solutions [see Box 1].

attract the entrepreneurial talent todeliver even more success stories
for the sector. Alongside growing
institutional investor pressure todecarbonise investments, specialist
funds are increasingly being
established to chase the alpha inclimate tech. For example, Chamath
Palihapitiya, CEO and Founderof Social Capital, announced oneof the largest pledges to invest
in sustainability from a crediblemainstream VC.

• Investment is growing. Money
today is flowing rapidly into
assets labelled green or climatepositive, with over $45Tr AUM(close to half tracked AUM, andcounting) committed to portfolio
decarbonisation targets and/or
investing in low-carbon funds andholdings. Combine this with thefirst wave of climate tech unicorns
and wider success stories setting
the stage to attract even greaterlevels of investment in the area, andThis confluence of factors has resulted
in a vibrant and self-reinforcing
ecosystem, presenting a better andmore stable environment for startups
to thrive than the heyday of the clean
tech boom. We anticipate this trend topledge dedicated early stage capital tothe climate challenge will continue, bothas investors recognise the scale of thechallenge, the strengthening demand
signal for solutions, and the growing
investment opportunity and policy
enabling environment.

Box 1: Recent venture funding announcements support new waveof climate tech
Recent reports have outlined the multi trillion-dollar investment opportunity
presented by combating climate change with technology.22 Corporations
and investors are taking notice. In recent months, Amazon has committed tolaunching their Climate Pledge Fund, $2 billion in venture capital aimed at clean
energy ventures; Jeff Bezos, Amazon’s chief executive, pledged $10 billion
to fight climate change through the creation of the Bezos Earth Fund, making
him the largest single US climate change donor; Microsoft has announced a$1 billion Climate Innovation Fund, and Unilever has pledged to invest €1 billion
in a new dedicated Climate & Nature Fund, focused on nature restoration andcarbon sequestration. In addition, generalist VCs have announced that they
are now seeking climate tech related opportunities, including Sequoia Capital,
Founders Fund, Khosla Ventures, Kleiner Perkins and Union Square Ventures.

20

The Paris Agreement (UNFCCC, 2015)21

See the Science Based Targets initiative, for example

22 There’s a Trillion Dollar Investing Opportunity in Green
Innovation, Bill Gross Says. Here’s How. (MarketWatch,
2nd Jul 2020); and Climate Smart Growth Could Deliver 26
Trillion USD to 2030, Finds Global Commission (UNFCCC,
5th Sep 2018)8

Why a thriving startup ecosystemmatters
We need faster, bolder innovation inclimate tech, and startup innovation canhelp deliver this. The startup/venture
ecosystem is geared up to deliver fastgrowing, highly scalable companies
with a technological edge, which isexactly what is needed now for climate.
The special recipe is the combination ofhuman capital with novel technologies,
often wrapped in business models
which challenge or disrupt the statusquo. For example, companies likeApple, Amazon, Google, Genentech,
Uber and Tesla have created ortransformed industries, markets, anddaily behaviour, in under a decade since
their inception.

Startups are not a silver bullet,
however, and there are limitations
to what can be achieved from thisecosystem. Startups can succeed
in a given domain at a biting point
when the technology is not intractablenor is it completely widespread. For
example, touch screen computing firms
failed in the early 1990s because thecomponent technologies were neither
robust, nor cheap enough. Today,
touch screen devices are ubiquitous.
Startups also succeed when there is anestablished infrastructure upon whichnovel services can be built. eBay andAmazon, for example, were built on topof a multi-decade government-led
investment in the global internet
infrastructure. On the other end of thespectrum, startups often struggle ininfrastructure plays or businesses thatare highly capital intensive. Finally, thestartup world is a game of outsized and‘fat-tailed’ outcomes, winners regularly
take all and exceptions to the rule are
not common.
Startups may play a key role in certain
aspects of tackling the climate crisis,
even if activity today is comparatively
modest. They often presage thewidespread availability of new products
and services. The founder’s art is inconnecting technology plausibility witha latent demand signal in the market.
The incentives for founders and theventure capitalists who support them
are structured to help them explore
uncertain areas with potentiallylarge markets and high returns. The
capital fuels the talent to create
new products and services, driving
adoption in the market, and demand forcomplementary products.

Annual VC investment in AI startups
$40b

$30b

$20b

$10b

$0b
2004

2006

2008

2010

2012

2014

2016

2018

Source: Dealroom.co analysis

Climate tech parallels with the AI
investment boom?
The boom in AI investing may provide
some insight on both how quickly thestartup ecosystem can contribute to
making technologies widely available,
and the critical role of different
investment types. Prior to 2011 VC
investment levels in AI startups were
negligible with the first wave in AI
mainly funded by government sources
and the big tech platform players.
But a breakthrough in a key area of
research, machine vision, was thetrigger that the technology had matured
sufficiently to enable application
proliferation. In 2013, around $3 billionof venture capital had been invested in
AI companies. By 2018, the level had
increased ten-fold to $32 billion.23 Suchinvestments drove the availability of AI
technology in the broader economy,
with VCs, governments and enterprises
all joining venture capital deals. IDC
Group estimated that large enterprises
spent $5 billion on AI technologies in
2016; by 2019, that had increased to$37.5 billion.24

Early stage funding by large
enterprises reflects a growing buyin to the transformative benefits ofAI applications, and its criticality forcompetitive positioning and value
creation. Climate tech applications willneed to do the same.
As the saying goes, history does notrepeat itself, but it often rhymes. We
cannot perfectly apply this model toclimate tech, which covers a broad andheterogeneous set of challenge areas
and technologies with different states ofmaturity. But we do see some parallels
that can help us understand the sortsof places where founders and different
investor types might play, and how
those endeavours might scale to haveuseful contributions to the net
zero transition.

23 Source: Dealroom.co analysis
24 See Worldwide Spending on Artificial Intelligence Systems
Will Be Nearly $98 Billion in 2023, According to New IDC
Spending Guide (IDC, 4th Sep 2019); and Worldwide
Spending on Cognitive and Artificial Intelligence Systems
Forecast to Reach $12.5 Billion This Year, According to
New IDC Spending Guide (Business Wire, 3rd Apr 2017)

The State of Climate Tech 2020 The next frontier for venture capital9

Three key criteria that drive suitability
for venture capital investment are the:• Abatement feasibility in agiven sector: to what extent aretechnology solutions technicallyfeasible, applicable at scale, andcost effective for a carbon reduction
sector-specific solution?
• Capital efficiency in the sector: dosolutions require significant amounts
of upfront capital to prove themodel?
• Value creation potential: do
applications create materialvalue creation benefits for large
enterprises, from operating model
enhancements, to product/
service customer growth, brand
optimisation, or optimised balance
sheets including capex gains or tax
efficiencies?
Propositions which are capitalefficient, technically feasible toapply and scale, and showcase aclear value creation proposition lendthemselves to fast growth venturesand heightened investor interest.
Examples include efficient sharedmobility, sustainable new consumer
goods brands, consumer bundling ofexisting renewable power capacity, andprecision agriculture technologies.

Where solutions are feasible but
large amounts of capital are required,for example solar photovoltaic (PV)generation, it is likely that these capitalrequirements will be met by projector other non-VC sources of finance.
However, startup opportunities might
emerge in analytics, optimisation,marketplace or distribution in thesechallenge areas.
Technically risky challenge areas thatare still in the R&D phase (including
many in the so-called hard-to-abate
sectors) require higher levels ofinvestment and valuation in earlyrounds. In general, government funding
and corporate funding from relevant
big industry players searching fortransformative solutions are importantbackers for such ventures. Some,however, may be unsuitable for venture
capital depending on how far frombuilding and testing they are.
Alternative proteins are one area where
the breakthroughs were made using
venture funding, while in comparison,carbon sequestration and nuclear
fusion technologies are still in relatively
nascent stages of investment, withenterprises and governments acting as
critical strategic partners and investors.
The area where there is the least clear
path for startups to play is where thetechnological path is unclear andcapital efficiency is low. Testing large
scale geothermal or geoengineering
approaches, for example.

‘

There’s been asignificant cultural
move towards accepting
climate change as a risk,
driven by the childrenof the 90’s reallyinfluencing theirfamilies. This
generation cares about
the sustainability play,and how corporations
are addressing thisthrough their supply
chains. Brands need
to be addressing climatechange, or they’ll suffer.
Technology isincreasingly affecting
every industry. AI will
be a large contributor tosustainability, andnecessity is the motherof investment’

Vinod KhoslaFounder, Khosla Ventures10

Approach

The State of Climate Tech 2020 The next frontier for venture capital

11

Approach
What is climate tech?
Climate tech is defined as technologies that are explicitly focused on reducing GHG emissions or addressing
the impacts of global warming, while climate tech startups are companies which are applying thosetechnologies. The term climate tech is purposefully broad in order to incorporate the broad swathe oftechnologies and innovations being used to address GHG emissions and the broad array of industries where
they are being applied.

Categorising climate techstartups by challenge area
Governments, businesses, andinternational organisations have adeliberate focus on reducing GHG
emissions across all sectors of theeconomy. There are, however, five key
sectors which contribute the majorityof emissions, and which remain key‘challenge areas’.
PwC has grouped our climate techsolutions in alignment with thesechallenge areas. In addition to these‘vertical’ areas, we have included two‘horizontal’ challenge areas, reflecting
themes where we see significant
potential for sector-agnostic solutions
to emissions reduction.
Together, these seven challengeareas, shown in the diagram to theright, encompass our ‘universe’ ofclimate tech solutions. Each of theseseven challenge areas are broken
down into specific net zero levers – forexample, alternative proteins, vertical
farming, and agricultural biotech –which are explained in further detail in
the Appendix. These challenge areas
are designed to broadly follow theindustry classifications set out by theIntergovernmental Panel on Climate
Change (IPCC) and which are typicallyused when discussing emissions
reduction.25

25

IPCC Fifth Assessment Report, Chapter 10 (IPCC, 201426 More details on the boundaries of our analysis is available
in the Appendix

12

EnergyMobility andTransport

Food,
Agricultureand LandUse

Heavy
Industry

Built
Environment

GHG Capture and Storage

Climate and Earth Data Generation

How has PwC produced the data to
support this report?
The initial dataset was provided by
Dealroom.co, a global data platform
gathering information on startups,
investors, and deals. Based on
feedback from the VC community andour own experience, we applied a filter
on investment time frame and minimum
size of funding for startups26 to produce
a shortlist of startups we think will beof most interest to the VC community.
Through this, we excluded startups
who are still relatively small (thosethat have raised less than $1 million in
VC funding), as well as those who arestaying private for longer, and who havemore in common with many corporates
than with startups still raising earlyrounds of capital.

PwC developed a machine learning
approach to further filter and prioritise
this shortlist by likelihood of being
climate tech relevant. Our analysis
was underpinned by extensive humanverification of our results, and each of
our climate tech startups was tagged to
relevant challenge areas and levers.
Quantitative analysis was conducted ondeal data provided by Dealroom.co,which allowed for analysis on areas
such as amount of funding raised,geographic split, investors involved,
and several other important fields – see
the results section for more details.
Additional detail on our methodology
can also be found in the Appendix.

Key findings:
Investment

The State of Climate Tech 2020 The next frontier for venture capital

13

Key findings: Investment
Overall Funding Levels: 2013-19
Investment in climate tech has grown at almost five times the rate of the overall global venture capital market,
with similar growth seen in numbers of deals. There was ten-fold growth in investment between just 2013 and2018 – though 2019 experienced a small drop-off, concomitant with wider VC investment trends.27
VC investment in Climate Tech and number of deals
20

800

15

600

10

400

Number of deals

200

5

GHG Capture and Storage

Number of deals

Investment (US$ B)

Climate and Earth Data Generation

Built Environment
Industrial Processes
Food, Agriculture and Land Use
Mobility and Transport

0

0
2013

2014

2015

2016

2017

2018

Energy2019

Source: PwC analysis on Dealroom data

Key highlights from our dataset include:• PwC identified around 2,700 uniqueinvestors from venture capitalists,
corporate VCs, angel investors,
philanthropists, and government funds
who have participated in funding over
1,200 climate tech startups between
2013 and 2019, covering over 2,700
funding rounds.
• Investment levels are growing rapidly
from a low base. Of the firms that met
our criteria of having raised venture
capital (or the equivalent) between
2013 and 2019, we see an 84%
compounded annual growth rate
(CAGR) in total capital deployed.
This represents almost five times thegrowth rate of the wider VC industry,where investment grew at just 18%
annually. It also is on the order of 3
times the growth rate of VC investment
into AI, during a time period renowned
for its uptick in AI investment.

• Over this seven year period, $59.5
billion of venture capital flowed into
startups contributing to tackling the net
zero challenge.
• In 2013, climate tech attracted only
$418 million in venture capital. By
2018, nearly fifty times as muchcapital was deployed, before levels
cooled off to $16.3 billion in 2019. The
venture industry as a whole deployedapproximately $264.4 billion last year,
implying climate tech investment
represented 6% of global venture
capital activity in 2019.
• We also see a rapid acceleration in
the number of deals being done. The
number of funding rounds grewat a 35% CAGR over the sevenyear period. As this was a lower
growth rate than funds deployed,
it implies an increase in the typicaldeal size, suggesting a maturing of
the climate tech market. This wasparticularly noticeable for investmentsin the Mobility and Transport challenge
area.
• The Mobility and Transport challengearea represents 63% of all climate techfunding over the past seven years, as
investments in electric vehicles, micromobility and other transit models haveattracted significant investor attention– of the ten firms which attracted themost capital in the period, nine were in
the Mobility and Transport challengearea. VC investment in this challengearea alone grew at a CAGR of 151%
over the period; whilst the remaining
climate tech challenge areas grew at amore temperate, but still pacy, gait of
57% per annum.

