EV & CLIMATE TECH
Climate tech funding is holding up in dollars while deal counts hit multi-year lows. For investors, the real question is no longer whether these companies can raise, but what their factories, batteries and loans are worth when plans change.
Key takeaways
- Climate tech raised $19.6 billion in Q3 2026 across 686 deals, the lowest quarterly deal count since 2021 (Net Zero Insights).
- When hardware startups fail, their factories, batteries, equipment and loans remain and must be valued and sold.
- Investors need discreet matching and data-driven pricing for illiquid climate assets and the credit behind them.
An Industry That Builds Things
I spent most of my career in the automotive business, so I have a soft spot for companies that make physical things. You can kick the tires. You can walk the factory floor. You can see whether the inventory is moving.
Climate tech and electric vehicles are the most physical corner of the startup world. Batteries, charging networks, grid storage, fusion, next generation manufacturing: these businesses need steel, land and equipment before they need marketing. That is what makes them important, and it is also what makes them so demanding for investors.
Concentration Comes to Climate
The latest numbers show a market that is maturing in an unforgiving way. Net Zero Insights reports that climate tech companies raised $19.6 billion in the third quarter of 2026, a 7.6 percent decline from the prior quarter, across 686 transactions, the lowest quarterly deal count since 2021. Three companies, Commonwealth Fusion Systems, Valar Atomics and Base Power, each raised rounds of around $1 billion.
The first half told the same story. Climate tech attracted $41.3 billion while recording the lowest deal count on record, with the largest rounds accounting for nearly 65 percent of total investment. Latitude Media notes that the average round size rose from $18 million to $27 million. There is a bright spot: Series B funding rose 50 percent quarter on quarter to $3.6 billion, reversing a long stretch of weakness.
The fund side is tighter still. Sightline Climate found that only 39 percent of climate-focused venture funds that were actively raising managed to close, compared with 73 percent of mature infrastructure funds. Capital is flowing to proven technologies and large projects. The early pipeline is thinner than the headline dollars suggest.
When the Plan Fails, the Assets Remain
Software startups that fail mostly vanish. Hardware startups that fail leave things behind. The recent bankruptcies of Northvolt, Li-Cycle, Sunnova and Powin were reminders that capital intensity and technology risk do not forgive mistakes. But they also left something else: production lines, battery inventory, installed systems, equipment leases, project loans and receivables that someone now has to value and sell.
This is the part of climate investing that rarely makes the headlines. A large share of the money in this sector does not arrive as venture equity at all. It comes as project finance, equipment loans and private credit secured on hard assets. When a company stumbles, those assets do not disappear. They move to lenders, special situations investors and, eventually, to whoever can put them back to productive use.
In the automotive world, we always had a market for used inventory. A car that did not sell in one showroom found a buyer in another, at a price everyone could see. Climate hardware has no equivalent. A specialized battery line or a portfolio of solar loans can sit for months while sellers search for the handful of buyers who understand it.
What an Operator Looks For
When I look at a climate or EV company today, I start with the capital plan, not the technology. How much hard spending sits between today and first real revenue? Who is financing it, and on what terms? Is the equity being asked to carry risks that should sit with project lenders, or the reverse?
Then I look at the downside honestly. If this company runs out of time, what is left, and who would buy it? A business whose assets have a clear secondary value is a far safer investment than one whose value exists only as long as the team stays together. That is not pessimism. It is the discipline every good lender already applies, and equity investors in this sector should borrow it.
I also look closely at customers and offtake. In the car business, a dealer with a waiting list for a model was in a very different position from one with a lot full of unsold units. Climate companies are no different. A battery maker with signed long-term contracts, or a charging network with committed fleet customers, can finance its assets on far better terms than one selling a forecast. Contracts turn capital-intensive projects into something lenders can underwrite, and anything lenders can underwrite is something a secondary buyer can eventually price.
Finally, I look at timing. Policy support, interest rates and supply chains all move faster than a factory can be built. The companies that survive are the ones that kept enough flexibility in their capital structure to absorb a delay of a year or two.
Pricing the Steel, Not Just the Story
Climate tech will produce some of the most valuable companies of the next two decades. It will also produce a steady flow of distressed loans, idle equipment and stranded projects. Both are part of a healthy market. The problem is that only the first half has good infrastructure.
Investors in this sector need a reliable way to price and transfer the heavy assets and the credit behind them: discreet matching between sellers and qualified buyers, data-driven pricing benchmarks for illiquid loans and equipment, and execution that protects everyone’s reputation while value is recovered. When the market can price the steel as well as it prices the story, more capital will be willing to back the story in the first place.
#ClimateTech #EVs #StartupInvesting
Bruce Bendell is an investor in startups and private companies and a five-decade operator in the automotive industry. Follow him on LinkedIn.