Climate tech startups pulled in billion in venture funding globally in 2025. For comparison, the entire AI sector raised about billion in the same period. Five years ago, climate tech was a rounding error in VC portfolios — maybe 2-3% of total funding. Now it’s approaching 15%. Something changed, and it wasn’t just governments writing bigger checks. Private capital figured out that decarbonization is possibly the largest commercial opportunity of the century, and the money followed.
So what actually changed? A few things collided at once, and the combination was bigger than any single piece. Government policy got real teeth — the Inflation Reduction Act in the US, the EU Green Deal, China expanding its carbon market. Energy prices spiked and stayed unpredictable, which made alternatives look a lot more appealing from a pure dollars-and-cents perspective. And the tech itself grew up. Battery costs fell. Carbon capture crept closer to something that could work at scale. Green hydrogen stopped being a joke people told at energy conferences. The founders building in this space aren’t wide-eyed idealists anymore, either. They’re operators who’ve built and scaled companies before, and they look at climate tech and see probably the biggest market opportunity of the next twenty years.
Let me get specific, because vague climate articles drive me nuts. Form Energy is one of the most interesting infrastructure plays I’ve come across recently. They’re building iron-air batteries. Iron and air. That’s it. And these things can store energy for up to 100 hours. Not a typo — a hundred hours. Your typical lithium-ion battery tops out around 4 to 6 hours, which handles daytime solar smoothing just fine but is totally useless when a weather system parks itself over your region for three days. Form Energy’s approach could solve what’s arguably the last big unsolved problem in renewable energy: what do you do when the sun disappears and the wind dies for an extended stretch?
They raised $450 million in a Series E back in 2023 and have been putting up their first commercial-scale manufacturing facility in Weirton, West Virginia. Contracts are already signed with utilities — Great River Energy in Minnesota, Xcel Energy in Colorado. Here’s what I find fascinating about the iron-air chemistry: the materials are dirt cheap. Iron is literally one of the most common elements on Earth. So their cost targets sit way below lithium-ion. We’re talking something like $20 per kilowatt-hour for storage versus $150-plus for lithium-ion. If they hit those numbers at scale, it rewrites the math on deploying renewables everywhere.
But — and this is my startup brain kicking in — they haven’t shipped a commercial product yet. The technology works at pilot scale. The physics check out. Fine. The question is whether they can manufacture at volume, actually reach those cost targets, and deliver on schedule. Manufacturing scale-up is where hardware startups go to die. I’ve watched it happen over and over again. Lab results look amazing, the pilot runs perfectly, and then you try to build a factory and everything costs three times more and takes twice as long as anyone planned for. Form Energy has a strong team and serious backing, so I’m cautiously optimistic. But they’re not out of the danger zone. Keep an eye on that Weirton facility timeline — it’ll tell you a lot.
Carbon capture is another story entirely, and it’s been “the technology of the future” for roughly thirty years. For most of those thirty years, it probably deserved the skepticism. The economics were awful. Pulling a ton of CO2 out of the atmosphere ran you $600 to $1,000, and nobody was paying anything close to that. But the math is shifting, and a few companies are making genuine progress that I think people are underestimating.
Climeworks is the one most people have heard of. Swiss company. Direct air capture — giant fans and chemical filters that literally suck CO2 out of the sky. Their Orca plant in Iceland went live in 2021 and captures about 4,000 tons of CO2 per year. Mammoth, their newer plant that started running in 2024, is designed for 36,000 tons annually. They’ve locked in long-term offtake agreements with Microsoft, Shopify, Stripe — companies paying $600 to $1,000 per ton for verified carbon removal. Those prices sound bonkers. They are bonkers. But Climeworks is betting hard that scale brings costs down. They’re targeting $300 to $400 per ton by 2030 and under $200 by 2035.
