Urban tech passes 100 unicorns, but funding has eased
As the UN’s climate conference COP27 takes place in Sharm El Sheikh, a new report by analysts at Dealroom and 2150, a climate-focused VC, explores the state of urban tech innovation and entrepreneurship.
Climate risk is accelerating, and cities will play a key role in ensuring we can hit sustainability targets. Urban technologies can support us rethinking and renovating our ways of building and living in cities.
Urban tech startups have collectively raised $28bn in 2022 to date. While this is already more than was raised in the full year of 2020 (or any year prior), it is projected to fall short of last year’s total by 23%. This is against a backdrop of a broad pullback in venture capital investment in every sector amid a global economic downturn, but this loss of momentum is nonetheless a blow to net-zero targets.
Despite a considerable drop in corporate participation, heavy industry giants, such as Cemex and Honeywell, continue to be active urban tech investors.
Globally, the urban tech ecosystem has now produced over 100 unicorns – startups valued at over $1bn – with the vast majority emerging within clean energy and grid technology, and urban mobility and logistics.
Scaled success in other categories has been ramping up in the last two years, however. This year saw two urban tech unicorns emerge within ESG and carbon tracking – ecovadis and Watershed – as well as the first new unicorn in building efficiency – Palmetto – since 2015. Buildings take up 37% of global CO2 emissions, and so this is an important shift.
Urban flooding caused an estimated $440bn in damage in the decade to 2020. Less than 0.2% of that amount has been invested in flood prevention, monitoring and response startups in all time. While investment has been ramping up in the last two years (over $200m was raised in 2021, and a similar total projected for 2022), these numbers are still tiny compared to the size of the challenges they’re addressing, and indeed the size of the potential market opportunity.