April 15, 2024
Why US-based VCs are investing big in European climate tech

In the last decade, the US established itself as a leader in funding climate tech ventures, with Europe trailing. Known for their willingness to embrace risk and invest heavily, US investors stand out in their approach to supporting these ventures.

The world of climate tech is marked by uncertainty: new markets are emerging, technology winners are yet to be determined, and fluctuating policies impact commercial viability. Notably, many of these ventures are developing complex hardware products, necessitating a longer path to market.

Recognising how well US investors’ perspective aligns with the climate tech sector, we were intrigued by the question of what US capital means for the growth of European climate tech startups. Analysing over 4500 such companies, we investigated the distinct characteristics of deals with US involvement, the evolving trends, and what this could mean for the future of Europe’s climate tech industry.

Trends & predictions

2023 presented a challenging year for venture capital globally, with a significant downturn in startup funding. European ventures experienced a 37% decline in overall venture capital compared to 2022, while the US saw a 40% drop. However, there’s a silver lining in the climate tech sector.

Unlike other industries, climate tech in the EU demonstrated resilience, with only a 6% reduction in investments. This European resilience is even more remarkable when contrasted with the US. Although total EU investment in the sector amounted to only half of US based investments in 2020 and 2021, Europe is catching up and almost equaled climate tech investment in the US in 2023.

US vs Europe total investments in European climate tech