Rapid rise in corporate climate-tech investments complements support from public grants

Supporting climate-tech startups that can rapidly bring innovations to market is a policy priority for meeting net-zero goals. However, many climate-tech startups face high risks and fail (for example, bankruptcy, going out of business). Policymakers can support these startups by increasing public funding and mobilizing private investment to increase the likelihood of success or exits (for example, IPOs, mergers/acquisitions). But current policies treat all private investors the same, neglecting differences in their effects and potential synergies with public funding. Alongside various financial- or impact-focused venture capital investors, corporations are strategic investors that seek to increase profits while achieving goals related to long-term business plans, competitive standing or decarbonization. Corporations make fewer investments than other private investors, but these investments are often substantially larger and come with sectoral experience, supply chains and networks. Corporations are thus potentially more influential at shaping innovation outcomes than other investors, yet remain poorly understood in innovation policy discussions.

Corporate investments in climate-tech have consistently increased since 2005, even when other sources of investment declined (Fig. 1a). The startups they invest in are more likely to achieve a successful exit. Public grants are not significantly associated with exits on their own but are likely to act as catalysts for high-risk startups. Publicly funded startups exit at a higher rate with the addition of corporate investment (155% increase) compared with other private investment (78% increase). Additionally, corporate investment has not been significantly associated with failure in more recent years (2012–2020), suggesting corporations may have learned from earlier losses and could play an increasingly important role in future climate-tech innovation. Although these results may indicate corporate investors are better at selecting startups destined for success, the correlations we observe are unlikely to arise purely from selection bias because investments are correlated with failure as well as success.

a, Investments over time. b, Number of startups receiving investment from different combinations of investors. ‘Other investment’ includes all forms of non-corporate private investment. Figure adapted from Kennedy, K. M. et.al. Nat. Energy https://doi.org/10.1038/s41560-024-01530-w (2024); Springer Nature Ltd.

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We cleaned and expanded a comprehensive investment dataset created by the Cleantech Group to include 2,910 US-based startups founded between 2005 and 2020 that received at least one grant or equity investment. These startups were supported by 3,979 unique investors participating in 15,108 investment deals (Fig. 1a,b). This dataset enabled statistical analysis of whether corporate investment, coupled with public grants and other private investment, improves outcomes linked to technology deployment for climate-tech startups. Exits occur when a startup has an initial public offering (IPO) or participates in a merger/acquisition, indicating that its product has developed sufficiently to draw interest in the market. Failures occur when a startup goes bankrupt or out of business and is therefore unable to commercialize its product. We consider these outcomes in relation to variables of interest including investments by different actors, patenting and the startup’s sector, age and location.