Raise and repeat: Cracking the code behind climate techs’ rapid raises

Climate technology (climate tech) is often about bringing groundbreaking, first-of-its-kind innovation to the market quickly to solve the complex, urgent challenges associated with climate change.

And yet despite constantly evolving at speed to keep pace with the latest science, climate techs require significant time and investment to bring to market – particularly at the early stage. The need to conduct extensive research and development (R&D) in the lab and execute pilots before opportunities can be commercialised means that fundraising can be difficult.

However, recent data suggests that there are a number of growth stage startups that have managed to overcome these initial barriers and secure rapid, repeat funding rounds. Based on analysis of Pitchbook data, some 20% of climate tech companies who raised over the past 12 months went on to raise rapid follow-on rounds – compared to 7% of companies across the wider tech ecosystem.

So what are these businesses doing to attract capital so quickly, and what are the factors driving their success? I’ve spoken to several climate tech startups to identify the three key factors behind their ability to speed up the process and secure the funding they need to support their growth story.

Factor 1: Clear communication to the right investor is key

There’s a growing interest among investors to focus on “impact” investments that drive social or environmental benefits alongside financial gains – a strength of many climate tech startups.

Unfortunately, the appetite for impact investment butts up against several common obstacles in the sector. Long lead times to commercialisation, models that are often capex intensive, and an overall lack of experience with novel climate technologies are all challenging.

Given that inherent tension, how can climate techs present themselves to attract investor interest?

Robert Bahns, CFO of Oriole Networks, reflects on their journey.

“Although we are still some time away from a product, our main proposition of saving energy for data centres while improving performance is generating significant interest from potential customers and partners. I believe this interest has directly translated to investors who can also see the positive financial implication and impact of reducing energy consumption within the sector.” 

While commercial traction is still a year or two away for Oriole Networks, they have provided evidence and clearly articulated the market need for their solution so that the opportunity is evident.

Which leads us to the second factor contributing to the raise and repeat trend.

Factor 2: Demonstrating a distinctive climate impact

The current economic landscape means that investors are increasingly drawn to businesses that demonstrate solid fundamentals.

This could come in the form of a working prototype, early market traction or even small-scale deployment. To put it bluntly, climate techs that can show clear signs of progress stand out in a sea of early-stage ventures still at the R&D stage.

Dennis Atkinson, Investor from BGF, shares this sentiment.

“For those climate tech companies that are managing to raise quickly, we are seeing a common trend. Those with a clear financial ROI and both a distinctive technology and climate impact are raising faster.

“Another trend we’re seeing is round extensions. Some due to investors that potentially missed out in the previous fundraising staying in touch to contribute to the next one, we’ve had that in our own portfolio. Alternatively, companies are addressing that it might take more time and capital to hit the next big milestone and turning to repeat investors to add to the recent round for more runway.” 

In the case of Oriole Networks, a £10m Seed round announced in March 2024 led to immediate follow-on interest and the close of a $22m Series A just months later. An extreme example yes, but evidence of what is possible in the current market.

Another aspect of demonstrating strong fundamentals is ensuring that your business is efficient in its use of capital. This is something that can be accelerated through the use of innovative technology – something we discuss in the next section.

Factor 3: Simplicity and scalability

While many climate technologies require heavy capital investment for the likes of hardware, manufacturing and energy infrastructure, there is a growing subset of climate tech startups utilising advancements in AI, machine learning (ML) and digital twins to scale at speed – for a fraction of the cost.

The importance of scaling at speed was not lost on Henrik Hagemann, founder and Chief Innovation Officer at Puraffinity, a business aiming to remove PFAS (Per- or poly-fluorinated alkyl substances or synthetic chemical compounds, also known as ‘forever chemicals’) from water across the residential, commercial, industrial, municipal and environmental services market sectors.

Having completed their Series A fundraise in June 2023, the business was soon approached by new investors and completed a follow-on raise in September 2024.

Hagemann credits this to the growing global demand for the product driven by regulation and increased awareness of the impact of PFAS, utilising technology to scale at speed and pivoting to increase the application of their product:

Final thought: Clear communication, simplicity and demonstrating a distinctive climate benefit remain key for successful fundraising

There’s no single silver bullet when it comes to successful fundraising.

Most early-stage companies in the innovation economy are grappling with a difficult fundraising environment, and the gap between equity rounds is growing¹.

But with increased investor interest in impact, and record levels of dry powder earmarked for climate investment², there are opportunities to increase and accelerate fundraising in this space.

For budding climate tech innovators, understanding the factors that have contributed to notable success stories, and strategically placing themselves within an environment that is gaining rapid interest, could prove the difference between fundraising fears and fundraising victory.