Can they get there? Maybe. The learning curve for industrial processes is pretty well documented — costs tend to fall 20 to 30 percent every time cumulative production doubles. Solar panels followed this curve almost perfectly over the last two decades. But DAC is trickier than solar manufacturing. You need cheap clean energy to power the capture process (otherwise you’re burning fossil fuels to grab carbon, which… come on). You need geological storage sites. You need massive physical infrastructure. Climeworks planted itself in Iceland specifically for the cheap geothermal energy and basalt rock formations that can permanently mineralize CO2. Great for Iceland. Limits where you can copy the playbook, though.
The carbon capture company that gets me more excited, if I’m being honest, is Twelve. Used to be called Opus 12. They’re based in Berkeley, and instead of just capturing CO2 and burying it underground (which is a cost center, full stop), they convert it into useful chemicals and fuels. Their tech uses a proprietary electrolyzer to turn CO2 and water into carbon monoxide, which then becomes jet fuel, plastics, industrial chemicals — stuff people actually buy. They’ve partnered with the US Air Force on CO2-derived jet fuel and signed deals with Mercedes-Benz to make car parts from captured carbon. Think about that business model for a second. Climeworks is essentially a waste disposal company. Capture CO2, bury it, charge somebody for the service. Twelve is a manufacturing company that happens to use CO2 as a feedstock. If their costs come down far enough, they don’t need carbon credits or government subsidies to turn a profit. They just need to be cost-competitive with fossil-derived chemicals. That’s a completely — wait, let me put it differently — that’s a totally different and, I’d argue, way more durable business model. They raised $645 million through 2024 and have been scaling production capacity. Still pre-revenue at any meaningful scale, but the path to profitability is clearer than pure storage plays.
The funding side of climate tech has gone through its own wild transformation. Five years ago, raising money for a climate startup meant pitching to maybe a handful of specialized funds. Breakthrough Energy Ventures. Congruent Ventures. Lowercarbon Capital if you were lucky. Today? Nearly every major VC firm has a climate practice or at least one partner dedicated to it. Sequoia’s in. Andreessen Horowitz is in. Khosla Ventures, Kleiner Perkins — all active. And the check sizes have ballooned. Series A rounds of $50 million are becoming normal for climate startups with promising tech. Series B and C rounds blowing past $200 million happen regularly now.
All this capital is mostly good news. Mostly. But I’ve lived through two hype cycles — the dot-com bubble and the 2021 SPAC craze — and I’m seeing some familiar patterns creep into climate tech that make me nervous. Money is flooding in faster than good opportunities can soak it up, which means companies are getting funded that probably shouldn’t be. Valuations are stretching. And the bar for what counts as “climate tech” is dropping to include stuff that’s really just incremental improvements wrapped in green marketing. A slightly more efficient HVAC system isn’t climate tech in any real sense. But it’ll get funded right now because the category is hot.
The companies that’ll survive the correction — and a correction is coming, I’m fairly sure of that — are the ones with real technological differentiation and a path to making money without subsidies. Government incentives are great for getting off the ground. But any business plan that depends on IRA tax credits existing forever is a bad business plan. Policy changes. Administrations change. Build something that works even if the subsidies vanish tomorrow. The best climate tech founders I’ve met think about this constantly. The worst ones have built their entire financial model on 45Q tax credits and are just hoping for the best. That’s not a strategy. That’s a prayer.
Green hydrogen was supposed to be huge by now, and it’s… getting there, I guess, but slowly. The concept is simple enough: use renewable electricity to split water into hydrogen and oxygen through electrolysis. Then use the hydrogen as clean fuel for heavy industry, shipping, aviation, long-haul trucking — applications where batteries are either too heavy or don’t pack enough energy density. On paper, the market is massive. Steel production alone accounts for about 7% of global CO2 emissions, and green hydrogen could replace the coal used in blast furnaces.