27 
We note that there is often a time lag between when funding is raised and when it is reported. Our report makes use of data from Q2of 2020, and as such, figures for 2019 may be underestimated. Based on the level of additional 2019 funding identified by Dealroom
since the data for this report was extracted, we estimate this ‘reporting gap’ represents approximately 3% of 2019 funds

14How does investment vary by stage?
Early stage company formation
PwC analysis also shows a vibrant andgrowing ecosystem of early stage firms
and investors. In 2013, we identified
35 early stage, seed or series A rounds
in excess of $1 million. By 2019, thishad increased by an order of magnitude
to 353. This implies a healthy pipelineof younger firms in the market, readyto approach more mature funding
milestones in the coming years.

Number of early stage rounds worth >$1m
400

300

200

100

0
2013

2014

2015
Early VC

2016

2017

Series A

Seed

2018

2019

‘Early VC’ is the default label for rounds of $1-10m with no self-reported label
Source: PwC analysis on Dealroom data

The State of Climate Tech 2020 The next frontier for venture capital15

We see that a large part of the top
line growth in VC funding is driven bylarge deals (that is, those in excess
of $100 million). In 2013, negligible
venture dollars went into large deals
in climate tech, but by 2019 sixty one
cents of every venture dollar invested
came from a large deal. This reflects
a maturation of the climate techmarket, characterised most strongly in
the Mobility and Transport challengearea, where an increasing numberof successful late-stage startups are
disrupting traditional urban mobility,
through offerings such as electricvehicles and micro-mobility options.

Graduation time

Funding split by deal size
$20

$15
Funding (US$ B)

Large deals

$10

$5

$0
2013

2014

2015

2016

Large (>$100M)

2017

2018

2019

Small (up to $100M)

Conversion to Series A by time elapsed since Seed roundOf climate tech startups that raised aseed round, approximately 29% hadraised an A round within 36 months.28
This compares favourably against thewider VC market. Previous analysis
by Dealroom suggests that, for typicalstartups which have managed to raise
seed funding, only 19% graduate
to Series A funding within 36 months.29

22%

26%

29%

17%
10%

12 months

18 months

Source: PwC analysis on Dealroom data

28 There may be a lag between when a round is reported
to have happened and when it has actually happened.
There is potential for bias – perhaps investors are
more active to announce investments in climate techstartups compared to other types of startups – but thisis inevitably impossible to assess externally
29 Approximately 90% of series A rounds have happened
within 36 months of the seed round, making it a useful
cutoff for measuring conversion rates

16

24 months

30 months

36 months

Investment by challenge area
Overall findings
Each challenge area attracts very
different amounts of capital, as indeed
does each lever within the challengeareas, reflecting the maturity of theunderlying technology. For example,
solar and wind power generation has
well-tested, established technologies
and a proven, mature businessmodel. Accordingly, this lever attracts
substantial overall finance, but
comparatively limited amounts ofventure capital.

We see a similar scenario in the Mobility
and Transport challenge area: overall,the challenge area is nearing maturity,
but this top-level view obscures theunderlying detail within each lever.
In practice, electric car startups are
attracting large amounts of venture
capital, particularly in China, and micromobility has also been the recipientof substantial investment. Yet venture
investment into essential low-emissions
solutions for international transportchallenges such as shipping are almost
non-existent.

‘

The Mobility andTransport; Food,
Agriculture, andLand Use; and the
Built Environment
challenge areas havebeen the major
recipients of climate
tech investment.

The State of Climate Tech 2020 The next frontier for venture capital

17

Energy
Challenge area overview and climate challenge
Generating electricity and heat energy accounts for around one-third of global greenhouse gases emissions
each year.30 Finding net zero sources of energy – which are also reliable and affordable – is vital to limiting theeffects of climate change. Some solutions are already a mainstay: falling costs and rising efficiency meansthat renewables such as wind and solar are increasingly competitive with their fossil fuel counterparts.31
However, there is a need to develop new tools that are more consistent, reliable, and available to all. Battery
storage will be crucial to help with intermittency of many renewables. Society also needs smarter, more
efficient grids that can store and transmit clean energy when and where it’s needed. Emerging technologies,
such as AI and blockchain, can enable and optimise decentralised grids which are well suited to renewablesources. Finally, a clean transition from carbon-based fuels must include tools which abate the emissions of
our current energy system.
Headlines from PwC analysis
Investment level: Energy is the thirdlargest challenge area by level ofinvestment, accounting for $4.9 billionof investment between 2013 and2019, or 8.2% of total climate tech
investment.
Growth rate: Investment in Energy
startups has grown at a moderatepace, recording a CAGR of 41%, which
is substantially lower than the overall
growth rate of climate tech investment(though still double that of the wider VC
ecosystem). This reflects the relative
maturity of two of the major sources ofrenewable energy – wind and solar –which are now being deployed globallyat scale, and are increasingly financed
through traditional project, debt andother finance rather than venture capital.
Number of deals: The deal flow has
increased steadily from 14 in 2013 to
101 in 2019 in this area. The majority ofthis growth in deals, however, has takenplace in renewable energy generation,energy storage, and grid management.
These are clearly at greater levels of
maturity than the remaining levers,
such as nuclear and alternative fuels,
which are early in their investment
development path.

Investors: Volkswagen Group,
Kleiner Perkins, and Schneider Electric
are the biggest investors in the challengearea by total dollars invested, whilein terms of the number of deals, Total
Energy Ventures, GE Ventures,and InnoEnergy lead.
Unicorns: SolarCity, specialisingin solar energy services, gained avaluation of $2.6 billion during its
acquisition by Tesla, Inc. and is the only
$1 billion plus investment identified in
Energy during the period analysed.
Other notes: An apparent dip ininvestment takes place in 2017. The
number of deals year on year showsa more even trend and indicates thisis predominantly due to large deals
landing in 2015 and 2018, particularly
in renewable energy generation andenergy storage.

30 4 Charts Explain Greenhouse Gas Emissions by Countries
and Sectors (WRI, 6th Feb 2020)
31 Renewables Increasingly Beat Even Cheapest Coal
Competitors on Cost (IRENA, 2nd Jun 2020)

18

The State of Climate Tech 2020 The next frontier for venture capital

Sector definition:• Production, development anddistribution of alternative fuels• Measures which support proliferationof renewable energy, including
load-balancing (storage) and supplydemand balancing mechanisms• Measures which increase
efficiency of the energy sector or ofenergy intensive electronics (suchas data centres)• Excludes measures which
create efficiencies specifically forfossil fuel energy generation, suchas improvements to venting/flaring
mechanisms on oil andgas refineries

Key levers

1.25

125

1.00

100

0.75

75

0.50

50

0.25

25

• Noteworthy startups: Oxford
Photovoltaics raised $120 million andis making breakthrough perovskiteon-silicon tandem solar cells
which demonstrates much higher
efficiency than traditional cells. Fenix
International raised $130 million, andis building affordable solar homesystems to deliver electricity toremote, off-grid households. Similarly,
Bboxx have raised $90 million todeliver clean energy using solar homesystems, and tackle energy poverty.

Energy storage:• Major investment themes: Twentyfive percent (25%) of investment
is focused on energy storage:
predominantly development ofbatteries, but also some more fringe
chemical/kinetic storage startups.
Increasing penetration of intermittent
renewables goes hand in hand withrising investment in this lever, as
increased dependence on wind andsolar require deployment of storage tobalance their variability.
• Noteworthy startups: Just fivecompanies account for more than
50% of storage investments:
Quantumscape, Sonnen GmbH,
Aquion Energy, Energy Vault SA,
and Vionx Energy. Of these five, only
Energy Vault SA is a non-chemical
battery system, using a novel form ofgravity storage.

0.00

Number of deals02013 2014 2015 2016 2017 2018 2019

Number of deals
Waste heat capture/
conversion/storage
Renewable energy
generation
Nuclear generation
Low GHG extraction
and maintenanceHigh efﬁciency energy
intensive electronics,
and smart monitoring/
management
Energy storage(thermal or electricity)
Alternative fuels
Grid management

Number of deals

60

Waste heat capture/
conversion/storage
Renewable energy
generation
Number of deals• Major investment themes: Thirtysix percent (36%) of investment(215 deals) is from this importantlever, which is relatively mature
given the high levels of funding
and regulatory support since theclean tech boom. Startups havepredominantly focussed on renewableenergy (mainly solar), encompassing
technology development as well as
innovative funding/distribution models
for solar and wind, but also including
exploration of other technologies,
such as wave and geothermal energy.

Investment (US$ B)

Renewable energy generation

40

Nuclear generation
Low GHG extraction
and maintenanceHigh efﬁciency energy
intensive electronics,
and smart monitoring/
management

20

Energy storage(thermal or electricity)0

Alternative fuels
2013

2014

2015

2016

2017

2018

2019

Grid Management

Source: PwC analysis on Dealroom data

Nuclear generation:
Major investment themes: Nuclear
generation on the whole has not been
invested in heavily during the period,
with only six startups identified witha combined total of $262 million VC
funding. Two-thirds of this funding camein 2018 and 2019, focussed primarily
around fusion power, suggesting thismay be an area to watch.

Noteworthy startups: Energy General
Fusion has raised $136 million, while
Commonwealth Fusion Systems
closed an $84 million funding round in
May 2020 (just outside of our analysis
time frame).

The State of Climate Tech 2020 The next frontier for venture capital

19

Mobility and Transport
Challenge area overview and climate challenge

Transport has been one of the fastest growing sources of emissions, having increased by 71% since 1990,32
and now accounts for approximately one-quarter of global GHG emissions.33 The transition to electricvehicles has been a favoured tool for abating GHG emissions, perhaps unsurprising given that 72% of global
transport emissions arise from road vehicles.
Reducing global transport GHG emissions will still be challenging, however, as the continuing growth inpassenger and freight activity could outweigh all mitigation efforts unless transport emissions can be strongly
decoupled from GDP growth (and carbon-intensive energy systems). Though electrifying transport systems
remains a vital part of the net zero transition, other changes need to occur too. An increased focus on increasing
the attractiveness of different mobility options (leading to modal shifts, shared transport, or avoided journeys),improved vehicle performance technologies, alternative fuels, investments in related infrastructure, and changes
in the built environment, will all be necessary to mitigate the impacts of climate change.

Headlines from PwC analysis
Investment level: This is by far thelargest area of investment at $37.4
billion, or 63% of the funding analysed
between 2013 and 2019. Much of thisis attributable to heavy EV investment
in China (nearly half of all investment
here takes place in Chinese startups)
and investment into micro-mobility (e.g.
e-scooter rental platforms).
Growth rate: Investment has grown
dramatically, recording a CAGR of
151%, which is substantially above
the overall growth rate of climate techof 84%. CAGR by number of deals
sits below this at 47%, but above
the climate tech average (35%). The
difference between these indicates adisproportionate growth in large deals.
Number of deals: Deal flow has
increased steadily from 18 in 2013 to
182 in 2019, with efficient transportsystems as the lever with the mostdeals. Growth in the number of deals
has shown early signs of slowing since2017 as some of the main levers –efficient transport systems (31% ofdeals), and low GHG road transport(22% of deals) – reach maturity. Low

GHG shipping, low GHG air transport,
and batteries/fuel cells recorded
significantly less deals than the otherlevers, indicating the relative immaturityof these levers.
Investors: Evergrande Health Industry
Group, SoftBank, China Cinda AssetManagement, and Zhongji Holding are
the biggest investors by total dollars
invested – all of whom, excluding
SoftBank, are Chinese investors.
Sequoia Capital and DST Global are theonly other non-Chinese investors in the
top 10. In terms of the number of deals,
Y Combinator, Sequoia Capital andTencent lead.
Unicorns: Mobility and Transport
contains the largest number of unicorns
for any challenge area, with 30 from a
total of 43. The majority of these are
EV-related (15) or electric micro-mobility
related (7). Of the 30, nearly half are
Chinese startups, again predominantly
EV-related (9) and electric micromobility related (3).

32 4 Charts Explain Greenhouse Gas Emissions by Countries
and Sectors (WRI, 6th Feb 2020)33 Everything You Need to Know About the Fastest-Growing
Source of Global Emissions: Transport (WRI, 16th Oct 2019)20

The State of Climate Tech 2020 The next frontier for venture capital

Sector definition:• Developments which increase
efficiency (of engines, design, ormaterials) associated with movementof goods or people by land, air or sea• Development of electric vehicles
and micro-mobility vehicles, andthe infrastructure used to propagate
these technologies, including ridesharing apps and charging points• Development of battery technologies
for mobility applications and theassociated infrastructure• Improvements to the efficiency oftransport systems, including use of
autonomous & sensor technologies,
improvements to maintenanceand repair, and urban planningand designKey levers

Number of deals

200

12.5

Micro-mobility• Noteworthy startups: Ofo, the mostheavily funded startup during ouranalysis period, had – at its peak –10 million bicycles in 250 cities, and20 countries, with 63 million monthly
active users. Hellobike and Mobike
have also raised significant funds
to provide bicycle sharing systems,
headquartered in China. This area
has seen some bumpy times inrecent years, however, particularly
outside of China.

Low GHG light and heavy duty roadtransport: EVs and high-efficiency
vehicles• Major investment themes: Low
GHG road transport is the mostheavily funded lever in this challengearea, with $19.4 billion raised
between 2013 and 2019. This
represents over half of all investmentin this challenge area, and nearly
as much as all investments in theother challenge areas combined.
Nearly 85% of this investment isdirected towards electric vehicle(EV)/hydrogen-EV development in
Chinese startups. Other focus areas
include development of heavy duty
vehicles such as buses and trucks,
smart infrastructure for EVs, andsharing platforms/rental services
targeted at emissions reduction.

