📈 Climate tech trending: Hardtech, Tax Credits, Messy Middles

Hey there,

Today we’re stepping back from day-to-day events to look at the trends from the last quarter, and what they might mean for the future.

In this issue:

• A snapshot of VC funding for the quarter

• Tax credits unlock carbon capture

• Hydrogen and EVs are going through “messy middle” periods

• Carbon pricing under fire

P.s. Enjoying the newsletter? Share it with someone in your network. And if you’re that someone, subscribe here.

1. Climate VC funding stabilizes with hardtech focus

VC funding for climate tech stabilized a bit more this quarter, deploying $352.7M across 20 deals. Total funding is down from Q2’s $587M but is more in line with a typical quarter (and far better than this year’s dismal Q1). Median deal size is climbing back up, and it was one of the most active quarters in the last few years.

Drivers: Hardware and software-enabled hardware dominated this quarter. We saw rounds for Cyclic Materials’ rare earth recycling, UgoWork’s electric forklift platform, Miru’s smart windows, and Svante’s carbon capture tech. Pure software plays were virtually non-existent.

Another bright spot was several new climate-focused funds. MKB closed a $145M growth fund, Pangaea Ventures raised a $115M impact fund, and Diagram Ventures closed their first, $80M climate tech fund. While there haven’t been a significant number of IPOs, investors still see an opportunity in the space. According to CTVC, climate tech funds have more than $41B in “dry powder” ready to be deployed.

2. Tax credits unlock carbon capture

Several carbon capture and storage (CCS) projects moved forward backed by new public financing tools: