Covering more than 8,000 deals, the research shows that built-world climate tech investment has remained resilient relative to the broader venture and climate tech markets.
Climate investments now make up 70 percent of the built world’s VC investment, with investment in building efficiency alone growing 73 percent this year.
The report demonstrates that the built world stands at a pivotal intersection, as the largest contributor to global carbon emissions, and with the most important environmental regulations, and capital markets transformative potential going forward.
“The positive transformation of the built world is the biggest opportunity of our generation and as our research continues to demonstrate the breadth, depth and importance of technological innovation in our space, we have never been more optimistic about the road ahead.”
Here are some of the key findings
$11.8 billion in venture capital dollars was invested in the built world in 2023.
Built world tech continues to outperform the wider venture market despite a broader VC downturn. Further, longer term, tech investment has grown much faster in the built world (+34 percent dollar 10-year CAGR) than the wider venture ecosystem (3 percent dollar 10-year CAGR).
The report, however, notes that decarbonisation in 2023 represented just 3 percent of total venture capital dollars — including the very necessary tech for retrofitting, green construction, and climate risk management.
Early-stage investment parity between Europe and the US
For the first time, Europe and North America now see the same dollars invested for early-stage (Pre-Seed to Series B) built world climatetech.
Germany and the UK grew significantly this year (+73 percent and +27 percent respectively) while the US market contracted by nearly a third (-32 percent).
For the first time, the top three cities for dollars invested are all European (London, Berlin, Munich).
In Europe, 90 percent of the building stock that will stand in 2050 has already been constructed, making the retrofitting of existing buildings through energy efficiency and electrification measures key.
Adapting to Energy Price Volatility
The transition to a low-carbon society will see a greater component of renewables in the grid mix, enabling building owners and operators to shift their load profile to capture cheaper electricity prices off-peak.
Further, coupled with growing regulatory and investor pressure to reduce Scope 2 emissions, this year has underscored the importance of building a resilient, sustainable energy strategy by combining onsite, offsite and grid resources.
However, for commercial and industrial businesses, creating and managing a diverse energy strategy is complex and resource-intensive, especially for energy-intensive businesses — such as bakeries, cement manufacturers and SMBs, who lack the resources to define and implement strategies.
In response, a new generation of companies are seeking to:
- Digitise power procurement planning workflows, reducing the need for vast in-house energy teams or consultancy fees.
- Aggregate demand across smaller providers, enabling minimum consumption and financing thresholds to be met.
- Provide verified certification, enabling corporate net zero targets to be met.
Installer shortages are a significant painpoint to energy resilience
The home retrofit customer journey and broader supply chain are fragmented, inefficient and opaque. Tech-first installer solutions seek to provide customers with an easy-to-use interface with integrated design tools and upfront quotes, combined with installer upskilling and vendor workflow software, and complete with streamlined access to financing and grants.
However, with 1.7 vacancies for every available energy technician in Germany alone, the average time to fill a vacancy for this role is more than six months. Not only do companies need to consolidate the existing fragmented and disparate workforce, but boost the network of skilled labour supply.
The report notes that even in mature markets such as Germany and the US, where large players such as Enpal have raised billions of dollars, we will continue to see Pre-Seed and Seed stage succeed because even in the most mature markets, the largest retrofit installers account for less than 1 percent of the wider installer base, leaving room for multiple winners.
Retrofit installers continue to see the most funding across the VC stack — with the highest amount of dollars and fastest early-stage deal growth — as government incentives, regulations and corporate net zero targets ramp up.
Within the wider building electrification category, this year saw Europe represent 60 percent of the deal count for the first time, with early-stage deals in startups including Enter, Smalt, and Lun.
Materials manufacturers also saw significant funding this year, partly due to several large green steel deals and low-carbon concrete scale-ups.
Declining satellite launch costs are also catalysing investment in earth observation companies such as Satellite Vu and Constllr, with growing commercial interest in global thermal imagery data for infrastructure monitoring and retrofit decision-making.
Growth in grid storage funding is driven by hardware investments in long-duration batteries such as Energy Dome.
Meanwhile, dollars invested in EV charging solutions dropped in 2023 following significant growth over the past three years
Infrastructure monitoring software for the grid is also on the rise. The vertical recorded a 134 percent investment CAGR from 2020-2023.
Solar hardware tech has also experienced positive investment growth, albeit from a smaller base, with investments in combined solar heat and power tech, such as Naked Energy, coming to the fore.
However, building water efficiency and heat pump hardware remain significantly underinvested relative to potential climate impact.
Lead image: Di.