Notes:All Dealroom.co data excludes Israel and the following: biotech, secondary transactions, debt, lending capital, and grants. 2022 figures show data as of 31 October 2022.
Purpose-driven tech is inching back towards the record it reached in 2020, representing close to one-fifth of total capital invested. While purpose-driven companies address any of the United Nations' SDGs, Planet Positive is a subset of SDGs which target sustainable use of the planet's resources. This year, Planet Positive companies gained further market share of the broader tech market, capturing 19% of total European funding so far this year, up from 15% last year. Year to date, this represents $10.3B invested in tech companies with Planet Positive themes.
Climate tech, the smallest subset addressing only SDG 13, Climate Action, stands at $6.9B YTD. While all three categories have exhibited upward trendlines since 2018, both 2020 and 2022 - two years defined by global crises - saw spikes in their share of overall investments.
Climate Action (SDG 13) has received the most funding overall and has accelerated with 4x more funding than 2017-2019's cumulative figure. But other themes are accelerating and, in particular, Life on Land (SDG 15), Responsible Consumption and Production (SDG 12), and Industry Innovation and Infrastructure (SDG 9) have had even higher growth multiples since 2017-2019 levels, 6x, 4.7x, and 4.6x respectively.
Despite this growth, it is telling that SDGs 15 and 14 - Life on Land and Life below Water - remain at far lower overall funding levels compared with the other climate-related SDGs listed.
This likely reflects the continued challenge over funding (and monetising) innovations / deep tech related to biodiversity, oceans, and general natural capital resources requiring more patient capital. But numerous entrepreneurs, investors, and policymakers continue to try to crack this case; hopefully the growth rates we see here - since 2017, 25x and 5x respectively - are harbingers of much more growth and innovation to come in these important areas.
We know that avoiding the worst effects of climate change requires two things: radical emissions reduction, and the permanent removal of gigatons of carbon already in the atmosphere and oceans. European startups like 44.01, Mission Zero and Climeworks are attracting global investors and customers for novel carbon removal techniques: sucking CO2 out of the air, sprinkling CO2-reactive dust on agricultural fields, and turning CO2 into rock. As these companies scale, they’ll become a source of growth and employment across Europe. But we need to be removing gigatons, not grams. Those entrepreneurs need a bold assist to get there. We need more of Europe’s institutions to promote high quality, permanent carbon removal, act as a customer, and help these companies scale. Policymakers can also help steer more public investment towards climate tech, just like some of them did to boost their domestic startup ecosystem. 65% of global climate tech investment went to US climate startups last year. Surely, we could do better.
Over our years of producing this report, we've been early in identifying the emergence of two important cross-cutting themes: deep tech and purpose-driven tech.
Additionally, we have also charted the emergence and ever-greater presence of climate tech as a core theme at the heart of the European tech ecosystem. It is a cross-cutting theme that operates at the intersection of different sectors with a clear focus on reducing carbon emissions, and is aligned with Dealroom's definition of Climate Action SDG (excludes clean energy). The trends of the past five years in these areas have once again risen to the top in 2022, setting new records in terms of total capital investment into purpose-driven tech and climate tech. Deep tech investment also reached very strong levels in 2022, though it is approximately 25% down on the record-breaking levels of 2021. This still represents, however, a near-doubling versus the levels in 2020.
The themes of sustainability and deep tech are becoming increasingly linked. In fact, an analysis of the top 10 largest deep tech rounds raised by European tech companies in 2022 shows that many of them have sustainability embedded at their core. Climeworks, for example, which is working on direct air carbon capture and storage, raised a $650M Series F round to continue to push as a global leader in the carbon removal industry.
|1||Climeworks||Switzerland||$650M Series F||Direct air carbon capture and storage|
|2||Volocopter||Germany||$352M Series E||Electric vertical takeoff and landing vehicles|
|3||Exotec||France||$335M Series D||Industrial robotics|
|4||Newcleo||UK||$315M Early VC||Nuclear fission|
|5||H2 Green Steel||Sweden||$255M Series B||Production of fossil-free steel|
|6||Wayve||UK||$200M Series B||Autonomous vehicles|
|7||Carbon clean solutions||UK||$150M Series C||Industrial carbon capture solutions|
|8||ICEYE||Finland||$136M Series D||Earth observation micro-satellites|
|9||IQM||Finland||$128M Series A||Quantum computing|
In order to dive into emerging clusters at the earliest stages of company formation, which will provide the best forward-looking indicator of future thematic clustering, we have looked to identify what's happening at the Pre-Series A stage, defined here as rounds of $5M or less. Specifically, we picked out clusters that have seen a new peak in activity in 2022 and that have seen growing investment activity over recent years.
What stands out here is the rise of climate tech clusters within the top 10 highest-ranked clusters based on this methodology. These clusters include companies working on carbon emissions reduction, solar and photovoltaics, air quality, and energy efficiency. Web3 is also a notable theme across the clusters identified, including companies working on core blockchain technologies, as well as NFTs.
|1||Carbon emissions reduction||21||37||40||8%|
|4||Solar & photovoltaic||18||17||20||18%|
|6||Metaverse & VR||2||9||12||33%|
|10||Annotation / NLP||8||7||10||43%|
European tech benefits from Europe’s commitment to protecting climate and biodiversity – humanity's number one problem. That means more regulations, but these limits force traditional and new players to be more creative. European startups have the opportunity to learn from demanding customers, who are only going for (green) technology that is innovative, compliant, and easy to implement. By being at the heart of the world's green policy reactor and having the greatest pool of climate talent, European tech has all the assets to take the lead on climate tech – connecting all the key actors to scale climate action globally and building the Tech Giants of tomorrow.
At a macro level this is a great time to elevate the European climate tech ecosystem to global leadership. In common with other regions, Europe is experiencing tailwinds at the confluence of advancements in technology, strong consumer sentiment, and a favourable regulatory environment. But in Europe the Ukraine war is having a particularly marked impact on energy and food security, further amplifying these tailwinds. Scandinavia in particular, with its low cost renewable energy, is a potential epicentre for climate tech developments.