Low GHG shipping

150

7.5

100

5.0
50
2.5

Number of deals

Investment (US$ B)

10.0

Low GHG light andheavy duty roadtransport: EVs andhigh-efﬁciency vehicles
Low GHG air transport
Efﬁcient transportsystems
Batteries/fuel cells

002013 2014 2015 2016 2017 2018 201980

Micro-mobility
Low GHG shipping
Low GHG light andheavy duty roadtransport: EVs andhigh-efﬁciency vehicles

60
Number of deals• Major investment themes: Micromobility is the second most heavily
invested lever in this challenge area,with $9.1 billion raised between
2013 and 2019 (approximately
one quarter of all investment in
the challenge area, and larger thanany other challenge area). The
level of investment in this space isunsurprising as major cities aroundthe world have seen a surge in thenumber of providers of docklessbikes and scooters. There are also
some examples of other modes oftransport, including e-skateboards
and self-driving robots.

Micro-mobility

40

Low GHG air transport
Efﬁcient transportsystems

20

Batteries/fuel cells

0
2013

2014

2015

2016

2017

2018

2019

Source: PwC analysis on Dealroom data

• Noteworthy startups: NIO is a
Chinese startup which designs
and develops electric autonomousvehicles. They are the most heavily

funded startup in this analysis,
having raised $3.1 billion, andwent public on the New York Stock
Exchange in 2018.

Notes:• The onset of COVID-19 points to further growth in the micro-mobility sector, as
governments, such as the UK, have fast tracked micro-mobility trials in response.
• EV startups identified in our analysis are predominantly China-based because
venture capital is a big stream for Chinese EV investments. In Europe andNorth America, by contrast, EV investment is taking place through incumbent
auto-manufacturing companies, a funding mechanism which is excluded fromthis analysis.
• Growth rate in this challenge area may be surprising given the major levers– electric vehicles, micro-mobility, and efficient transport systems – havebeen relatively mature for a while. However, our analysis indicates how muchinvestment can grow significantly once scientific and product risks are overcome
and investors become more certain of tangible value in an investment space.
The State of Climate Tech 2020 The next frontier for venture capital

21

Food, Agriculture, andLand Use (FALU)
Challenge area overview and climate challenge
The food systems that feed the world’s population account for 19-29% of global GHG emissions.34 By 2050,
global population is expected to grow by 25%,35 leading to an acute increase in GHG emissions if we donot transform the way we grow food. There is a need to find more efficient and productive ways to feed theplanet’s growing population whilst lowering the environmental load of food production.
Current approaches to mitigation often focus on improving efficiency in farming processes. However, with$44 trillion of economic value generation moderately or highly dependent on nature and its services, society
will need to also find innovative approaches which are less land-intensive. These include whole new formsof nutrition, ways to manage natural environments more effectively, mitigate and capture carbon during
agricultural processes, and disrupt the current food supply chain.
Headlines from PwC analysis
Investment level: FALU is the second
largest challenge area by level ofinvestment at $8.1 billion, or 13.6% of
the funding analysed between 2013 and2019. A major portion of this can be
attributed to growth in alternative foods(such as plant-based burgers and meatalternatives) and precision agriculture.
Growth rate: Investment in FALU has
seen strong growth at 75% CAGR,
slightly below the overall growth rate ofclimate tech at 84% (though the overall
average is 57% when discounting
Mobility and Transport, which heavily
distorts this figure). At 41%, CAGR bynumber of deals is significantly lower
than investment CAGR, indicating
disproportionate growth in large deals.
Number of deals: The annual numberof funding rounds has risen from 21
in 2013 to 162 in 2019. The majorityof this growth has taken place inalternative foods and precision
agriculture: together they form 64% ofdeals in 2019.

Other more nascent levers showing
early signs of accelerating, include
urban farming and value chain
GHG reduction; while land use
management, energy efficient
agricultural equipment, and earth andmarine protection are still embryonic,
with only one deal each in 2019.
Investors: Temasek, Kleiner Perkins,
and Insight Partners are the biggest
investors in terms of total dollars,
while in terms of the number of deals,
SOSV, New Crop Capital, and S2G
Ventures lead.
Unicorns: This challenge area
records the second highest number ofunicorns after Mobility and Transport,(7 from a total of 43). The majority ofthese are in alternative foods (4), while
precision agriculture (2) and value
chain GHG reduction (1) form theremainder.

34 Vermeulen et al., 201235 World Population Prospects 2019 (UN, 2019)22

The State of Climate Tech 2020 The next frontier for venture capital

Sector definition:• Food production methods,
commonly using biotech, that often
replace carbon intensive animalbased products, such as synthetic
proteins or insect proteins• Low-GHG farming practices which
improve efficiencies or reducecarbon from farming, such as
precision farming, vertical farming or
aeroponics• Management and modification ofnatural environments, in particularthrough reforestation, afforestation,or (avoided) deforestation• Managing land resources in a way
which reduces carbon emissions(e.g. reducing soil CO2 emissions)• Any activity associated with reduced
GHG emissions in food supply
chains (e.g. eliminating spoilage)• Development of new fertiliserswith lower carbon footprints andprocesses which reduce the level of
GHG emitted in production and useof current fertilisers

Key levers3

Alternative foods/low-GHG proteins• Noteworthy startups: Impossible
Foods is an American startup
founded in 2011 that develops plantbased substitutes for meat products.
It is the most heavily invested startup
in this challenge area during theanalysis period and had a valuationof $2 billion in 2019. The company
researches animal products at themolecular level, then selects proteinsand nutrients from plants to recreate
the experience and nutrition of meatproducts. Their signature product,
the Impossible Burger, was launched
in July 2016, after years of researchand development.
Precision agriculture and robotics• Major investment themes:
Precision agriculture and robotics isthe second most invested lever in
FALU. It is the lever with the highest
number of deals, but conversely oneof the lowest average deal sizes,
illustrating the early stage manyof the startups find themselves
at. They typically use establishedtechnologies, which therefore do notneed as much capital investment:
e.g. AI, sensors, drones, and robotics
to either gather data or distributeresources more efficiently
and productively.

150

2

100
1

Number of deals

Investment (US$ B)

Value chain GHG reduction

50

Precision agriculture
and robotics
Low GHG Fertilizers, Pesticides,
Insecticides, and therapeutics
Low GHG/energy
efﬁcient equipment
Land use management
Earth and Marine protection
Deforestation prevention,
eforestation and afforestation
Alternative foods/low
GHG-proteins
Agricultural biotech/genomics
and natural solutions

00
2013 2014 2015 2016 2017 2018 2019

Vertical and urban farming(including aquaponics)
Value chain GHG reduction

60

Number of deals• Major investment themes: This is
the most heavily invested challengearea in FALU with over one-thirdof the overall investment. Deal size
is higher than the sector average,
reflecting more momentum forstartups reaching scale. Alternative
foods and low-GHG proteins
is typified by food technology
companies exploring plant-based
and lab-based alternatives to animalbased products. This lever has seen adramatic increase since 2017 in boththe number of deals and the levelof investment, reflecting improved
investor confidence following the
success of recent unicorns (such as
Beyond Meat and Impossible Foods).

Number of deals
Vertical and urban farming(including aquaponics)

200

40

20

0
2013

2014

2015

2016

2017

2018

2019

Precision agriculture and robotics
Low GHG Fertilizers,
Pesticides, Insecticides,
and therapeutics
Low GHG/energy
efﬁcient equipment
Land use management
Earth and Marine protection
Deforestation prevention,
reforestation and afforestation
Alternative foods/low
GHG-proteins
Agricultural biotech/ genomics
and natural solutions

Source: PwC analysis on Dealroom data

• Noteworthy startups: Indigo
Agriculture is an American
agricultural technology company
founded in 2014 and is the mosthighly valued agritech startup, with apost money valuation of $3.5 billion
after raising $500 million in Series F
funding in 2020. Indigo started with amicrobe-based seed treatment that
improves yields of products such as
cotton, wheat, and rice.
They have since evolved into an
online grain marketplace, an onlinetransport matchmaking service
for that grain, a carbon market togive farmers a financial incentive
for sequestering carbon withregenerative agriculture, and adata platform, underscored by its
acquisition of the satellite imagery
business TellusLabs.

VCs are especiallyinterested in Land Use
as a sector because of it
being relatively
outdated, it is prone totech as a disruptor’Hampus Jakobsson
General Partner, Pale Blue Dot

The State of Climate Tech 2020 The next frontier for venture capital

23

Heavy Industry
Challenge area overview and climate challenge
Heavy industry is accountable for around one-fifth of GHG emissions,36 and has been the fastest growing andmost difficult to abate challenge area.
The materials which drive the need for industrial processes underpin our everyday lives: chemicals form ourplastics, fertilisers, and synthetic fibres; concrete and metals are the basis of much of our infrastructure.
Furthermore, GHG emissions in industry come from both energy used in industrial processes, as well as
emissions generated by industrial processes themselves (such as CO2 emitted during a chemical reaction).
Therefore, an absolute reduction in emissions from the industry sector will require deployment of a broad setof mitigation options beyond simply energy efficiency measures. Society will need to explore other innovations
such as material use efficiencies, transformative recycling, product efficiencies, and demand reduction.
Headlines from PwC analysis
Investment level: Heavy industry
attracted $3.8 billion of venture capital
between 2013 and 2019, or 6.4% of
overall investment, making it one of thesmaller challenge areas. The investment
into each lever varied significantly year
on year, attributable to the challengearea’s relative immaturity: as newtechnological breakthroughs appear,
they are flooded with VC capital. The
steadiest investment has funnelled into
other low-GHG materials (such as BOLT
Threads, which use bio-engineered
yeast to produce silk; Modern Meadow,which produces bio-leather; and Allbirds,
which produces wool shoes) andenergy/resource efficient manufacturing
processes – over three-quarters of thetotal invested in this challenge area went
to these levers.
Growth rate: Investment in heavy
industry startups has grown consistently,
with the challenge area recording a
CAGR of 75%, slightly below the overall
growth rate of climate tech investmentof 84%.

Number of deals: The deal flow has
increased modestly from 22 in 2013 to
45 in 2019, reaching a peak in 2017,attributable to an abnormal influx ofdeals in the efficient manufacturing
processes lever that year. Most of thedeals have taken place in this samelever, while the lever with the highest
growth rate is low GHG plastics andplastic alternatives.
Investors: Top investors by dollars
invested include Viking Global
Investors, Cascade Investment, andGeneral Atlantic, while in terms of thenumber of deals, SOSV, Y Combinator,
and O’Reilly AlphaTech Ventures lead.
Unicorns: Four unicorns were recordedin this challenge area: three in low GHG:
other materials (Ginkgo Bioworks,
Allbirds and Zymergen) and one in
efficient manufacturing processes(Carbon).

36 Global Greenhouse Gas Emissions Data
(WRI, retrieved Aug 2020)

24

The State of Climate Tech 2020 The next frontier for venture capital

Sector definition:• Reduction of emissions from the
manufacturing of large, heavy articles
and materials in bulk
• Includes activities and actions to
reduce, reuse, or manage waste in
manufacturing• The creation of low GHG alternatives
to traditional inputs (e.g. chemicals,
steel, plastics, etc.)

Key levers
Energy/resource efficientmanufacturing processes• Noteworthy startups: Carbon is
an American digital manufacturing
company founded in 2013. Carbon
develops and manufactures 3-D
printing hardware, software, and its
own printing materials.

40

0.75
0.50

20

Number of deals

Investment (US$ B)

1.00

0.25
0

0.00
2013 2014 2015 2016 2017 2018 201930

Number of deals• Major investment themes:
The lever covers nearly a third of all
the startups and total investment inheavy industry. This is due in partto this lever containing the least
technically and financially challenging
startup opportunities, in particularusing software and hardware toincrease efficiencies in production
processes. The types of solutions
found in this lever include: use of
AI, Internet of Things (IoT), sensors,and drones, to increase efficiencies;
3-D printing of products; industrial
robotics to reduce material waste;
and automated maintenance using
autonomous robots and drones.

60

1.25

20

10

Low GHG: Other materials• Major investment themes: Thelever includes 18 startups, which
are predominantly focused on two
applications: bio-based productalternatives for broad industrial
purposes; and bio-based and plant
alternatives for the fashion industry
specifically. The largest startups
in the challenge area are biotech
companies; while the fashion
focused startups, though greater innumber, have garnered significantly
less investment.

0
2013

2014

2015

2016

2017

2018

2019

Number of deals
Transformative circularity,
recycling and materials
efﬁciency solutions
Low GHG: other materials
Low GHG plastics orplastic alternatives
Low GHG Iron, Steeland Aluminium
Low GHG extraction,
supply and maintenance
Low GHG Concrete andAlternatives for construction
Low GHG chemicals(beyond plastics)
Industrial residuals
treatment andmanagement
Energy/resource efﬁcientmanufacturing processes

Energy/resource efficientmanufacturing processes
Low GHG: other materials
Low GHG plastics orplastic alternatives
Low GHG Iron, Steeland Aluminium
Low GHG extraction,
supply and maintenance
Low GHG Concrete andAlternatives for construction
Low GHG chemicals(beyond plastics)
Industrial residuals
treatment andmanagement
Transformative circularity,
recycling and materials
efficiency solutions

Source: PwC analysis on Dealroom data

• Noteworthy startups: Two startups
alone form 75% of the investmentin this lever: Ginkgo Bioworks andZymergen. Both are American
biotech companies which specialize
in using genetic engineering to
produce bacteria with broad
industrial applications, and are twoof the world’s largest privately held
biotech companies.

