Crowdfunding for Climate:
Small but Full of Energy
In order to decarbonize our economy, we need tremendous investment in technologies that transition our transportation, agriculture, building, and energy systems. For Jigar Shah, head of the DOE LPO, “tremendous investment” means most of these industries need up to $100 Billion dollars in investment before reaching “commercial liftoff.”
In other words, this is not a problem solved by shifting small consumer buying behaviors (though separately honorable/desirable); these are problems solved by getting revolutionary technologies to bankable form, using high-risk dollars in partnership with a growing pool of grants and loan funding.
The spike in retail trading in 2021-2023 generated provocative headlines, but a slower-moving, considerably less glamorous venue for non-professional investors also gained momentum. Regulation crowdfunding, made possible by Title III of the JOBS act, loosened investment regulations enough to give "non-accredited investors" (aka "RegCF investors" or "normal people") access to early stage investment opportunities starting in 2016.
Tracking investments on crowdfunding platforms like Republic, one of many platforms that enable non-accredited investors to acquire equity in startups, can indicate how a subset of these climate investors are thinking about supporting climate tech solutions. Three things are clear:
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RegCF Investors are as eager to invest in climate as traditional investors, as the share of dollars invested in climate solutions is on par with the venture landscape.
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A wide range of climate tech solutions exist on RegCF platforms but the most diversified & well-funded climate industry is Energy, led by Solar & Storage solutions.
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The best listings garner investment by communicating project-readiness and co-investment opportunities with discerning institutional investors.
Crowdfunding Dollars Still a Tiny Piece of the Pie
Regulation Crowdfunding (RegCF), like happens on Republic, is a drop in the climate capital bucket. According to analysis of Kingscrowd’s (et al.) aggregated data of dealflow on crowdfunding platforms, about $163.1M was raised in Q2 2023, and $11.7M of those dollars were allocated to climate tech companies (Figure 1). Compared with the scale of VC Dollars in the same quarter - $75.3B broadly invested by VCs and $6.5B invested into climate tech (according to Sightline Climate data, and Dealroom data) - these projects can feel paltry.
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*Cue ominous $100 Billion Dollars Needed song*
Figure 1: Dot chart shows relative size of total VC dollars, climate VC dollars, total crowdfunding dollars, and climate crowdfunding dollars for Q2 2023.
RegCF Investors Pull Back in 2023
That number feels even smaller considering it follows a huge lift in RegCF activity starting in 2020. Reg CF platforms cleared more than $812M in 2021 (Figure 2), a year-over-year inflow jump of 137% while climate-based ones grew 169% (though gross figures remained small). However, in 2022, though the growth rate of total dollars raised shrunk, climate-focused projects got the delayed “retail investor” bump of 281%, causing their highest inflow to date, collecting more than $136M.
But as the global economy shed its Zero-Interest Rate Policy (ZIRP) starting in 2022, RegCF funding decelerated: in 2023, RegCF dollars are not projected to increase over 2022’s, in aggregate or for climate tech startups. Perhaps an unsurprising finding, as the historically fast increase in cost of capital affects non-accredited and traditional capital allocators alike.
Figure 2: Dual-axis line chart shows dollars raised by crowdfunded opportunities, dollars raised by crowdfunded climate solutions, and average interest rates annually.
Figure 3: Line chart shows share of VC dollars directed at climate tech solutions over time versus share of crowdfunding dollars directed at climate tech solutions over time.
Silver Lining: Appetite for Climate Solutions
Now it’s time for the silver lining: RegCF investors are as interested in mobilizing their dollars for climate tech startups as the broader VC landscape.
According to publicly available listings, estimates suggest that, as the share of VC dollars specific to climate tech startups increases (and hovers anywhere from 7-10%), so too does the share of dollars raised from RegCF investors (Figure 3). As mentioned earlier, 2022 was a year of exciting climate tech raises, and in Q4 2022, climate tech startups accounted for 24% of RegCF dollars raised. While that number has since stabilized closer to 10%, it is on par with the slowly-increasing share of VC dollars directed at climate startups, which estimates suggest hasn’t passed more than 11% (in Q3 2022).
