Dealroom – Impact Startups, 2023

Despite the pressing need for progress on the Sustainable Development Goals (SDGs), there has been a significant decline in impact venture capital (VC) funding worldwide. Impact startups have raised $41 billion in 2023, which marks a 36% drop from the levels seen between 2021 and 2022. This decline is aligned with the overall decrease of 35% in global VC capital. The situation is particularly concerning because none of the 17 SDGs are currently on track to be achieved in 2023. Additionally, despite impact startups being valued at a total of $2.4 trillion, low and middle-income countries are only attracting a minimal 5% share of global impact funding, despite being home to over 50% of the global population and being most vulnerable to the impacts of climate change. These countries require more support in developing their own impact ecosystem. In terms of regional trends, Europe has surpassed the United States in VC impact funding in 2023, with over 30% of the global share compared to less than 10% for the US. However, there is still a long way to go in achieving climate justice. When it comes to specific industries, climate technology dominates the field of impact investment. Startups focusing on climate-related SDGs receive the majority of impact investment, while those addressing social-related SDGs are underfunded. Climate tech segments such as carbon tech, lab-grown meat, hydrogen, climate fintech, and EV batteries are among the fastest-growing categories in venture capital. Although climate tech VC funding has decreased by 35% from the previous year, the gap is being filled by private equity, project finance, and debt.