Venture capital still likes cleantech

In casual conversation at a recent climate-tech meetup in Baltimore, a venture capital (VC) officer at a major US financial institution told a C&EN staffer the firm was back to investing in sustainable technologies after a pause.

Their firm, like much of the business community, was scrambled by the blitz of changes coming out of Washington, DC, after US president Donald J. Trump took office in January. Venture capital and private equity investment requires a higher tolerance for risk than do the loans, stocks, and bonds that make up the bread and butter of most banks, but even those investors have their limits.

Most successful investors have a well-engineered algorithm for managing, isolating, and offsetting risk, not a lucky rabbit’s foot. And the policy environment in the first quarter of 2025 introduced too many unknowns to make those calculations, especially for any efforts that involve decarbonization or other forms of sustainability. Businesses certainly like policies that favor their industry, but what they really need is consistent and predictable policies.

It’d be a stretch to say things are back to normal or even stable. But at networking events and conferences in Baltimore and beyond, there’s a growing sense that start-up companies developing sustainable technologies are still a good bet. Supporting that notion, a scan of just C&EN’s May 5 business section shows $40 million in new VC funds going to DePoly, RepAir, and novoMOF, cleantech firms working on polymer recycling and carbon capture.

The US administration’s assault on policy structures that support cleantech will hurt start-ups in vulnerable stages such as scale-up. Proposed cuts to loan programs at the US Department of Energy and the Environmental Protection Agency would cut off key sources of capital for companies deploying first-of-a-kind clean power and water quality tech, for example. And the administration’s freeze of funds awarded under bipartisan infrastructure laws undermine individual projects as well as the creditworthiness of any firm participating in those programs.

But the long-term global trend, despite the current chaos, is still to transition away from fossil fuels and toward clean energy and carbon neutrality. That’s the technology future that many venture capitalists want to get in on.

Venture capitalists and private equity groups generally hold investments in such firms—seed, series A, and series B rounds—for 3–7 years before they look to sell their stake for a profit. VC investment is inherently risky, and executives expect only 10–20% of their investments to pan out.

Turning scientific ideas into self-sustaining enterprises is always hard. In March, C&EN covered the bankruptcy of two sustainable polymer makers, Danimer Scientific and Brightmark, which stumbled during market development and process scale-up.

Another sustainable chemistry star, LanzaTech, also seems to be struggling. The firm uses engineered microbes to convert steel mill waste gas and other carbon dioxide–containing gas streams into fuels and chemicals. The company posted a loss of $111 million for the first 9 months of 2024 and recently fielded a buyout offer from one of its investors that valued the firm at only $100 million, less than half of what the firm raised when it went public in 2023.

For venture capitalists, those struggles serve as useful data points for improving proprietary risk models. Most early investors in all three firms would have cashed out at early milestones, such as when LanzaTech and Danimer became publicly traded firms or when Brightmark paired up with Chevron. These failures are adjustments in the road, not roadblocks.

Similarly, despite the climate pessimism of the moment, decarbonization is driven by huge economic forces that transcend a single US presidential administration. Companies up and down the supply chain have climate goals motivated by consumer pressure, government incentives, and even, one hopes, genuine concern for future generations.

And down at the bottom line of a venture capitalist’s balance sheet, that means customers for start-ups that are commercializing ways to make all kinds of things more sustainable.

This editorial is the result of collective deliberation in C&EN. For this week’s editorial, the lead contributor is Craig Bettenhausen.

Views expressed on this page are not necessarily those of ACS.