The climate tech sector is booming—here are the applications VCs are most excited about

Investor interest—and dollars—in climate tech (the umbrella term that includes a range of technologies that aim to address the impact of global warming, whether that be through decarbonization or sustainable agriculture supply chains) has been gaining momentum since 2021. While the sector has not been completely immune to the venture slowdown in 2023, it has fared relatively well.

“The growth in climate tech funding has been driven by a variety of factors, including regulatory support, which has in turn been influenced by strong growth in the number of decarbonization pledges at the country, city, and company level,” explained John MacDonagh, emerging technology analyst at PitchBook. “This has been particularly apparent in the clean energy sector, where technological maturation has also pushed down technology costs to the point at which they’re competitive with high-carbon approaches, regardless of climate benefits.”

Climate tech, like many other sectors, has gone through hype cycles in terms of VC attention and funding. In a period referred to as “Clean Tech 1.0,” VCs poured billions into climate tech between 2006 and 2011. However following the financial crisis, many of the investments did not pan out. Now, many of the players investing the most in the space are newer, including SOSV and Breakthrough Energy Ventures. Famed seed investor Chris Sacca, who is known for his winning investments in Instagram, Twitter, and Uber, founded Lowercarbon Ventures in 2018 along with his wife Crystal Sacca to invest in climate tech. 

While companies focusing on clean energy are still crucial, VCs are also looking at the next wave of transformational inventions that will transform supply chains for polluting industries that have yet to see sustainable innovation. “Clean tech 1.0 was really somewhat focused on just the energy sector, and now we’re seeing a large diversification of really interesting new sectors and investors who are gaining knowledge about those areas and wanting to deploy capital,” said Duncan Turner, a partner at SOSV. Turner emphasized some of the most exciting new tech revolutionizes supply chains for some of the most polluting industries like concrete production and agriculture. 

Another piece of tech that is seeing a boom? Carbon removal. “VC investment in carbon removal tech has also been growing strongly – in the US, the Inflation Reduction Act’s support for carbon removal is particularly strong,” explained MacDonagh. One recent example is carbon removal firm Charm announcing their $100 million Series B today. General Catalyst led the round. 

While climate tech may be having a moment, investment towards the sector is meager compared to funding going to A.I. software companies. Yet VCs say those on board have huge returns ahead. “[Agriculture] is still in need of a good digital revolution that has happened in so many other sectors and I think capital now senses that that’s coming—there’s just nothing but a green field of opportunity,” said David Barber, partner at Astanor Ventures, a firm that invests in sustainable agriculture tech. 

Binance blow: On Monday the Securities and Exchange Commission filed a big lawsuit against top-dog crypto exchange Binance, alleging, among other things, the exchange mishandled user funds and that the exchange’s token, BNB, is an unregistered security. The lawsuit named several other popular tokens—including Solana and Polygon—as securities as well. That’s bad news for the broader industry, and for venture capital investors who’ve bet on crypto projects and tokens including Solana. One crypto-focused VC told me yesterday shortly after the news broke that “right now everyone is just reading the complaint and discussing which tokens were named (and the fact that [Ethereum] was not…).” It’s a significant move and one that could make things tricky for those holding or trading tokens—and it’s already taken a hit to the prices of several tokens. A Binance spokesperson said in a statement that “We are disappointed that the SEC chose to file a complaint today against Binance seeking, among other remedies, purported emergency relief,” adding that “We respectfully disagree with the SEC’s allegations that Binance operated as an unregistered securities exchange or illegally offered and sold securities, including by offering BNB, or the BUSD fiat-backed stable coin. We work diligently to comply with laws and regulations applicable to our business.” —Anne Sraders

Until next time,

Lucy Brewster
Twitter: @lucybrewster
Email: Lucille.brewster@fortune.com
Submit a deal for the Term Sheet newsletter here.

Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Charm Industrial, a San Francisco-based carbon removal technology company, raised $100 million in Series B funding. General Catalyst led the round and was joined by Lowercarbon, Exor, Kinnevik, Thrive Capital, and Elad Gil.

- Red 6, an Orlando-based augmented reality technology firm, raised $70 million in Series B funding. RedBird Capital Partners led the round and was joined by Alpha Edison, Boeing’s AEI Horizon X Fund, Lockheed Ventures, Accelerator Investments, Downey Labs, and others.