In practice? It’s struggling with cost and infrastructure. Producing green hydrogen runs about $4 to $6 per kilogram right now, versus $1 to $2 for hydrogen made from natural gas (that’s “gray hydrogen,” for the uninitiated). The cost gap needs to close a lot before green hydrogen can compete without someone writing a subsidy check. Companies like Plug Power and Nel ASA have been grinding away at electrolyzer costs — they’ve dropped roughly 40% since 2020, which is real progress. But they need to fall another 50 to 60 percent to reach parity with gray hydrogen, and that’s a years-long timeline, not months. And then there’s the infrastructure problem, which is maybe even harder. You need pipelines, storage facilities, distribution networks — none of which exist at scale. Some countries are going big on hydrogen infrastructure as an export play. Australia, Chile, Saudi Arabia. They’re betting their cheap renewable energy gives them a cost edge. But the buildout timeline is long. I wouldn’t expect green hydrogen to be a mainstream energy source before 2032 to 2035, at the earliest. If you’re founding or investing in a green hydrogen startup, make sure you’ve got patience and runway for a very long road.
There are a few sectors I think are under-appreciated and overdue for breakout companies. Carbon accounting software is one. Every large company now has to measure and report emissions. The EU’s Corporate Sustainability Reporting Directive requires it. The SEC’s climate disclosure rules are being rolled out. That creates massive, recurring demand for software that can track emissions across messy, complex supply chains. Watershed, Persefoni, Sweep — they’re all building here, and the market is growing fast. This is the kind of boring-but-profitable software play that tends to produce great returns.
Grid-scale energy management is another one. As more renewables come online, managing the electrical grid gets harder. Solar and wind are variable by nature, and you need sophisticated software to balance supply and demand in real time. AutoGrid and Stem are in this space, along with several newer startups building AI-powered grid management tools. It’s a software play with infrastructure-level importance, which is a sweet spot if there ever was one.
Sustainable agriculture doesn’t get enough attention either. Agriculture accounts for about 10% of US greenhouse gas emissions and considerably more globally. Startups working on precision fertilizer application, methane reduction in livestock, soil carbon sequestration — they’re addressing a huge market. Pivot Bio is one to watch. They make microbial nitrogen fixation products that replace synthetic fertilizer, raised over $600 million, and are already generating revenue from corn and wheat farmers. Real revenue. Not pilot program revenue.
And building decarbonization. Buildings eat up roughly 40% of energy consumption in developed countries. Heat pumps, smart building controls, energy-efficient materials, electrifying heating systems — all of it represents major startup opportunities. Policy tailwinds are strong here too, with many cities banning natural gas hookups in new construction. Seems like a space where several big winners will emerge over the next few years.
I’ve met hundreds of climate tech founders over the past three years, and the ones who impress me share a few traits. Deep domain expertise, first and foremost. You can’t fake it in this space. Building a battery company? You need someone on the founding team who genuinely gets electrochemistry. Doing carbon capture? You need chemical engineers who can explain exactly why their approach works and where the failure modes hide. The technical risk in climate tech is real, and hand-waving doesn’t survive contact with reality.
Patience and pragmatism matter too. Climate tech companies often take longer to reach profitability than software companies. Sales cycles are longer. Regulatory approvals eat time. Manufacturing scale-up demands capital. Founders who come from the move-fast-and-break-things school of Silicon Valley tend to struggle with the pace here. The ones who thrive can think in 5-to-10-year windows while still executing with urgency right now.
But the trait that separates winners from everybody else? Obsession with unit economics. Not just wanting to save the planet — wanting to build a profitable business that saves the planet. They can tell you their cost per ton of carbon captured, their energy cost per kilowatt-hour stored, their customer acquisition cost, their lifetime value. They know that sustainability without profitability is just a hobby. And they’re building companies that stand on their own feet even without carbon credits, tax incentives, or ESG-motivated investors paying a green premium.
