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Ask investors what the buzziest sectors in VC are right now, and climate tech isn't at the top of the list.
The vertical was once the darling of the VC world, with funding levels soaring during the pandemic. Between 2019 and 2021, total deal value in the space grew by over 225%—more than SaaS, fintech or even AI by a fair margin during the same period.
Its rise to popularity was driven by a confluence of factors, including a growing recognition of climate change, increased government support and an era of cheap money that made the capital-intensive nature of many of the startups within the sector easier to fund.
But priorities have changed, and so has the flow of capital. Funding has dried up, and new funds dedicated to the strategy have all but disappeared. Looking at the slew of VC conferences for the year, few have any climate-related panels, but most, if not all, have one around defense.
I'm Leah Hodgson, and this is The Weekend Pitch. You can reach me at leah.hodgson@pitchbook.com or on X @LeahFHodgson.
The rise in VC appetite for defense has many climate startups pivoting to fit into the national security narrative, hoping their funding woes will be alleviated. But is it a winning strategy? |
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How can firms get the most out of their data?
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Keeping up in today's financial landscape is not just a matter of having data. The real challenge is knowing how to leverage it to gain a competitive edge. A unified data platform can help maximize the impact of your data. Learn how with actionable insights in this ebook from Arcesium's team of financial services experts.
Read ebook |
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What's next for private credit? Take our survey
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| US private credit dealmakers face many pressing questions amid tariff policy fluctuations and volatility. What do you think comes next for private debt? Take the PitchBook LCD survey |
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Inflexion has closed Europe's largest multi-asset continuation fund. How much did the London-based PE firm raise for its debut continuation vehicle?
A) £2.3 billion
B) £1.4 billion
C) £980 million
D) £3.5 billion
Find your answer at the bottom of The Weekend Pitch! |
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Tariffs cloud outlook
for comeback in VC returns
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The VC market has split into two, as AI startups thrive while the rest of the industry struggles against persistent headwinds. Tariff uncertainty has further delayed IPOs and applied renewed pressure on valuations.
While mega-deals dominate headlines, over a quarter of venture deals were down or flat in Q1, according to our recent US VC Valuations and Returns Report, sponsored by Morgan Stanley at Work. The one-year rolling IRR may turned positive for the first time in eight quarters, but distributions remain scarce and IPOs have underperformed—leaving many LPs without meaningful liquidity and putting long-term returns at risk. |
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PE on uneven ground amid rising uncertainty, falling confidence
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The US PE industry entered 2025 with high hopes, but trade barriers and economic signals have thrown up red flags. A surprise dip in GDP, soaring tariffs and renewed market volatility are reshaping the environment for investors and dealmakers.
Our recent Quantitative Perspectives report covers how these macroeconomic shifts are influencing fund performance, buyout activity and exit dynamics. Returns whipsawed in April. With distributions still lagging and exit windows narrowing, fund managers and LPs are facing a far more challenging environment than they expected just months ago. |
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