Dealflow | January 6, 2023

Dealflow spotlight: Following the money in 2023

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, January 6 – The year’s slow start to dealflow is no fluke. Despite a year-end flurry, investments in everything from venture capital to sustainable and green bonds were down last year from 2021.

Bright spots were climate tech, which last year accounted for one-quarter of all venture capital investments, and investments in Africa, which were actually up in 2022.

The investment pace in 2021 was always going to be hard to match. The full year’s VC numbers aren’t out yet, but 2022 activity appears to have far exceeded the dealflow in 2018, 2019 and 2020. 

This year, watch out for “natural capital” investments. Terratai, a new investment firm focused on biodiversity, launched in Indonesia this week. Kering and L’Occitane Group committed €140 million ($148.5 million to a natural capital fund mobilizing capital from fashion and beauty brands. Global summits last year reached new agreements to dial up the flow of capital for conservation and climate-vulnerable communities.

Hot climate tech

Investors are looking for innovations that can flatten the curve of climate change. Nearly $5 billion has flowed in recent years to startups in fusion energy, which reached a critical milestone last year. More than half of climate tech investments are going into the biggest carbon-emitting sectors. India has become the third-largest market for climate tech startups.

Africa’s boom

Africa will have attracted more than $5 billion in venture capital last year, up from about $4.2 billion, when the final tally is done, according to Africa: The Big Deal. That makes the continent the one region where investment activity exceeded 2021. The number of investors active on the continent is also up.

And fintech accounted for 37% of the VC pie last year, down from 53% in 2021, suggesting that investors are increasingly diversified.