Entrepreneurs are frequently provided with cash for technology testing and creation through early-stage venture capital (VC). This is frequently a very excellent fit for technologies requiring less upfront money, and increasingly, according to our data for 2021, it is being directed into more “asset-heavy” technologies, such as those in aviation and heavy industries, reflecting growing investor confidence in clean energy.
Energy technology start-ups raised USD 6.9 billion in early-stage VC capital in 2021, more than tripling the amount raised in 2020 and setting a new record. Despite the pandemic’s negative economic effects, energy venture capital in 2020 managed to sustain year-over-year growth in the number of acquisitions. Continued investor confidence in energy transitions, awareness that these changes provide the significant market potential for disruptive new energy technology, and brisk venture capital markets all contributed to growth in 2021.
The rise in 2021 was mostly driven by electric mobility and battery start-ups, which combined accounted for around 40% of year-over-year growth and 45% of the early-stage total.
The most striking trend in early-stage mobility investment is a shift away from businesses making electric vehicles (EVs) and toward those producing batteries and essential minerals, as well as attention to riskier mobility concepts like tiny electric airplanes.
Another noteworthy development is the increase in early-stage investment in creative strategies to reduce the usage of fossil fuels in heavy industries, including hydrogen.
With the help of larger projects, factories, and contracts, later-stage VC aims to scale up promising enterprises. These rounds of funding are substantially bigger. Energy storage, batteries, hydrogen, and fuel cells saw a 60% increase in later-stage VC financing for the energy sector in 2021.
Source: IEA