Inside London’s 2025 ClimateTech Trends

Venture Cafe London hosted an evening that provided a glimpse into the reality of climatetech.

It provided an inside look at how investors actually think about climate risk, why “hard tech” is both the future and struggles with funding, the tension between AI and climate reality, and what founders face on the ground as they try to commercialize climate solutions.

Here’s what I learned from funders, founders, and a few early-stage startups.

The State of ClimateTech in 2025: Fewer Winners and Bigger Rounds

Federico Cristoforani presented a “State of ClimateTech” report. He is from Net Zero Insights, a company that conducts climate-focused market research.

He shared several key takeaways that anchor where climatetech sits right now.

Investment is stable, but more selective

Overall, climatetech investment is stable, not collapsing.

Grants are down, largely due to the US pulling back elements related to the Inflation Reduction Act. However, the US is still the global leader in sustainability investment, and the amount continues to rise.

The primary difference is that fewer companies are raising, but those that do are raising larger rounds.

Series A and B drop-off

50% fewer companies are making it to Series A. 80% fewer at making it to Series B.

This is a huge reality check for founders. Seed is still possible, especially in hot categories. But the bar to graduate into later stages is dramatically higher.

Investors want clearer traction, clearer unit economics, and clearer paths to large-scale commercialization.

They’re not looking for a startup that should really be a small business.

Hard tech dominates funding and risk

“Hard tech” is deep tech with heavy R&D, physical infrastructure, or scientific breakthroughs. It makes up the majority of funding. This makes sense — hard tech constitutes truly revolutionary and disruptive technology.

However, it has longer R&D cycles, comes with higher risk and higher capital intensity, and companies are struggling to move from demonstrations to full profitability. Think of technology like nuclear fusion, which still has over 5 more years until it reaches commercialization.

This creates a strange tension:

Hard tech is where the big climate wins live, but it’s also where the funding risk is highest, and the patience required is longest.

Energy and transport remain the sector leaders

Energy is still central. People care a lot about generation, storage, and infrastructure. Transport is still big, but decreasing.

Industrial decarbonization is increasing in popularity.

The low-hanging fruit in consumer-facing green products may be saturated. The next big gains, both for investors and the planet, are in industrial process decarbonization.

AI makes up $1 in every $4 invested

For every $4 invested in climatetech, about $1 goes into AI-powered climate products.

Investors believe that AI is a core layer in the climate innovation stack. It can accelerate discovery, improve system optimization, and enhance modeling and prediction. The real question is about where AI is genuinely additive versus where it’s just buzz.

What Climate Data Means for Builders and Buyers

To synthesize the findings of the report, a panel brought different perspectives together to determine the on-the-ground experience. It was moderated by Sammy Fry, Head of Climate at Tech Nation. It featured:

• Nadav Steinmetz, cofounder of Climate First

• Alexandra Dias-Lalcaca, Head of Research at GVP Climate

• Brett Cotten, cofounder of Arda

The conversation moved quickly between funding reality, AI, and customer behavior, but had four core themes.

The money is still there, but it’s harder to reach

All three panelists agreed: capital hasn’t disappeared, but it’s harder to unlock.

Contrary to what the climatetech report said about growing investments in the space, Nadav described a slower investment environment. However, he mentioned that VCs are looking at better, more rational valuations. The bubble pricing from COVID-19 has cooled, which is good for long-term health.

However, the bar is still high for start-ups. You must prove your solution is better, cheaper, and faster than what your customers already use.

Brett confirmed this reality. He shared how his first round included reaching out to 100 VCs in 6 months. For his second round, he had to reach out to 400 VCs over 12 months.

Founders need more time, more stamina, and more proof of commercialization to raise the same or slightly larger amounts of capital.

Government grants are helpful, but insufficient

The panel touched on the role of the UK government in climatetech. It offered grants for initial investment, usually at a small dollar amount.

The investors agreed that this was insufficient to coerce founders to build in the UK versus moving to the US. The existing grants aren’t large enough, especially when looking at deeptech that requires a half-million-dollar initial investment to build a prototype.

However, they also agreed that the government should be reducing interference around regulations and permits, which often slow deployment. This is especially true in the energy space with the deployment of nuclear energy.

Is AI an energy hog or climate enabler?

Sammy raised a critical question: are VCs like Sequoia and Andreesen-Horowitz over-investing in generic AI tools like auto website generation at the expense of AI that tackles climate and infrastructure issues like traffic, energy, or grid reliability?

The panelists said yes.

Nadav pointed out that AI can drive climate progress.

For example, Cobalt Energy uses AI to model the subsurface of the Earth and accelerate the search for critical minerals. AI can also help grid operators predict energy demand more accurately.

Alexandra added another concrete example. One of the companies she tracks uses AI for geothermal mapping, identifying promising sites for geothermal energy.

My personal opinion is that generalist firms can continue to invest in generic AI products because they have rapid market adoption and global usage. It is a no-brainer for firms to invest in website generation.

The climate space has a longer time horizon and also relies on countries to adopt conducive policies for operators. It’s a more complex game that generalist firms might not be as willing to play with.

However, AI serves as a powerful climate tool with the capacity to completely change the space over the next twenty years.

Who buys, who stalls, and what investors look for

Then the panel shifted to ground level: who actually buys climate solutions, and when?

Brett shared a very practical view on selling sustainable materials. Beverage companies are generally strong clients for sustainable materials. They have clearer incentives from brand pressure, regulatory risk, and supply chain exposure. They are willing to try new things.

However, automotives and luxury fashion brands are harder to work with. There’s a sense of entitlement from the groups to receive free products, and the CEOs of fashion companies are difficult. Designers often lead the company and are brilliant creatively, but poor business operators.

Climate startups cannot just build for everyone. They need to be honest about which sectors are actually ready to adopt, and which are structurally resistant.

More importantly, the startups need to consider whether they are solving an immediate problem for their customers.

Alexandra explained how her firm, GVP Climate, thinks about investment. They usually enter at Series A when a company has at least one pilot. She said that often, a founder builds for a problem that is real in theory, but not urgent right now for customers.

Are you solving a problem your customer feels today, badly enough to pay you today?

If the pain is “future climate risk” but the customer’s real pain is “next quarter’s budget,” the sale will be slow or never.

Where is the real opportunity?

The overwhelming consensus was on energy products and infrastructure. We need to scale solar, wind, batteries, grid technologies, grid monitoring, transformers, and transmission capacity.

Additionally, people need to think about speeding up the process for large-scale deployment, not sitting in R&D. Investors want to see a fast time to market, especially in the areas of nuclear and critical minerals.

I’ve personally seen nuclear fusion in a race. Several companies in the US have raised $1–3 billion and are fighting for the first commercialization over the next 5 years. After that, it will be a competition for replication and creating a strong power plant construction procedure.

The headlines are that China leads in critical metals and minerals. It creates geopolitical dependencies for the rest of the world. This could be devastating for the US economy and the AI bubble if technology manufacturing were suddenly interfered with by China.

The overall message

If you’re building in climatetech today, you’re operating in a world where:

• Funding is still available, but more demanding

• Governments help at the margins but don’t yet de-risk the big bets

• AI can either worsen emissions or unlock breakthroughs

• Customers and investors want solutions that solve concrete, immediate problems, not just future climate scenarios

The builders who will survive this environment are the ones who can:

• Show real traction with real buyers

• Translate climate value into clear business value

• Align their technology with urgent, current pain points rather than distant, theoretical ones