There’s one risk in climate tech that I don’t hear people talk about enough: technology lock-in leading to stranded assets. When you build a factory for iron-air batteries or a plant for carbon capture, you’re making an enormous capital bet on one specific technology. If something better comes along two years later — or if an existing technology improves faster than expected — your factory could be obsolete before it’s paid for itself. This isn’t software, where you can pivot in a quarter. You can’t pivot a $500 million battery factory. That money’s spent.
This risk hits hardest in sectors where multiple competing technologies are still battling it out. In energy storage, there are at least five different battery chemistries being developed at scale, plus non-battery approaches like compressed air and gravity storage. In carbon capture, there’s DAC, bioenergy with CCS, ocean-based approaches, enhanced weathering. In hydrogen, you’ve got PEM electrolysis, alkaline electrolysis, solid oxide electrolysis. Each bet requires different infrastructure and manufacturing capabilities. Backing the wrong horse is expensive, and in climate tech, it’s expensive with a capital E. Smart founders and investors are managing this by focusing on platform technologies that can serve multiple end markets, keeping manufacturing processes flexible where possible, and staging capital deployment so they’re not betting everything on one facility before the technology is truly proven. But the risk is real and it isn’t going away.
Climate tech is a global market in a way that most software just isn’t. Biggest emitters: China, the US, India, the EU. Biggest renewable energy resources: Middle East, North Africa, Australia, Latin America. Critical mineral supply chains span dozens of countries. And regulatory frameworks differ wildly between regions. A carbon capture technology that’s economically viable in the US — thanks to 45Q tax credits — might not work at all in Southeast Asia, where carbon pricing doesn’t exist yet. This global complexity creates openings for startups that can operate across borders, but it also makes things harder. You need local partners, local regulatory knowledge, understanding of local energy markets. The founders doing this well tend to have international co-founding teams or have spent serious time working across multiple geographies. Treating climate tech as a purely American market means leaving enormous value on the table. And non-US founders who understand emerging market dynamics — where energy access, not just emissions reduction, drives adoption — have an edge that Silicon Valley founders often lack.
My honest take on where all of this goes? I think climate tech is in a bubble. Not in the sense that the underlying problem isn’t real — it absolutely is, and anyone denying climate change at this point has lost the plot. But in the sense that too much money is chasing too many companies, and a lot of them will fail. That’s okay, though. That’s how emerging industries have always worked. The dot-com bubble popped, but Amazon and Google survived and built the internet economy. The cleantech bubble of 2008 to 2011 popped, but it laid the groundwork for today’s solar and EV industries. The climate tech bubble of the mid-2020s will pop too — I’m pretty confident about that — and the companies that survive will build the clean energy economy for the next fifty years.
Who survives? Companies with real technology, defensible IP, a path to profitability that doesn’t depend on subsidies, and founders who are in it for the long haul. Form Energy, Twelve, Climeworks — they’re among the most likely candidates because they’ve got genuine technological differentiation, serious financial backing, and teams that understand what the timelines actually look like. Even among the well-funded winners, though, I expect delays, cost overruns, and at least one major pivot. That’s just what happens when you build hardware companies in regulated industries. It’s messy. It’s slow. It’s also where some of the most valuable companies of our generation will come from.
If you’re a founder considering this space, don’t do it because it feels good. Do it because you’ve found a specific technical problem you’re uniquely qualified to solve, there’s a clear economic reason for your customer to adopt your solution, and you’re ready for a 7-to-10-year journey with more setbacks than wins. If all three of those things are true, you might have something worth building. And if you’re an investor looking at climate tech, focus on unit economics, not mission statements. The companies that actually save the planet will be the ones that make money doing it. The transition from fossil fuels to clean energy is happening — not as fast as activists want, faster than skeptics expected. The startups at the front of this thing are building the bones of a post-carbon economy. Some will succeed in spectacular fashion. Some will flame out just as spectacularly. But the market is measured in trillions, not billions, and the founders who crack clean energy, carbon removal, and sustainable industry will be running some of the most valuable companies on the planet.
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