- RxLightning, a New Albany, Ind.-based medication access and affordability platform, raised $17.5 million in Series A funding. LRVHealth led the round and was joined by McKesson Ventures, Novartis, Onco360, Hearst Ventures, and HealthX Ventures. 

- Onebeat, a Tel Aviv-based inventory management platform, raised $10 million in additional Series B funding. Magenta Venture Partners led the round and was joined by AnD Ventures, INcapital Ventures, J-Ventures, Surround Ventures, and Wilson’s Bird Capital.

- Rithmm, a Boston-based sports betting technology company, raised $2 million in seed funding. Boston Seed Capital, Counterview Capital, Oyster Ventures, Correlation Ventures, Service Provider Capital, and Permit Ventures invested in the round.

- Grow Lab Organics, an Isle of Man-based cannabis company, raised £1 million ($1.24 million) in seed funding from angels including Saul Milton and Mark Wilkinson. 

PRIVATE EQUITY

- KKR agreed to acquire CIRCOR International, a Burlington, Mass.-based flow control products and services provider for the industrial, aerospace, and defense markets. The deal is valued at approximately $1.6 billion, including debt.

- Acacia Partners recapitalized A&A Global Industries, a Baltimore-based toys, candy, and redemption prizes distributor to family entertainment centers. Financial terms were not disclosed.

- AE Industrial Partners acquired a majority stake in Yingling Aviation, a Wichita, Kansas-based maintenance, repair, and overhaul services provider to business aviation. Financial terms were not disclosed. 

- Arcadia Consumer Healthcare, backed by Bansk Group, acquired all of the assets of Avrio Health, a Bridgewater, N.J.-based consumer health products company. Financial terms were not disclosed. 

- Blackford Capital acquired PACIV, a San Juan, Puerto Rico-based industrial automation solutions provider. Financial terms were not disclosed.

- Fenix Parts, backed by Stellex Capital Management, acquired the assets of Fox Auto Parts, a Belleville, Mich.-based automotive recycler and auto repair facility. Financial terms were not disclosed.

- Mercer Global Advisors, backed by Oak Hill Capital and Genstar Capital, acquired RMR Wealth Advisors, a Madison, Wis.-based wealth management firm. Financial terms were not disclosed.

- SE7 Partners agreed to acquire Charlton Athletic, a London-based soccer club. Financial terms were not disclosed.

- Warburg Pincus acquired a minority stake in ParetoHealth, a Philadelphia-based employee benefits platform and portfolio company of Great Hill Partners. Financial terms were not disclosed.

- WestView Capital Partners acquired a minority stake in Triple Crown Consulting, an Austin-based engineering talent provider for semiconductor hardware, embedded systems, and software. Financial terms were not disclosed. 

OTHER

- Floranow acquired Bloomax, a Riyadh, Saudi Arabia-based flower distributor. Financial terms were not disclosed.

- StoneEagle acquired Pencilwrench, a Cape Coral, Fla.-based repair event documentation software company. Financial terms were not disclosed.

IPOS 

- Cava, a Washington, D.C.-based Mediterranean chain restaurant, plans to raise up to $274.44 million through the sale of 14.44 million shares priced between $17-19.

- Surf Air Mobility, a Hawthorne, Calif.-based regional air travel company, filed for an initial public offering. 

FUNDS + FUNDS OF FUNDS

- ARCHIMED, a Lyon, France-based private equity firm, raised €3.5 billion ($3.75 billion) for a fund focused on buyouts in health care industries.

- IQ Capital, a leading London-based venture capital firm, raised $200 million for its fourth fund focused on seed and Series A deep tech companies in Europe.

- Kyber Knight Capital, a San Francisco-based venture capital firm, raised $120 million for a fund focused on pre-seed and seed investments.

PEOPLE

- Ara Partners, a Boston-, Dublin-, and Houston-based private equity firm, hired Kaitlin Fronczek as director of investor relations. Formerly, she was with Apax Partners. 

- NightDragon, a San Francisco-based venture capital firm, hired Joe Bubniak as vice president of corporate development and partnerships. Formerly, he was with Polyhive.