Investment Trends 2023
Key takeaways
Built world venture funding has decreased for the first time in five years, but the sector has been shielded from the full impact of the broader venture downturn.
There have been strong signs of recovery over the course of 2023, with an uptick in quarterly investments holding true throughout the second half of the year.
Downward investment volumes are predominantly driven by a drop in later stage deals, while early stage venture investment has increased.
Building energy efficiency and grid technologies have outperformed this year, while venture investment in climate management solutions contracted by more than two thirds.

Built World Climate Tech Remains Resilient

Venture investment is down for the first time in five years

Global built world climate venture funding is expected to fall by almost a fifth this year, significantly less than total VC volumes, which are anticipated to fall by more than a third. Over time, built world climate investment has also outperformed broader climate tech investment.

Quarterly investment bounces back from Q1 low

Quarterly funding for the built world has recovered from Q1's low this year, while the wider tech ecosystem is yet to see a strong recovery.

Early stage funding increases with the energy transition driving growth

Total Pre-Seed to Series A investment saw growth this year, while VCs doubled down in building efficiency and grid technologies.

Venture funding for green built world tech is expected to end the year 17% down year on year. A notable decline on last year’s investment volumes, the first half of 2023 saw a 29% YoY decrease relative to the same period a year prior. Performance has significantly improved throughout the year, with second quarter funding climbing 48% to reach $3.4bn. Third quarter volumes confirmed this trend, recording another $3.2bn of venture investment, and marking close to a full recovery to Q3-2022’s $3.5bn investment.

The built world’s recovery is notable in that it appears more resilient than both the broader venture market and the climate tech sector, where annual funding is expected to end the year down 36% and 26% respectively. Given the significant overlap between climate tech and the built world, the disparity in performance this year is notable: the first half of this year saw a 47% decrease in climate tech funding relative to the year prior, with quarterly funding volumes returning to levels only seen pre-2021.

While all built world tech deal stages have seen less investment year on year, early stage deals have shown strong signs of recovery over the course of 2023. In H1-2023, Pre-Seed, Seed and Series A deal stages all saw growth in total funding volumes. Notably, Pre-Seed volumes grew 67%, reaching levels previously seen in the second half of 2021. Later stage rounds suffered the most, with an 8% reduction in Series B funding and 53% decrease in Series C allocation over the six month period.

The drop in funding this year is not consistent across all investment themes. Energy themes have outperformed this year, with investment growth across building efficiency (+73%) and building to grid (+8%). Meanwhile, climate management solutions, which saw a rapid rise in funding in 2022, are expected to end the year 66% down. While other themes have also seen compression this year, climate management funding is the only built world tech theme to (i) decrease by more than the wider venture ecosystem’s 36% drop, and (ii) record less investment than in 2021.

Tracking innovative startups

Download the full report to access a market map of the top built world climate startups that raised this year.

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