The State of Climate Tech 2020 The next frontier for venture capital

25Built Environment
Challenge area overview and climate challenge
Buildings and construction are responsible for 39% of global greenhouse gas emissions.37 Operationalemissions (generated from energy used to heat, cool and light buildings) account for nearly two-thirds ofthis, while the remainder comes from embodied carbon emissions, or the ‘upfront’ carbon that is associatedwith materials and construction processes. To eliminate the carbon footprint of the built environment, bothbuildings and the materials they are made from must therefore be more efficient, smarter, and cheaper thanthose used today. Small scale efficiencies such as improvements in heating, lighting or appliances will playa role. However, given the breadth of the built environment’s impact, more pivotal solutions will also beneeded: for example, building-level electricity and thermal storage, innovative construction methods andtransformative circularity, or sensor-led smart building management.
Headlines from PwC analysis
Investment level: Built environment is
the smallest of the vertical challengeareas, with $3.7 billion of VC invested
between 2013 and 2019, or 6.2% of
overall investment.
Growth rate: Investment in built
environment startups has grownstrongly, with the challenge area
recording a CAGR of 57%, though
this is substantially below the overall
growth rate of climate tech investmentof 84%.
Number of deals: The number ofdeals has increased steadily from 13
in 2013 to 65 in 2019. Nearly onethird of these deals have focused on
sensortech and smart management ofbuildings/infrastructure, while a similar
number of deals have been aimed athigh efficiency appliances/lighting/cooling systems. This is reflective of
the relatively low investment cost,
relatability for investors to typical tech
investments, and consumer demand
signalling (see more in key levers
section). Other areas have seen fewer
deals and are relatively more nascent,including low GHG construction
processes (35 total) and transformative
circularity and recycling (32 total).

Investors: Khosla Ventures, Obvious
Ventures, and DFJ Growth are thebiggest investors in the challenge area
by total invested, while in terms ofnumber of deals Amazon Alexa Fund,
Demeter, New Enterprise Associates,
and Prelude Ventures lead.
Unicorns: There is only one
startup with a $1 billion plus valuationin this challenge area for the time
period analysed: Katerra, an American
technology-driven offsite
construction company.
Other notes: We see ‘bumpy’
investment in high efficiency spacewater heating/cooling (in 2016),
high efficiency urban spaces andcommunities (in 2017), and low GHG
construction processes (in 2018),
reflecting the relatively nascent levelof investment in all of these levers.
As startups in these sectors develop,
we would expect to see more evenly
distributed investments rather thanfunding allocated to a small handfulof startups.

37 New report: the building and construction sector canreach net zero carbon emissions by 2050
(World Green Building Council, 23rd Sep 2019)26

The State of Climate Tech 2020 The next frontier for venture capital

Sector definition:• High efficiency fittings, fixtures,lighting, and heating and cooling forcommercial and residential buildings,
including district-level solutions• Smart management of building
energy consumption using sensors,
smart devices, AI analysis of theensuing data, and app control
for consumers• Efficient construction methods, with
an emphasis on ease to construct
and reduced waste on site (inparticular modular construction, 3-D
printing, imagery/computing)• Noteworthy startups: Katerra raised
the most funding in this lever in ourdata set, at $1.2 billion since 2016.
Other startups include NODE andBiokable. This lever has seen somechallenges also, with some startups
reducing the size of their workforce
in recent years.
Smart management of devices• Major investment themes: Twentysix (26%) of investments for thechallenge area and 139 deals
fall into this lever. Startups arefocused on cost saving measuresrelating to energy consumption forresidential/commercial consumers,
and address this typically via data
gathering sensors, analysis of energy
consumption, and remote control ofenergy devices.
• Noteworthy startups: Ecobee
is a Canadian home automationcompany that makes smart
thermostats, temperature andoccupancy sensors, smart lightswitches, smart cameras, andcontact sensors. The thermostats
are controlled by using the built-in
touchscreen, web portal, or app.
Their products and services are
typical of much of the startups
in this lever.

2.0

80

1.5

60

1.0

40

0.5

20

0.0

0
2013 2014 2015 2016 2017 2018 2019

Number of deals
Transformative
circularity and recycling
Smart managementof devices
Low GHG construction
processes
High efﬁciency urban
spaces and communities
High efﬁciency
space-water heating
and coolingHigh efﬁciency ﬁxtures,ﬁttings, and lighting
Commercial andresidential residuals
treatment and management
Building level (electricity
and thermal) storage

30

Number of deals• Major investment themes: Thislever accounts for 37% of funding,though 90% of this is attributableto just one startup, Katerra. Only
13 startups fall under this lever, allof which address waste reduction
during construction or controlled
construction environments: typically
off-site construction, modular
construction, 3-D printing, or 3-D
imagery enabled construction
planning.

Investment (US$ B)

Low GHG Construction Processes

Number of deals

Key levers

Transformative
circularity and recycling
Smart managementof devices
Low GHG construction
processes
High efﬁciency urban
spaces and communities
High efﬁciency
space-water heating
and coolingHigh efﬁciency ﬁxtures,ﬁttings, and lighting
Commercial andresidential residuals
treatment and management

20

10

0
2013

2014

2015

2016

2017

2018

2019

Building level (electricity
and thermal) storage

Source: PwC analysis on Dealroom data

Notes:
Smart management of devices is a significant proportion of the challengearea’s deals (approx. one-third), with several possible explanations. Firstly,
founders could be vectoring into areas they understand and are able totackle. Of the levers, this is the most clearly tangible to founders withtechnology backgrounds. Secondly, the investments in this lever are also
more reflective of the type of deals which tech investors are affiliated –smart sensors, consumer apps to manage devices remotely, and artificial
intelligence of underlying data, are all much more comparable to a typicaltech company than a 3-D device printing homes, as an example (i.e. lower
capital investment and quicker potential return on investment). Finally,
consumer demand for cheap and cheerful home energy improvements could
also be leading to larger growth in this area.

The State of Climate Tech 2020 The next frontier for venture capital

27

GHG Capture and Storage
Challenge area overview and climate challenge
Though some major economies are transitioning their energy systems from coal to cleaner fuels, fossil fuels
will likely remain a primary contributor to energy production for some time. The availability and dependence
on these fuels to provide affordable energy means significant mitigating measures must be taken if society is
to reach net zero. Capturing, storing and reusing greenhouses could play an important role in stabilising andreducing greenhouse gas emissions while our energy and industrial systems transition. Carbon sequestration
technologies must be developed rapidly and deployed at scale if the world is to continue using fossil fuels asa key energy source.
Headlines from PwC analysis
Investment level: GHG captureand storage is one of two horizontal
challenge areas (i.e. those which
are sector agnostic), and is boththe smallest of the horizontals andsmallest absolute challenge area
by level of investment: overall it
has raised less than 1% of the total
venture capital identified, at just $506
million. Of the three levers featured
in this challenge area, over 80%of the investment has been raisedby carbon, capture, utilisation, andstorage (CCUS) startups.

Investors: Novo Holdings and Zurich
Cantonal Bank are the biggest
investors in the challenge area by
total venture capital invested, whilein terms of number of deals, Chevron
Technology Ventures and Husky
Energy lead, both with less than fivedeals: illustrating that this sector is
yet to attract a large number ofactive investors.
Unicorns: This the only challengearea with no unicorns raising VC
investment during the analysis period.
However, as of June 2020, LanzaTechreached a valuation of over $1 billion.

Growth rate: This is a particularly
nascent challenge area andaccordingly the investments in thisspace record a CAGR of 102%
between 2013 and 2019.
Number of deals: Low deal flow
highlights the immaturity of thischallenge area, with only 2 deals
recorded in 2013. This has risen
moderately, but still to a small
absolute figure, of 15 deals in 2019,
in comparison with nearly 600 deals
across all challenge areas for thesame year.

28

The State of Climate Tech 2020 The next frontier for venture capital

Sector definition:• The removal of greenhouse gases
from the atmosphere and theirstorage for long periods, primarily
from energy and industrial processes
but also including natural climate
solutions developed specifically tosequester greenhouse gases• Systems for monitoring andmanaging the carbon footprint oforganisations or governments

Key levers

0.20

Number of deals

20

Carbon capture, utilisation, andstorage (CCUS)• Noteworthy startups: LanzaTech
is an American carbon capture
startup founded in 2005. They aredeveloping a technology that canturn waste carbon streams intoethanol, which can be used forfuel or chemical processes. They
are also attempting to branch into
processes which produce usefulproducts other than ethanol.
Similar to many of the types ofstartups we would expect to see inthis entire challenge area, solutions
made by LanzaTech could beheavily utilised by those working
other challenge areas, primarily
Mobility and Transport, Energy, or
Heavy Industry.

CCUS

0.10

10

Biomass Uptake of
CO2 (excluding
afforestation andland management)

0.05

5

0.00

0

Investment (US$ B)

Number of deals

15

0.15

2013 2014 2015 2016 2017 2018 201910

GHG monitoring andmanagement platforms
CCUS

8
Number of deals• Major investment themes: This
is by far the most mature lever
within GHG capture and storage,
having raised over 80% of theoverall investment for the challengearea. It is however by no meansmature itself, comprising 18
startups which have raised $406
million collectively. The startups
fall into two key categories: carbon
capture technologies deployed atemissions source used for various
industry purposes; and productionof useful by-products to sell on forfurther industrial purposes (e.g.
thermoplastics). Investment in thischallenge area is showing somesigns of growth, most likely driven
by the regulatory environment
around carbon for industry.

GHG monitoring andmanagement platforms

Biomass Uptake of
CO2 (excluding
afforestation andland management)

6

4

2

0
2013

2014

2015

2016

2017

2018

2019

Source: PwC analysis on Dealroom data

Notes:The economics of carbon capture and storage are challenging, and require
the right enabling environment to tackle. Startups in our analysis highlightthe level of capital investment and time horizons which some will take tomake meaningful carbon emissions reductions, while also indicating someof the limitations in this sector around funding, as technologies often takelonger to develop and return investment than typical venture capitalists arewilling to bear.

The State of Climate Tech 2020 The next frontier for venture capital

29

Climate and Earth Data
Generation
Challenge area overview and climate challenge
Environmental policymaking, one of the largest drivers for the business case around climate tech, depends
on timely, accurate information about the state of our planet and predictions about its future. Deregulationof the space industry in the US – typified by the rise of SpaceX and Planet – has led to the development of
this challenge area, as open source satellite units have driven down the cost of nano-satellites and therefore
data generation. Climate and earth observation is beginning to provide a wealth of data relating to the land,
oceans and atmosphere: data which is crucial to enhancing protecting the environment and achieving
broader sustainable development aims. The resulting information offers greater detail than we have ever hadaccess to before, which will be pivotal in both supporting the environmental regulation which climate techneeds to prosper while also creating unique business opportunities for climate tech startups.
Headlines from PwC analysis
Investment level: Climate andEarth data generation is one of two
horizontal challenge areas (i.e. thosewhich are sector agnostic). It is thelarger of the two horizontal challengeareas, with $1.1 billion of venture
capital deployed between 2013 and2019, though still smaller than anyof the vertical challenge areas, atapproximately 2% of the total
funding analysed.
Growth rate: Investment in thisspace has recorded a CAGR of 18%
between 2013 and 2019. This is
likely under-reporting growth in thechallenge area though, as this figure
is skewed by Planet’s 2013 funding
round, the largest of any individual
startup in 2013. Nearly all of thegrowth for the challenge areas isrecorded in startups explicitly focusedon climate/earth data generation: lessthan 0.5% of the challenge area’s
funding was raised by startups within
our low-GHG satellites andsensors lever.

30

Number of deals: Low deal flowreflects the relative immaturity ofthis challenge area, with only 8
deals recorded in 2013. This has
risen moderately, but still to a small
absolute figure, of 23 deals in 2019,
in comparison with nearly 600
deals across all challenge areas forthe same year. Nearly all of these
deals were related to climate/earth
data generation, while only 8 deals
were recorded in total for low-GHG
satellites, all taking place from2017 onwards.
Investors: Pitanga Fund and Lux
Capital are the biggest investors inthis challenge area by total venture
capital invested, while in terms ofnumber of deals, Dylan Taylor and
GV lead. This is the only challengearea where an angel investor featuresin the top 5 investors by number ofdeals or investment value.
Unicorns: There is only one startup
with a $1 billion plus valuation in thischallenge area for the time period
analysed: Planet Labs, an American
aerospace and analytics company.

The State of Climate Tech 2020 The next frontier for venture capital

Sector definition:• Recording or analysis of earth andclimate related data which will be
useful specifically for reducing
emissions or by climate techcompanies. Typically collected
via satellites, sensors or weather
machines and analysed using
machine learning algorithms• Development of technologies which
reduce emissions associated withsatellites, such as mini-satellites,
electrified launch equipment,
improved energy efficiency ofsatellites, or biodegradable satellites

Key levers

0.4

25

• Noteworthy startups: Planet Labs,
founded in 2010, has a post-money
valuation of $2.2 billion from theirlatest investment round in 2019.
They build small satellites which aredelivered into orbit as secondary
payloads on other rocket launch
missions. Their satellites provide
frequently updated informationand insights relevant to climate
monitoring, crop yield prediction,
urban planning, and disaster
response.

15
0.2
10

Number of deals

20

0.3

0.1

Number of deals
Low-GHG satellites
and sensors
Climate/Earth data
generation

5

0

0.0
2013 2014 2015 2016 2017 2018 201920

Low-GHG satellites
and sensors
Climate/Earth data
generation

15
Number of deals• Major investment themes:This lever constitutes over 99.5%of the funding in this challengearea: a testament both to cost
reductions seen in space ventures,and the ability for low cost hardware/
software (sensors, machine learningalgorithms) to disrupt this area andprovide insightful data for companies
and governments. Startups which
gather and or process climate andearth data for broad applications
are typical of this lever. Beyond thestartups captured in this challengearea, there are even more startups
performing similar functions but
focusing their efforts on one industry(typically agriculture). Those startups
are categorised under the specificchallenge areas they address.
However, it is fair to assume thatthese startups may attempt to reach
into other markets in the future,
given the breadth of data they arecollecting, and so the investments
recorded in thislever can be viewed as aconservative estimate.

Investment (US$ B)

Climate/Earth data generation

10

5

0
2013

2014

2015

2016

2017

2018

2019

Source: PwC analysis on Dealroom data

The State of Climate Tech 2020 The next frontier for venture capital

31

Maturity

Number of early stage deals

A more granular analysis on a lever by lever basis helps us understand where each lever is in its maturity curve. By plotting theacceleration of a lever (a measure of whether the growth rate in venture capital invested is increasing or decreasing) against
the number of early stage deals, we’re able to categorise our levers into four distinct phases of their lifecycle:

Many earlystage deals

Few early
stage deals

Transitioning

Maturing• Renewable energy
generation• Efficient transport systems• Micro-mobility• Grid management• Alternative/low GHG proteins• Precision agriculture androbotic

Nascent

Emerging• CCUS• Agricultural biotech• Low GHG fertilisers,
pesticides, insecticides, andtherapeutics• GHG monitoring andmanagement platforms• Batteries/fuel cells for EVs• Low GHG chemicals (beyond
plastics)

Slowing

Accelerating
Rate of acceleration

Example levers within each of the four phases of the lever lifecycle
Source: PwC analysis

Nascent levers
demonstrate limited
new venture activity,and slowing (orin some cases,
shrinking) venture
capital investment.
These levers are often
associated with excess
R&D risk or lack of an
enabling environment– with CCUS anarchetypal example.
Some of these may
move onto the nextstage of maturity in the
coming years, though it
is hard to predict which
and when.

32

Emerging levers
are the next stage
in the lifecycle of alever. These show a
speeding up in thegrowth of VC capital
deployed, though still
few early stage deals– suggesting areas
where VCs are juststarting to see the firstsigns of success fromsome of their big bets.

The State of Climate Tech 2020 The next frontier for venture capital

Maturing levers
show high accelerationand growing earlystage activity.
Take, for example,
alternative proteins,
where there has
been a raft of recent
Seed and Series A
activity, buoyed by the
success of unicorns
such as Beyond Meatdemonstrating thecommercial viability of
the lever.

Transitioning levers
are those which
are beginning thephase out of the VC
ecosystem. Though
there are still many
new startups exploring
innovative ideas, thebusiness models haveoverall proven mature
enough for traditionalsources of financing
to take over. For
example, renewableenergy businesses
are increasingly being
funded by debt or
project finance, rather
than VC.

Regional investment distribution
Overall breakdown of investment by startup region
The geographical split shows that nearly half of all venture
dollars in climate tech startups, $29 billion, went to startups
in the USA and Canada. China is the second most significant
region at $20 billion. The European market is approximately athird of China’s at $7 billion invested.
Latin America
1.1%

Australasia
0.2%

Middle Eastand North Africa
1.5%

Africa0.2%

Asia (ex China)
3.1%
Europe11.7%
USA and
Canada
49.3%

China
32.9%

Top 10 climate tech investment hubs
(excluding Mobility and Transport)
Given the dominance of the electric vehicle and micromobility levers in our data set – which are no doubt important,but perhaps not reflective of overall trends – it is useful to
examine funding outside the Mobility and Transportchallenge area.
Here we see notably different results for top climate tech
investment hubs. No Chinese cities feature, and the US
dominates. However, three of the top 10 cities only have
one startup in their jurisdiction, indicating the nascency ofinvestment outside of established hubs.
The disproportionate investment in the San Francisco Bay
area suggests that investor hubs can create a positive
feedback loop of investment as startups and investors
congregate, even for new areas such as climate tech.
Startup HQ

Funding raised

San Francisco Bay Area,
United States$6.9B

Boston, United States$2.1B

Source: PwC analysis on Dealroom data

Berlin, Germany$650M

Top 10 climate tech investment hubs

New York, United States$650M

China and the USA and Canada dominate investment in
Mobility and Transport, the most heavily invested challengearea, and so it’s no surprise they feature heavily in our listof top 10 investment hubs. India and Germany are the only
countries to feature cities in the top 10 outside of the US
and China.

Sioux Falls, United States$370M

London, United Kingdom$350M

Labège, France$300M

Boulder, United States$300M

Chicago, United States$240M

Pittsburgh, United States$220M

Startup HQ

Funding raised

San Francisco Bay Area,
United States$11.7B

Shanghai, China$7.5B

Beijing, China$6.6B

Los Angeles, United States$3.5B

Boston, United States$2.1B

Guangzhou, China$1.7B

Nanjing, China$1.2B

Hangzhou, China$1.0B

Berlin, Germany$930M

Bengaluru, India$870M
The State of Climate Tech 2020 The next frontier for venture capital33

A closer look at the top three regions
USA and Canada
The US has the most mature venture capital market in theworld, and this is reflected in North America leading in climate
tech venture capital investment. Investment is concentrated
in two challenge areas, representing two-thirds of investment
dollars – Mobility & Transport and FALU – though this is
somewhat reflective of overall trends in climate tech.
Where this region varies from the norm is in its higher
than average investments in four challenge areas: FALU,
Heavy Industry, Climate/Earth Data Generation and GHG
Capture and Storage. Coupled with disproportionately highinvestment R&D-heavy levers such as nuclear fusion and
CCUS, this points to a greater appetite for risk in US founders
and investors, and greater interest in challenge areas that are
still at relatively nascent stages of development.
We see some of the fruits of this risk taking in the region’s
success stories. Looking at even relatively ‘mature’
challenge areas such as FALU, the North American startups
that have raised the most funding in our database havetackled arguably more novel lab-based challenges thantheir European counterparts (e.g. Impossible Foods andIndigo in North America, vs. HelloFresh in Europe), andhave been rewarded for it with unicorn status. Similarly, thehighest funded Heavy Industry startup in Europe (Avantium
Technologies) raised just a tenth of the highest funded US
startup (Ginkgo Bioworks) – with another 9 US startups
exceeding funding raised by Avantium.

34

The State of Climate Tech 2020 The next frontier for venture capital

Built Environment
9.0%

Mobility andTransport
44.8%

Climate/Earth Data
3.2%
Energy
9.4%
FALU
21.0%

Heavy Industry
11.2%

Source: PwC analysis on Dealroom data

GHG Captureand Storage
1.3%

China38

EuropeChinese investment is highly skewed towards one challengearea, with Mobility and Transport encompassing 98.5% ofclimate tech related venture investment. This is reflected
in China tending to dominate the Mobility and Transportchallenge area, providing 53% of overall investment in
the area.

As with the other two regions, Mobility and Transport again
dominates European investment, though most of thisinvestment is being directed towards new sharing businessmodels in micro-mobility (predominantly e-scooters ande-bikes) and efficient transport systems (such as ridesharing apps).

One reason for the significant imbalance here is the
Chinese automotive sector is relatively young, so much of
the investment is made in entrepreneurial firms. By contrast,
much investment in electric vehicles and the supporting
battery technologies in Europe and the US is dominatedby incumbent auto manufacturers, the majority of whose
investment does not feature in this venture
capital-focused analysis.

Compared to the other regions however, Europe isdisproportionately invested in Energy. Most investment
is taking place in developing the core technologies forrenewable energy generation (predominantly PV cells) and theenergy storage (batteries) to support their proliferation.

Built Environment
0.3%

FALU
0.7%
Heavy
Industry
0.3%

Mobility andTransport
98.5%

FALU is the third most heavily funded challenge area in
Europe, owing to heavy investments in alternative foods/low
GHG-proteins. Nearly 75% of funding in this lever is targeted
at insect proteins for animal rearing and aquaculture, in stark
contrast with American investments which predominantly
target synthetic proteins for human consumption.

Mobility andTransport
36.4%

Heavy
Industry
5.1%

Source: PwC analysis on Dealroom data
38

GHG Captureand Storage
1.9%

Built Environment
9.7%
Climate/Earth Data
2.0%
Energy
23.5%

FALU
21.4%

 ur data coverage is stronger in European and North AmericanO
markets, and this analysis may therefore underestimate therelative levels of Chinese investment

Source: PwC analysis on Dealroom data

The State of Climate Tech 2020 The next frontier for venture capital

35

Climate tech unicorns

Gender diversity in founders

Firms like Tesla, Nikola, Beyond Meat and Nest havedemonstrated it is possible for climate tech startups to reachunicorn level (that is, valuations at or exceeding $1 billion).
Our research estimates that there are currently 43 privately
held, venture-backed climate tech startups with valuations inexcess of $1 billion. These unicorns are concentrated in the
Mobility and Transport challenge area and, unsurprisingly,
represent firms founded relatively earlier in our research
period – though this suggests room for a stream of additional
climate tech unicorns in the coming years.

It is well understood that the tech startup ecosystem
faces diversity challenges across several different axes.
Our analysis backs this up, at least for gender.39 Of theapproximately 28,000 climate tech startup founders whose
gender was identified in our dataset, just 10% identified as
female (slightly lower than comparable non-climate techstartups, which came in at 11%). In terms of challenge areas,
FALU was a leader in proportion of female founders at 15%,
whilst Built Environment and Energy both lagged at 7% each.

The US has the most unicorns and the most diverse set of
unicorns, with billion-dollar firms in Mobility and Transport,
FALU, Heavy Industry, Built Environment and Climate andEarth Data Generation.
Other
6.8%
Europe
9.1%

China
29.5%

North
America
54.5%

What about startups with multiple founders? We found that
16% of climate tech startups had at least one female founder,
suggesting a small number of mixed gender teams. Just 15%
of venture funding went towards startups with at least one
female founder. For comparison, 19% of comparable nonclimate tech startups had at least one female founder, andthis group received 20% of funding.
Clearly there is still much work to be done to address evenjust gender diversity. Beyond the social equality argument,
it’s also critical to have a diversity of thinkers and founders
working on net zero, to maximise the chances of success. In
addition, there’s an economic argument to be made, with anestimated $8tn boost to GDP up for grabs for Organisation
for Economic Co-operation and Development (OECD)
countries if we can close the gender gap on employment andpay.40 Some venture capitalists are starting to take notice,with an increasing number of firms with a mandate to invest
in female founders.41

Source: PwC analysis on Dealroom data

15%of climate tech VC
funding went tostartups with atleast one female
founder39 
Not all of our gender data is self-reported. Though self-identificationof gender would be preferred, our results broadly match withcomparable recent survey-based studies. We acknowledge
however that this analysis does not give a complete picture of theinvolvement of gender minorities in climate tech, and we encourage
further research in this area
40 
Women in Work Index 2020 (PwC, 2020). See more on Women in
Technology on our website
41 
14 Venture Firms That Are Helping to Close the Massive Gender
Funding Gap (Inc., Oct 201836

The State of Climate Tech 2020 The next frontier for venture capitalKey findings:
Investors

The State of Climate Tech 2020 The next frontier for venture capital

37

Key findings: Investors
Clean tech to climate tech: what has changed?

Who are the climate tech investors?

The clean tech boom and bust, discussed in greater detailin our introduction, saw VC investors learn critical lessons
after losing around half of their investment.42 Clean tech
investment was dominated by energy startups, and investors
did not have sufficient experience in navigating the capitalintensity or regulatory complexity of that ecosystem.

We identified around 2,700 unique investors from venture
capitalists, corporate VC, angel investors, philanthropists,and government funds, who collectively have participatedin funding over 1,200 climate tech startups between 2013
and 2019.

Much has changed with the growth of climate tech. Firstly,
investors are coming into this with the hard-earned lessonsof their clean tech days, and are better equipped to handle
those complexities where they emerge. Secondly, the very
concept of climate tech is deliberately much broader thanclean tech, choosing to focus on decarbonisation across all
sectors of the economy, not solely the energy sector. This
diversification is in response to demand signals from themarket, who have clearly indicated the need for net zerotransformation across all sectors of the economy.

Our analysis suggests the climate tech investor ecosystem isstill nascent. The top 10 investors averaged about 28 climate
tech deals each in the time period, or about 4 per year.
However, the vast majority of investors (over 75%) have madeonly one or two investments in climate tech. This suggeststhat only a handful of investors have established the deeper
familiarity that comes with frequent investing activity, withmost investors just dipping their toes in climate tech so far.

Thirdly, and most importantly, is the change in the enabling
environment. Between the above mentioned corporate andconsumer demand; the increasing ubiquity of advanced
tech; and an increasingly supportive regulatory environment,
climate tech is happening at a very different ‘moment in time’
than the clean tech movement.

