Cleantech Investor: A Hard Time For Fundraising, But A Good One For Dealmaking

Cleantech investors have largely hit pause on new deals in the past few months. But for those who are writing checks, terms are increasingly favorable.

That鈥檚 the take from , CEO of , an early-stage cleantech investor that just announced it has closed on $85 million for a second flagship fund. The fundraise comes three years after the firm launched its first fund, which was half the size of its second.

鈥淪o many people have gotten very cautious because they鈥檙e worried about being targeted by the current administration,鈥� Davidson said regarding U.S. cleantech investment. 鈥淪o those of us that are in the market with capital, we鈥檙e finding better opportunities at better valuations.鈥�

Cleantech funding down

Aligned鈥檚 fundraise comes amid a period of weak investment for cleantech. Only around $2.9 billion has gone to seed through growth-stage investments in sustainability related categories globally so far this year, per 萝莉视频 .

The total to date for 2025 marks a decline of more than two-thirds from the same period last year, which was already a sluggish time for investment. U.S. sustainability related funding 鈥� about $1.5 billion so far this year 鈥� is down even more sharply.

A change in presidential administrations may be among the driving factors, but it鈥檚 not the only one. Big cleantech exits also have been few and far between. The last major run was during the聽 IPO and SPAC boom of 2020 to early 2022. Many of the high-flyers then, like EV charging network and , are worth a tiny fraction of their former highs.

In the private markets, meanwhile, investors were roiled by troubles at Swedish battery-maker , which filed for U.S. Chapter 11 bankruptcy protection in November. The company had previously raised over $6 billion in equity and over $7 billion in debt financing.

For smaller cleantech-focused investment funds, it鈥檚 also been 鈥渂rutally difficult to raise capital鈥� in recent months, said Davidson. Startups on the fundraising trail haven鈥檛 had it easy either.

And yet it keeps getting hotter

Yet while cleantech investment is down, we鈥檙e only seeing continued acceleration of the drivers underpinning demand, including climate change and attendant risks, energy demand, and progress in technologies to reduce carbon footprints.

We鈥檝e touched on some climate-related funding hot spots of recent quarters in previous coverage. These include carbon capture and sequestration, clean concrete and fusion.

At Aligned Climate Capital, Davidson, a former chief executive of the 鈥檚 loan programs office during the administration, describes the investment strategy as a聽鈥減icks and shovels鈥� approach. The portfolio is heavy on startups fixing issues for larger players in the energy space. They鈥檙e not necessarily companies that will become household name brands, but they are targeting large revenue streams.

The firm鈥檚 most recent disclosed investment was in a $20 million round for , which works with building owners and operators to provide on-site carbon capture for emissions from natural gas. Another portfolio company, , provides microgrid power to rural communities in California and elsewhere, with an eye to reducing the fire risk that comes with grid-connected power lines.

Looking ahead, Davidson said he鈥檚 bullish about opportunities driven by heightened demand for electricity, as a result of trends in EV adoption and growing data center infrastructure. At the same time, however, he鈥檚 worried about the administration鈥檚 unsupportive stance for clean energy, coupled with deep cuts to research funding.

鈥淚t hasn鈥檛 happened yet, but there definitely will be a crisis looming if the actions we see this administration doing continue,鈥� he said.

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