What Industries Are Represented & Well-Funded?
If RegCF investors are interested in climate, what industries are available?
In 2022, RegCF’s best year, the Energy, Food & Land Use, and Industry & Built Environment industries led the way accounting for almost $97M in raises (Figure 4). Energy featured many more listings but Food & Land Use saw huge raises in fertilizer production, and Industry featured startups focused on recycling materials.
In 2023, the story changed: all industries are on track to raise less than they did in 2022, the pre-money valuations of those companies were substantially larger on average, and most industries featured fewer listings overall, except energy (Figure 5).
Figure 4-5: Engage above by clicking arrows left and right to see year-over-year trends. Both dot charts show year-over-year valuations, listing counts, and dollars raised.
Figure 6: Stacked bar chart shows share of dollars raised from 2021-2023 for opportunities in energy, split out by energy sub-sector.
Solar: Tailor-Made for Crowdfunding Opportunities
Climate-focused listings in energy continue to rise on a year-over-year basis because the full spectrum of opportunities are available to investors: consumer-facing businesses, community-oriented businesses, high-reward projects, and moonshot startups all tackling green energy initiatives. By far, the sub-category with the most representation on RegCF platforms is solar, and that was true going as far back as 2017 when RegCF investing began. Interestingly, since 2021, the share of listings focused on either solar & storage or general storage has dramatically increased (Figure 6). In 2022, the year with the most climate dollars raised by crowdfunding, storage outpaced solar for the first time, accounting for 41% of all dollars raised in energy. While that number may be considerably higher than the broader industry average, leaders in solar (as well as other green energy developers) are increasingly focused on partnering solar projects with storage. In fact, no listings analyzed on RegCF platforms highlighted joint storage and solar initiatives before 2022, but now there are multiple.
Raise Green Leads the Climate CF Pack
Raise Green remains one of the only climate-focused RegCF platforms. According to comments from the leadership team, traction on the platform will grow rapidly for the foreseeable future. And for good reason: Raise Green has a 95% fully-funded rate, higher than the average for general listings and climate-focused listings (Figure 6). Though the average raise sizes on Raise Green are lower thus far than the average across all listings, climate-focused listings generally see higher raise sizes than non-climate listings, making these platforms especially valuable for the future of crowdfunded listings in climate.
If climate-specific platforms like Raise Green continue to grow – and raise sizes/funding rates for climate listings remain high – how should businesses position themselves to take advantage of growing interest in climate on RegCF platforms?
Figure 7: Screenshots for BlocPower on Raise Green, and a table showing raise size and "Fully Funded" rate across Raise Green, climate-focused listings, and all listings.
Blocpower raised more than a million dollars on Raise Green (across two listings) in 2022. Most folks following building electrification know BlocPower’s ongoing success, but their listing pages demonstrate effective positioning in a few key ways, likely boosting traction. In the promotional video associated with the listing, CEO Donnel Baird emphasizes that the opportunity to invest is alongside accredited investors with competitive returns, both financial and impact: “opportunity to co-invest alongside some of the world’s best investors in our company… Not only will you get a financial return but you're also going to get an environmental impact.” BlocPower’s listing details explain that funds are directly funneled to “already vetted” projects, assuring customers that their operations are already in motion. In the RegCF space, it seems BlocPower may have found a salve for non-accredited investor’s imposter syndrome or lack of comprehensive diligence processes: vetted and established paths to project development founder representation and conviction, and proven financial and environmental returns.
Figure 8: Stacked bar chart shows the types of crowdfunding campaigns available and the share of security types listed for each type of crowdfunding campaign.
Notes on Methodology
The data used in this analysis is a snapshot of the investment landscape pulling from various sources aggregated in October 2023. As a result, some of the data may have been revised or updated since collection, and only includes data with reasonable & available funding windows. The takeaways should therefore be viewed as directional in nature, rather than factual.
In order to provide the most accurate view of this topic, the analyses listed above were restricted to RegCF and RegA+ raises - only those that would allow (or partially allow) non-accredited investors access. For more information on the breakdown of RegCF vs RegA+ listings splits or security types offered, Figure 7 has more details.