Top investors by amount of venture capital deployed

Top investors by number of deals

Investor
Sequoia Capital
Tencent
Temasek

Investor type
VC
Corporate VC
Government

Investor
Y Combinator
SOSV
Sequoia Capital

Investor type
Accelerator
Accelerator
VC

Kleiner Perkins
Founders Fund
GV
Khosla Ventures
Horizons Ventures

VC
VC
Corporate VC
VC
VC

Bpifrance
GV
Khosla Ventures
Demeter
Kleiner Perkins

Government
Corporate VC
VC
VC
VC

Tao Capital Partners
Y Combinator
Total Energy VenturesEngie
GE Ventures
Prelude Ventures
Bpifrance
S2G Ventures
Demeter
SOSV
InnoEnergy
New Crop Capital
500 Startups
Techstars

VC
Accelerator
Corporate VC
Corporate VC
Corporate VC
VC
Government
VC
VC
Accelerator
Government
VC
VC
Accelerator

Techstars
Temasek
Total Energy Ventures
Engie
500 Startups
Founders FundGE Ventures
Horizons Ventures
Prelude Ventures
Tao Capital Partners
S2G Ventures
InnoEnergy
New Crop Capital
Tencent

Accelerator
Government
Corporate VC
Corporate VC
VC
VC
Corporate VC
VC
VC
VC
VC
Government
VC
Corporate VC

42 
3 hard-won lessons from a decade of negative cleantech returns (World Economic Forum, Mar 2020)

38

Investors by type

Corporate venture capital (CVC

Venture capital firms
The most active VCs in the climate tech space, both innumber of deals as well as amount invested, include:

The involvement of corporates will be key to the continued
success of climate tech. CVCs are seeing the importanceof strategic investing and partnerships with key industry
players, particularly in Mobility & Transport, where 30%of deals include a CVC firm, and Energy, where 32% ofcapital deployed came from CVCs. Overall, nearly a quarterof climate tech deals (24%) included a corporate investor(approximately 670). The most common CVCs include:

500 Startups

Matrix Partners

Accel

New Crop Capital

Breakthrough Energy
Ventures

New Enterprise
Associates

Acre Venture Partners

GE Ventures

Data Collective

Obvious Ventures

Airbus Ventures

GV

Demeter

Partech

BMW i Ventures

Founders Fund

Prelude Ventures

BP Ventures

InMotion
ventures

GGV Capital

S2G Ventures

Intel Capital

Horizons Ventures

Sequoia Capital

Chevron Technology
Ventures

Khosla Ventures

Tao Capital Partners

Qualcomm

Kleiner Perkins

UpHonest Capital

Constellation Technology
Ventures
Daimler

Tencent

e.on
Engie

Total Energy
VenturesFoxconn Technology
Group

Verizon
VenturesIn our discussions with investors, we heard how the mix ofLimited Partners (LPs) has changed over time, transitioning tobecome more aligned with mainstream VC investing.

Next47
Shell

Corporates are important to climate tech as users of thesolutions; as a partner to use their expertise to build out andscale solutions; and also as a valuable source of strategic
capital. For some estimate of the size of the prize on offer
for climate tech, consider that top corporates spent an
estimated $782 billion on R&D in 2018.43 As they look toradically transform their business models in the transition to
net zero, how much of that may be redeployed to strategic
engagement with the climate tech ecosystem?

43

What the top innovators get right (PwC’s Strategy&, 30 Oct 2018)

The State of Climate Tech 2020 The next frontier for venture capital

39

Accelerators and incubators

PE/growth stage investment managers

Alongside providing early funding, perhaps the mostimportant role of accelerators and incubators is working
closely with founders to de-risk the business and technicalaspects of their startups, and in the process get them readyfor Series A and B funding.

Investors in this class historically invest in companies laterin their life cycle than VC firms, but we’ve found that they
are beginning to enter earlier deals. There is a growing focus
on climate tech in both impact funds as well as mainstream
investing. Top investors by estimated investment include:

Our analysis finds investors in this class with potentiallyvarying motivations for investing in climate tech. Some funds,
such as SOSV, structure their programs around climate techrelated challenge areas. In our list of top investors in thisclass (by number of deals), however, we find acceleratorssuch as Y Combinator and Techstars, alongside SOSV, whobring a broader focus on a variety of tech themes.

China Fortune Ocean
Greenoaks CapitalManagement

Primavera CapitalGroup
Silver Lake Partners

Hillhouse Capital

Summit Partners

HPS Investment Partners

TPG Capital

LL Funds

Warburg Pincus

Breed Reply

SOSV

Government and Universities

EIT Digital

Techstars

Indie Bio

The Yield Lab

Oxford Sciences
Innovation

Venture Kick

We’ve only looked at venture capital as part of this analysis, butof course government funding and grants each have big parts
to play in helping jumpstart the climate tech response in R&Dheavy challenge areas. Indeed, we would see this were we to
expand the scope of our analysis – for example, the European
Innovation Council has provided over 200 grants to climate techstartups, while government-owned Temasek have invested over
$2 billion in climate tech startups over the time period.

Y Combinator

Plug and Play‘Our original investors started largely as foundations and banks, but the2008 financial crisis removed banks from the mix, with family offices,
ultra high-net-worth (UHNW) individuals, and public pension funds
filling the gap along with continuing participation from foundations.
These days, LPs in climate VC funds mirror those of typical Sand Hill
Road fund investors, and climate tech investment enjoys a broad levelof support, across all asset classes.’
Nancy Pfund
Founder and Managing Partner, DBL Partners

40

Key findings:
Drivers andBarriers

The State of Climate Tech 2020 The next frontier for venture capital

41

Key findings: Drivers
and Barriers
Factors driving recent successes
Climate tech is expected to play an increasingly significant role in the transformation required to reach net zero,with the rapidly-growing market already demonstrating an impressive ability to scale. If climate tech is to have amore central role in the net zero transformation, it makes sense to ask what have been the key factors behind thisimpressive growth to date, and how can those be amplified? Through our research and analysis we have identified
seven key drivers that have acted to help develop and grow the climate tech ecosystem over the past several years:• Technology and infrastructure:
low-carbon technology, inparticular as regards renewableelectricity generation and battery
manufacturing, has become muchcheaper and more widely available.

• Consumer demand: high-quality
low-carbon products and services
have created a range of high-profile‘winners’, including Beyond Meat,
Tesla, and Nest, for others to see
and mimic.

• Finance and investor demand:
much more investment capitalis being made available, both byinstitutional VC funds and fromalternative sources, as set out above.

• Inspired founders: the successof a growing number of individual
startups is motivating an increasing
number of founders to tackle theclimate challenge.

• Policy and process: the policy
and regulatory environment isincreasingly more supportive,
with 120 national governments44
having made commitments todecarbonise their economies –with commensurate spending andpolicy action across both regulatory
standards e.g. bans and phase-outs
to market-based measures, including
carbon pricing.
• People: increasingly high-quality
founders, and top talent, have beendrawn to different parts of thisimportant and increasingly urgent
challenge, across multiple sectors
and geographies.
• Corporate demand: corporate
ambition, and in turn action, is
accelerating, with nearly 300
global companies having made net
zero commitments, alongside anincreasing number of broader andmore concrete Environmental, Social,and Governance (ESG) goals.
44 
What Does ‘Net-Zero Emissions’ Mean? 6 Common
Questions, Answered (World Resources Institute,Sep 2019)

42

There’s been an
increase in interest in
working on the climate
challenge. We’ve beenable to attract a highlevel of quality talent inour company, even if
the tech giants are
more competitiveon salary.’
Tony Pan
Co-founder and CEO,
Modern Electron

The ecosystem has
become moredeveloped over the past
decade. There’s now a
big clean energy andclean transportation
sector, which can start
to nourish itself. The
fact there are now tensof thousands of windturbines, for example,
means you can now bea venture-funded
company that uses
machine learning to
optimise wind turbines.
That business model
just couldn’t exist
in 2005.’
Michael Liebreich
Chairman and CEO, Liebreich
Associates

Barriers
Despite this significant growth, and strong set of driving forces, we must
be clear – the levels of funding and innovation into climate tech have
simply been insufficient to drive the pace and scale required for net zerotransformation. Moreover, economies and societies are now also facedwith the rapid decarbonisation challenge while trying to build back betterfrom COVID-19.45
As a result, there is an urgent need for faster, bolder, innovation in climate tech.
Achieving this step-change will require significant additional VC dollars, of course,
but for climate tech to reach its full potential, the full range of the market’s key
challenges, beyond funding, must be proactively identified and overcome.
Through our interviews with leading players in the market, we have identified someof the fundamental barriers that still remain:

Overview of barriers

Technology

Finance• Uncertainty
in R&D
timelines• Lack ofaccess to
specific
types ofcapitalrequired• No tried
and tested
standard
operatingprocedures
to reachproduct/
market fit

Policy andprocess• Regulatory
markets are
fragmented,
making rapid
expansiondifficultPeople• Availabilityof talent andskills• Regulation
can be overly
complex,stifling
innovation• Lack ofregulatory
incentives forclimate tech

Reduced cost isactually not the driverof change here, but isthe effect of the four
forces actually driving
action (and which arein turn driven byclimate change).
These are consumer
preference combinedwith mistrust of
institutions; corporate
investors responding
to employees andconsumers;
governments
spending andregulating; andfounders withstrong values.’
Hampus Jakobsson
General Partner, Pale Blue Dot

We detail these below, and in the subsequent section discuss recommendations
for addressing these barriers.
45 
Building back better: A sustainable, resilient recovery
after COVID-19 (OECD, Jun 2020)

The State of Climate Tech 2020 The next frontier for venture capital

43

Technology
Uncertainty in R&D timelines
The climate tech ecosystem has
the potential to create novel andhigh-impact solutions to the net
zero transition; but R&D is inherently
uncertain, and early-stage startups inthis market often face unpredictable
timelines for product development.
This uncertainty can dissuade capital– and thus company formation –given that venture funds are typicallystructured to return capital to theirlimited partners within a fixed 10-to-12
year time span. This has been evident
in climate tech, where sectors such asnovel nuclear power or carbon captureand storage (CCS) have attracted only
modest amounts of venture funding(less than $700 million over the 20132019 period), in part because thetechnologies are not yet proven to work
cost-effectively, or at all.

44

Challenges with reachingproduct/market fit
Prominent entrepreneur and investor
Marc Andreessen defines product/
market fit as ‘being in a good market
with a product that can satisfy
that market’,46 and has argued thatreaching product/market fit is key tostartup success.
In other markets such as the web
and software, there are tried andtested operating procedures forreaching product/market fit, such aslean startup, blitz scaling and agile
methodologies. These establishedapproaches provide roadmaps to
success, allow teams to stand on theshoulders of the many giants before
them, and serve to communicate theirprogress to later-stage investors andother stakeholders more clearly – alingua franca for their market.

The State of Climate Tech 2020 The next frontier for venture capital

In contrast, many early stage climate
tech startups find the journey toproduct/market fit difficult. Withouta long line of historic climate techstartups to learn from, they findthemselves needing to invent the
playbook at the same time as
executing it.

46 Product/Market Fit (Marc Andreesen, 25 Jun 2007)

Finance
Financing risk remains a key, andongoing, challenge with climate tech.
Founders and investors must ask
themselves how they can create afunding model for capital and labour to
go on the difficult journey to create andget a product to market.
The capital requirements over thelife-cycle of a sustainability play are
nuanced. Climate tech startups may
face three different classes of capitalchallenge that differ from a traditional
venture capital-backed startup. The
question is not merely about theamount of capital required at eachpoint, but the participatory structure ofthat capital that works for climate tech:• R&D may take a long time and thus
requires patient capital• Proof-of-concepts or pilot
programmes may require significant
amounts of capital, meaning large
investments may be required before
products have been proven• Large scale deployments may havelong pay-back periods, running into
decades. These might typically have
involved project finance rather thanventure capital structures
As Joshua Posamentier (Co-founderand Managing Partner, Congruent)has put it, ‘The climate tech market
is nowhere near mature as traditionaltech markets, especially in terms of
expected milestones. Some investors
are worried that if they are funding seedrounds, no one will fund the ‘A’ round.
One consequence is that companies
with the slightest bit of traction get lotsof money piled on to it.’ This is reflectedin our analysis, which found that the top
5% of startups captured two-thirds ofclimate tech VC funding.

Access to patient capital will be
important, with Vinod Khosla (Founder,
Khosla Ventures) saying that ‘matching
the time horizons of ClimateTech
startups with investors is a key
challenge. Patient capital is needed,which is why Breakthrough Energy
Ventures was set up a 20-year fund,rather than demanding returns within
the traditional 10 years’.
Hampus Jakobsson (General Partner,
Pale Blue Dot) also noted that ‘there isa potential gap of later stage capital.
Some pension funds are making noises
about investing but we assume at thispoint that family funds may have tostep in if the gap is going to be filled’,though in recent months had seen
an increase in interest from pension
funds. Michael Liebreich (Chairman andCEO, Liebreich Associates) also statesthat ‘the big opportunity is in creating
blended finance structures, cleverly
mixing government guarantees andprivate funding. Low-carbon solutions
are almost always capital intensive,
they require low-cost debt to work, but
debt providers need to be remunerated
for the risk they’re taking. If we cansolve two problems – credit risk in theaftermath of COVID-19, and sovereign
wealth risk for developing countries –that would unleash a wall of money’.
It may yet take more time and more
success to increase the number ofinvestors with experience of supporting
founders through their scaling journey.
Mike Zelkind (Co-Founder and CEOof 80 Acres Farms), who avoided
traditional venture capital, argues that‘there isn’t yet an understanding ofwhat will be an accelerator to growth.
So, we felt it was more helpful to have
[corporate] partners with value add anda balance sheet.’

Our data and analysis shows that
corporate investors are increasingly
active in climate tech investments.
Corporate investors seem to be activein direct investments across thedifferent stages of a startups life, as
well as participating as limited partners
in investment funds and accelerators.
Some professional investors are moresanguine about the role of this capital.
‘Corporate venture capital has arole to play if it doesn’t come withstrings attached’, says Albert Wenger(Managing Partner, Union Square
Ventures).
Michael Liebreich (Chairman and CEO,
Liebreich Associates) expanded on therole of corporates in climate tech further,saying that ‘the heavy lifting on tacklingclimate change will come from hundredsof billions or trillions of dollars spent bybusinesses. Many of these investments
will be made by risk-averse players,
who don’t just swap out their businessmodels overnight – the world doesn’t
work that way – but who neverthelesshave committed themselves to a net
zero pathway. Every 5 years or so,at the start of a decision cycle, thesecompanies evaluate what is in the‘hopper’ of technologies to support
their net zero commitments. The role oftechnology and venture capital is not
so much to destroy these businesses,
but to make sure those hoppers are fullof technologies ready to scale. We only
have a couple of those cycles to take a
big bite out of emissions’.
On the positive front, the broader‘capital markets’ deep engagement
in climate change has structurally
changed financing, with rising cost ofcapital for carbon-intensive projects
and falling cost of capital for low
carbon initiatives. This is likely to foster
improving capital access for clean
tech start-ups, provided the regulatory
framework is attractive, as we layout in our Carbonomics research’,
points out Michele DellaVigna (Head ofEuropean Natural Resources Research,
Goldman Sachs).

The State of Climate Tech 2020 The next frontier for venture capital

45

Policy and Process
Fragmented regulatory markets
and scaling complexity
Market and scaling represent a unique
set of challenges for startups in climate
tech. Markets are often fragmented ata regulatory level and also differ acrossgeographies i.e. city, state, and national
levels. Delivering a proof-of-concept
at scale, therefore, can be capitalintensive. Even signing a first pilot
agreement with an incumbent can be
hazardous. Bilal Zuberi of Lux Capital ofpilots illustrates: ‘If you make a mistakein negotiations, it could be the end ofyou. You could be stuck in contract for
two years or more.’
Dawn Lippert, CEO of Elemental
Excelerator sums it up: ‘The road tocommercial realization is actually quite
long and bumpy. In this sector you also
have the market expansion valley ofdeath: can you sell successfully into
many specific markets?’
Accelerators such as Powerhouse andElemental Excelerator actively help
founders break through this ‘market
expansion valley of death’. Elemental
is partnered with governmental bodies
as well as utilities from around theworld, such as Korea’s SK Gas, theUK’s National Grid and Japan’s Tepco,
to help startups build proof-points forcommercial expansion.
Scaling to many customers may
involve navigating a fragmented
regulatory landscape. For example, in
the United States, ‘there's no nationalenergy policy really. You do have to go
to states and even local governments.
If you don't understand that, it canbe very daunting’, says Nancy Pfund(Founder and Managing Partner,
DBL Partners).

Of course, the flip side of regulatorycomplexity is that it creates meaningful
rewards for the founders who areable to navigate the patchwork of
regulations. To achieve success,some founders have ‘gone after early
adopter markets that have progressive
regulatory and political infrastructuresand built their companies from there’,says Nancy Pfund. Many startups alsofind themselves in a complex networkof suppliers, regulators, partners andincumbents, which can also be achallenge to navigate successfully.

Tightly regulated markets
Regulation of key industries can help
reduce information asymmetry, protect
consumers, and increase market
confidence.47 Overly stringent regulation
can also hinder innovation, however.
One of our interviewees highlighted the
US electricity market as an exampleof this, where regulation makes
decentralisation – a key innovation
critical for clean distributed grids –overly burdensome.
To encourage climate tech,governments should look not onlyat regulation, but also deregulation.
An example of this working well ina different area is the UK Financial
Conduct Authority’s ‘regulatory
sandbox’, which has made the UK
one of the leading hubs for Fintech
firms, as well as the UK energy
regulator’s innovation sandbox, which is
supporting the UK’s net zero targets.48

47 
3 ways that regulation benefits economies (World
Economic Forum, 18 Jul 2018)48 
Innovation Sandbox Service Overview (OFGEM,
27 Feb 2020)

46

The State of Climate Tech 2020 The next frontier for venture capital

Lack of regulatory incentives forclimate tech
Incentives are a key part of theregulatory toolkit and currently theclimate tech market lacks a globallyconsistent and meaningful carbon
price to drive decarbonisation. The
current reality is a carbon price set on
narrow economic segments, in specificregions, at different levels (including insome places prices too low to provokechange). An internationally agreed
carbon price covering all sectors
is the ideal market signal to foster
innovation in low-carbon technologies,
as inadequate regimes effectively
subsidize incumbent high-carbon
offerings. Carbon pricing is particularly
important for capital-intensive solutions
that are key to many of the harder toabate sectors (e.g. shipping, aviation,
carbon capture and storage). Severalof our interviewees believe funding
in this segment is unlikely to improve
without stronger policy and regulation.
In the absence of a global carbon
price, pragmatic solutions include
downstream taxes on product based
emissions, and differentiated carbon
prices including higher carbon prices
for harder to abate sectors.

PeopleFounder quality and the talent of theteams they can attract is critical forthese firms to succeed. In establishedstartup sectors, such as software,Internet or biotech, the matureecosystem attracts, grows andsupplies this talent. Serial founders arecommonplace, and they have accessto large pools of execs with deep
experience at the different stages of acompany’s development. With fewer
successes, the climate tech sector
has a smaller pool to draw from. The
sector is also complex in needing
deep technical expertise from different
domains, as well as commercial leaders
who know how to get to market.

But as Vinod Khosla (Founder,
Khosla Ventures) puts it: ‘A dozen
entrepreneurs is what we need tochange the planet on sustainability.
One guy, Elon Musk, changed theassumptions for electric vehicles.
One guy, Pat Brown [of Impossible
Foods], did it for plant-based
burgers. We only need ten more.’
Aaref Hilaly (Partner, Bain Capital
Ventures) concurs. ‘The calibreof teams tackling climate issues
has increased and improved.’
For those high calibre teams,
the ‘entrepreneurs can bechoosy and demand the highest
quality investors’, says Lila Preston(Co-Head of Growth Equity Strategy,
Generation IM).

Whether it is singular individuals or
the teams around them that matters,
talent is critical. This includes talentthat can help startups interact withlarge and significant customers, who
may not operate at the same pace as astartup. For startups aiming to develop
repeatable sales with such customers,‘founders may need to bring in talentfrom large, incumbent firms’, argues
Bilal Zuberi (Partner, Lux Capital).
The underlying mission of climate tech
may increasingly help firms in this
sector. ‘Purpose driven companies
have better access to talent’, argues
Hampus Jakobsson (General Partner,
Pale Blue Dot). This is a view echoedby Albert Wenger (Managing Partner,
Union Square Ventures). ‘There is ahuge amount of talent that wants towork on these problems. They don’t
want to be stuck in the old world.’

How these barriers impact startups throughout their VC lifecycle
Startups face a different set of challenges at each stage of growth. Though many startups will experience most or all of theabove barriers, some will be more relevant to early-stage startups focused on developing their tech; while others will be more
relevant to mature startups looking to reach scale and preparing to go public. Founders and investors should be aware ofthese differences, and make sure they have access to the right expertise to overcome these speed bumps on the journey. Failure
to do so can arrest development, decrease the pace and ability to scale, or simply attenuate the startup’s likelihood of success.
In the diagram below we map these barriers to key lifecycle stages:
Typical business building and funding cycle for a software-based tech company

Funding sources

Fund raisedTime frame

University
grants; Frinds &family<$500K

C. 12 months

Product risk
Can we built a
product that meets
market needs?

Seed stage
venture capital<$5M

36-60 months

Market risk
Can we find arepeatable, scalable& profitable growthmodel?

Series A throughto C venture
capital<$50M

Growth and scalling
Scale the businessbased on theunderstand garneredin previous stages

Series D,
Growth equity,
public financeTechnical risk
Can we get thetechnology to work?

...breaks in many climate tech spaces where startups
may require more time and capital
Key barriers
Finance: It may take years to develop a product andmake it cost competitive, and thus patient capital may beneeded at the R&D stage

Technology: Without established operating procedures
to reach product/market fit in climate tech, startups may
have to invent their playbook as they execute it$50M+

C. 12 months

n/aPolicy and process: Some climate tech markets
are tightly regulated, and reaching scale can requirenavigating a fragmented regulatory landscape

The State of Climate Tech 2020 The next frontier for venture capital47

Recommendations
and Conclusions

48

The State of Climate Tech 2020 The next frontier for venture capitalRecommendations andConclusions
Recommendations
Our research and analysis has uncovered a range of drivers, and barriers, to scaling climate tech startups.
Issues arise at different stages of development, but one fundamental point is clear: addressing the barriers
and amplifying the drivers is crucial if society is to harness climate tech to make a net zero emissions
economy before 2050 possible. At the same time, doing so will likely free up high return, impact-driven
investments which stakeholders are increasingly seeking, and often mandating, from their investors.

We have identified three key
overarching recommendations, drawn
from the longer list of barriers andenablers, which will enable further
scaling of the climate tech startup
ecosystem. These can be broadly
categorised as funding needs, talent,
and the role of government:tech investment opportunity.
Likewise net zero offers a strategic
positioning for VCs looking tobuild an LP base for a fund, given
the growing interest of LPs fromsovereign funds to corporate
investors, pension funds, anduniversities and family offices.

i. integrate net zero into theircorporate innovation strategy,
M&A strategy, and corporate
venture/accelerator arm to help
identify and fund the climate
tech solutions that are notyet mature or commerciallydeployable.

1. Funding the early-stage investing
life cycle of climate tech
Investors across the early stage life
cycle of climate tech companies
need to work harder to recognise
the time-critical and strategic
opportunity climate tech offers andto free up more capital to address
the large financing and funding gap:b. Corporate: The strategic roleof a corporate venture partneris critical to many climate techstartups, particularly thosetypified by heavy capital costs
targeted at disrupting assetheavy incumbent industries withhigh barriers to entry such as
in the energy, heavy industry
and transport sectors. Theseestablished corporates have thefinancial means, commercial
know-how, and market knowledge
to rapidly deploy and scale new
innovations into the market.
Corporates need to develop new
and more proactive models of
engaging with start-ups critical toproviding transformative solutions
to meet their own corporate net
zero pledge. Being involved as aninvestor in earlier stages will both
enable partnership to deploy andscale new solutions, In order to doso, they must:ii. be willing to pilot and proof-ofconcept at earlier stage;a. Venture Capital firms and funds:
a subset of VC firms are focusedon climate tech, or a sub-set ofclimate tech, and that number is
growing including both traditional
VCs and dedicated or specialist
climate tech venture funds. The
onus is growing on venture firms
to respond to the implications of
the net zero transition, with anincreasing number of institutional
investor LPs making portfolio
decarbonisation commitments49,
asking for climate risk disclosure,and interested in the climateiii. explore partnerships withclimate tech startups to help
them scale while helping tomeet their own climate targets(examples include innovation
grants, business alliances, orinvestment)
iv. explore partnerships which
include funding to help bridge
the gap for climate techstartupsc. Later stage investors (PE firms,
investment firms): PE and othergrowth stage investment firms arealso increasingly showing interestin the climate tech investing
opportunity, from investing in
VC firms active in this space togetting exposure directly as thelead or key investor in venture
capital rounds. This is particularly
the case for more well establishedstartups that have already raised

49 
See Climate Action 100+ and the United Nationsconvened Net-Zero Asset Owner Alliance, for example

The State of Climate Tech 2020 The next frontier for venture capital49

substantial capital from VCs. At
the average climate tech growth
rates observed in this research,
there will be a considerable poolof large enough valuations within
only a few years. PE firms cancapitalise on the investment
opportunity presented by climate
tech by:i. Filling the funding gap in orderto accelerate the climate techstartup lifecycle by funding VC
firms and related investment
intermediaries that are targeting
early-stage climate tech
ventures;ii. Developing in-house technicaland commercial capability
to support successful
direct investment in climate
tech deals, including moreestablished startups;iii. Investing earlier in the life cycleof startups, building exposure,
relationships and understandingof the climate tech ecosystem
which will aid their future laterround investments, including
decisions around restructuring
and value creation.
2. Foster and attract more talent toclimate techWith fewer success stories, theclimate tech sector has a smaller
pool of founders to draw from.
Bringing in, and fostering, theright blend of founder talent would
develop more fundable climate
tech companies and consequently
attract even more successful andexperienced founders. In order tobuild the climate tech talent pool, thefollowing needs to be recognised:a. Incubators, accelerators andplatform VC firms play animportant role in being able tohelp founders build and nurture
early stage teams that blend the
deep technical expertise which
distinguishes many domains ofclimate tech with commercial
expertise from C-suite (including
second time successful founders)to operational (e.g. growthmarketing, customer experience).

50

b. Young engineers will also be
critical to climate tech and are themost sought after talent globally,
but big tech and high growth
software startups tend to win out
on recruitment. A new approachon university campuses and by
talent/recruitment agencies isneeded to help steer passiondriven top talent into climate tech
ventures.
c. Governments, at a national,
regional and city level, cansupport entrepreneurial andinvestor expertise by developing
climate tech innovation hubs.
There are existing hubs ofinnovation, e.g. fintech, but noregion has yet strongly establisheditself as a world-leading climate
tech hub. For a heterogenous
field, hubs may be sector-specificand meet specific gaps or needs.
Such hubs will lead to a positive
feedback loop as investors andfounders begin to congregate andestablish expertise.
3. Increase Government funding andpolicy incentives for climate tech
Government interventions that create
the right enabling environment
can, and will, play a critical role innurturing the climate tech startup
ecosystem. In particular, some
sectors may never receive venture
funding as they do not fit the funding
requirements of venture capital(capital investment heavy and long
payback periods). Government
should urgently focus on developing
these sectors by:a. Ensuring that public R&D funding
is channeled towards priority
climate tech/net zero challengeareas.
b. Bridging public R&D with theventure ecosystem throughfunding joint public-private R&D
efforts, and creating startup
spaces in research centres.
c. Financing startups in the earlystage for these sectors withmechanisms such as R&D grants,
innovation prizes, and throughgovernment-backed incubators
and accelerators.

d. Deploying public financemechanisms to facilitate scalingof climate tech solutions – inparticular those with higher
technology costs – and build
investor confidence, including
the use of commitments on
public procurement for priceguarantees or advanced purchaseagreements (e.g. buying the firstone million units), loan guarantees,or concessional green loans, orgreen subsidies.
e. Improving climate policies
including stable (long-term),
efficient and pragmatic carbon
pricing mechanisms and removing
artificial support (e.g. direct andindirect fossil fuel subsidies
and tax breaks) which competewith and suppress the climate
tech ecosystem. Sector specificexamples include carbon taxes onhigh emissions aviation, cement,
vehicles, or plastics incineration;energy efficiency standards
and green fuels standards; orconstruction standards.
f. Channelling and targeting
significant portions of COVID-19
recovery packages including
infrastructure investment
to accelerate the net zerotransformation through green
stimulus – the EU Green Deal isan early example – as economies
and societies slowly start torebuild from the crisis in theearly-2020s. Examples include EV
recharging or hydrogen refuelling
infrastructure, CCS storage andpipelines infrastructure, scale-upof renewable power production.

Conclusions
Climate tech has experienced rapid growth in investment over the past seven years (2013-2019), rising morethan 3750% in only seven years. This impressive growth has been driven by a confluence of factors, which
include but are not limited to: growing consumer and corporate demand, an increasing number of founders
entering the space, rising investment levels and investor attention, falling infrastructure and technology
costs (increasing cost-competitiveness), and a stronger policy environment, including carbon pricing andother incentive mechanisms. Despite this impressive growth, however, the climate tech landscape acrossgeographies and sectors displays different levels of maturity and, overall, is far from the scale society needs
to make the overarching goal of a net zero emissions economy before 2050 a reality.

Across geographies, there is significant
variance in regional funding, partly due
to an uneven policy and regulatory
landscape across regions. The breadthand depth of policy differs significantly
between the EU, US and China, forexample. There are also big differences
in investment culture – US venture
capital levels are substantially higher
than in Europe in general. And levels ofcorporate involvement also differ: forexample, investment in batteries and
EVs is driven by incumbents in the EU,
while it is startup-driven in China.
Across sectors, some areas – mostnotably energy – are much moremature than others. And even withinareas, including energy and mobility,
several solutions are much moredeveloped. Many of the developed
and deployed climate tech solutions
thus far display similar characteristics.
They are minimally capital intensive, forexample, which can include applying
increasingly established mainstream
technologies to the climate space (e.g.
AI, sensors, drones), or are solutions
that have been explicitly targeted or
supported by government regulation(e.g. renewable energy).

From an investment perspective,
varying maturity can also be ascribedto the level of sector risk, including
both the amount of capital and time
it would take to generate returns, andthe financial support available fromgovernments and elsewhere, to support
the startup business case. There arealso a number of scientific and productrisks that have led to different levels of
engagement and investment thus far.
In terms of the macro picture, it is clearthat climate tech has a hugely importantrole to play as the world grapples withtransforming all sectors of the economy
towards net zero emissions. We hopethat the substantial rates of growth wehave seen in climate tech in the late
2010s, which to a large extent mirror
the exciting growth in VC funding of AI
startups in the early 2010s, augurs foran explosion of climate tech into themainstream investment and corporate
landscape of the 2020s, as is widelyrecognised to have happened with AI
over the past few years.
That said, many of the climate techstartups that have been founded, andreached scale (i.e. achieved ‘unicorn’status), during the late-2010s are theones already most likely to have asignificant impact on sizable emissions
reduction in the 2020s. Large-scale
investment in climate tech is urgently
needed now to have a meaningful
impact on rapid emissions reductionsin the late 2020s to support society’s
2030 goals, and global net zerocommitments beyond.

As more strong founders enter climate
tech, the scientific, product, andsector-specific risks will increasingly
be overcome. Investors are cautiously
becoming more certain of climate techas an investment space. Institutional
investors are asking more of their asset
managers around climate performance;
corporate investors are needing to
identify solutions to transform theirown industries; and a clearer productto market fit is emerging as customer
and consumer demand grows forsustainable solutions.
Investment will increasingly flow into
these spaces if the right support
is provided, and nurtured, fromacross founders, research, investors,
corporations, and governments.
Key stakeholders will need towork collaboratively, and often in
partnerships, to unlock barriers andachieve desired outcomes.
Finally, as countries and regions
around the world cautiously develop
COVID-19 recovery packages in the
coming months and years, these stimuli
provide an important opportunity
for governments to support, andaccelerate, climate tech as a highimpact area which has the potential tosupport the overarching goal of net zero
emissions growth.

The State of Climate Tech 2020 The next frontier for venture capital51

Acknowledgements

52

The State of Climate Tech 2020 The next frontier for venture capitalAcknowledgements
This report was written by Dr Celine Herweijer, Ben Combes, Tarik Moussa, James Wark, Jess Wrigley, andMarisa Donnelly of the PwC UK Innovation & Sustainability team, in close collaboration with Azeem Azhar of
Exponential View.
Celine Herweijer

Azeem Azhar

Global Innovation &Sustainability Leader

Senior Advisor to PwC UK, andFounder, Exponential View

Partner, PwC UK
E: celine.herweijer@pwc.com

E: azeem@azhar.co.uk

Twitter: @CHerweijer

Twitter: @azeem

Ben Combes

Tarik Moussa

James Wark

Innovation & Sustainability
PwC UK

Innovation & Sustainability
PwC UK

Innovation & Sustainability
PwC UK

E: benjamin.combes@pwc.com

E: tarik.moussa@pwc.com

E: james.wark@pwc.com
PwC would also like to acknowledge thevaluable contributions of Dealroom and the
below people in the development of thisdocument.

Jessica Wrigley

Marisa Donnelly

Innovation & Sustainability
PwC UK

Innovation & Sustainability
PwC UK

E: jessica.wrigley@pwc.com

E: marisa.m.donnelly@pwc.com

Dealroom.co
Providers of the underlying investment
data. Dealroom.co is a data provider onstartup, early-stage and growth company
ecosystems in Europe and around theglobe. Project team: Yoram Wijngaarde,
Antti Leivo, Matteo Renoldi
https://dealroom.co/

Interviewees and Inspirers
Andrew Beebe (Managing Director, Obvious Ventures)

Dawn Lippert (CEO, Elemental Excelerator)

Landon Brand (Co-founder, Project Wren)

Ramez Naam (Co-chair, Energy and Environment Program at
Singularity University)

Michele DellaVigna (Head of European Natural Resources
Research, Goldman Sachs)

Tony Pan (Co-founder and CEO, Modern Electron)

Bill Gross (Chairman & CEO, Idealab)

Ryan Panchadsaram (Advisor to the Chair, Kleiner Perkins)

Aaref Hilaly (Partner, Bain Capital Ventures)

Nancy Pfund (Founder and Managing Partner, DBL Partners)

Jason Jacobs (Host, My Climate Journey)
Hampus Jakobsson (General Partner, Pale Blue Dot)

Joshua Posamentier (Co-founder and Managing Partner,
Congruent)

Shayle Kann (Managing Director, Energy Impact Partners)

Lila Preston (Co-Head of Growth Equity Strategy, Generation IM)

Vinod Khosla (Founder, Khosla Ventures)

Albert Wenger (Managing Partner, Union Square Ventures)

Tommy Leep (Investor, Jetstream and Author, The Breeze)

Mike Zelkind (Co-Founder and CEO, 80 Acres Farms)

Michael Liebreich (Chairman and CEO, Liebreich Associates)

Bilal Zuberi (Partner, Lux Capital)
The State of Climate Tech 2020 The next frontier for venture capital

53

Appendix

54

The State of Climate Tech 2020 The next frontier for venture capitalMethodology
This section explains key features in the methodology that we have followed in our exercise to assess venture
capital investment in climate tech. Our approach follows three broad steps:
Step 1 was to establish
boundaries for the analysis.

Step 2 was to assess whether individual startups should beconsidered climate tech startups.

These boundaries guide our analysis
by defining what is and isn’t a startup,
and what should be considered
venture capital (for the purposes ofthis analysis). Our boundary conditions
included:This is not a black and white issue,
and so we applied a set of guiding
questions to assess whether startups
were sufficiently climate tech focused:• Time boundaries: We included
startups formed at any date, but
only examined funding which wasraised from 2013 onwards. This
time boundary was chosen basedon qualitative discussions withinterviewees and our own experienceof the increased interest in climate
tech investment since 2013.
• Funding boundaries: We included
only startups which had raised atleast $1 million. Startups smaller than
this are not unimportant to climate
tech, but are less able to be robustly
assessed against our climate tech
criteria, as many are still pivoting
their strategies in order to reachproduct/market fit.
• Funding type boundaries: We
filtered by round type to only
include early stage VC/PE funding.
IPOs, ICOs, and debt offerings, forexample, were excluded from ouranalysisa. Does the startup have anemissions/net zero focussed
strategy?
Startups publicly indicating that
reducing emissions was a clear
objective for them were included in
our analysis.
b. Does the startup address achallenge area or lever of criticalimportance to net zero?
Startups tackling certain levers seen
as pivotal to emissions reduction, orwith use cases almost exclusively
focused on resource efficiency
and emissions reduction, weremarked as climate tech irrespectiveof meeting our first criteria. For
example, satellite operators
gathering Earth observation data
which will be critical in informing
effective climate action andoptimising resource use.

c. Will the startup have a first order
impact on emissions?
Startups which reduce emissions
directly through their actions were
included in the analysis, while thosewhich had second order impacts
were not included (unless they met
our first criteria). For an example ofthe latter, consider a manufacturerof AI-focused processors – thesewill potentially be useful forstartups using AI to address thenet zero transition, but they do notthemselves directly contribute toemissions reduction (and depending
on how they are applied, may
indeed lead to greater emissions).
d. Does the startup show a levelof innovation and/or use oftechnology?
Startups were expected todemonstrate that they weredeveloping or using innovative tools
or techniques. For example, withinalternative proteins, a company
developing lab grown meat would
be considered sufficiently innovative,
whilst a company selling plant-based
food supplements (in the absence of
any other form of major innovation)
would not be included.

Step 3 was to allocate startups to challenge areas and levers.
We assigned each startup a ‘primary’challenge area and lever, based on thetargeting of their products or services.
We continually reviewed our taxonomy,
making adjustments where we foundstartups were not naturally aligning with
our initially hypothesised framework.
In some cases, startups provided
solutions applicable to more than one
challenge area: for example, developmentof electric vehicle battery technology,
which also supports grid management
when connected to the grid. In

these cases, we adopted a pragmatic
approach to classification by choosing
the companies’ primary industry of focus(Mobility & Transport in the prior example).
Noteworthy startups:
Our report discusses noteworthy startups
within certain levers. These have been
selected based primarily on funding
raised in the relevant period or thosehaving the highest valuation, as well as todisplay the diversity of offerings produced
under each lever.

The State of Climate Tech 2020 The next frontier for venture capital

55

Taxonomy
Challenge area

EnergyChallenge area

Mobility and Transport

Challenge area

Food, Agricultureand Land Use

Challenge area

Heavy Industry

56• Renewable energy generation• Nuclear generation• Grid management• Waste heat capture/conversion/storage• Alternative fuels• Energy storage (thermal orelectricity)• Low GHG extraction andmaintenance• High efficiency energy intensive
electronics, and smart monitoring/
management• Low GHG Air Transport• Low GHG Shipping• Micro-mobility• Low GHG Light and Heavy Duty
Road transport: EVs & HighEfficiency vehicles• Efficient transport systems• Batteries/Fuel Cells• Alternative foods/low GHG-proteins• Vertical and urban farming (including
aquaponics)• Agricultural biotech/genomics andnatural solutions• Precision agriculture and robotics• Low GHG/energy efficient equipment• Earth and Marine protection
Deforestation prevention,
reforestation and afforestation• Land use management• Value chain GHG reduction• Low GHG Fertilizers, Pesticides,
Insecticides, and therapeutics• Low GHG chemicals (beyond
plastics)• Low GHG Iron, Steel and Aluminium• Low GHG plastics or plastic
alternatives• Low GHG Concrete and Alternatives
for construction• Energy/resource efficientmanufacturing processes• Extreme durability for energy
intensive materials• Low GHG extraction and supply• Transformative circularity, recycling
and materials efficiency solutions• Industrial residuals treatment andmanagement• Low GHG: other materials

Challenge area

Built Environment

Challenge area

GHG capture and storage

Challenge area

Climate/Earth data
generation• High efficiency fixtures and fittings• High efficiency lighting• High efficiency space-water heating
and cooling• Building level (electricity andthermal) storage• Low GHG construction processes• High efficiency urban spaces andcommunities• Transformative circularity andrecycling• Commercial and residential residuals
treatment and management• CCUS• Biomass Uptake of CO2 (excluding
afforestation and land management)• Geo-engineering based direct air
capture and storage• GHG monitoring and management
platforms• Climate/earth data generation• Low-GHG satellites and sensors

The State of Climate Tech 2020 The next frontier for venture capital

57

58

The State of Climate Tech 2020 The next frontier for venture capital

The State of Climate Tech 2020 The next frontier for venture capital

59www.pwc.com/climatetech
This content is provided for general information purposes only, and should not be used as a substitute for
consultation with professional advisors. No representation or warranty (express or implied) is given as to theaccuracy or completeness of the content, and, to the extent permitted by law, neither PwC nor Dealroom accept
or assume any liability, responsibility or duty of care for any consequences of anyone acting, or refraining to act,in reliance on the content of this report or for any decision based on it.
© 2020 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the UK member firm, and may sometimes
refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure forfurther details.
2020-09-09_RITM3651373