Key concepts:

• Each investment stage plays a different role in financing tomorrow’s solutions: Different funding stages from venture capital, growth equity, and buyouts, to infrastructure play distinct roles in scaling solutions. For climate tech, this means private equity (PE) can fund nascent technologies like sourcing geological hydrogen as well as mature projects, like large-scale offshore wind farms. Each investment stage serves a different purpose in the company’s growth journey.
• Private market investments have varying risk-return profiles. They range from high-risk, high-reward bets on breakthrough ideas to lower-risk, with more stable returns, financing of big roll-out infrastructure projects. When investing in an early-stage PE fund the cashflow typically shows deeper initial losses and a steeper recovery afterwards. That is due to higher risk and young companies that take longer to grow. In contrast,  an infrastructure PE fund displays a shallower curve with more stable returns early on, reflecting lower risk and steady cash flows from established assets.
• Aligning Strategy with Climate Goals: Investors can build portfolios that align with their financial objectives, risk tolerance and climate impact by understanding the role of each investment stage in the energy transition. 
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As an investor, you might already be familiar with public equity, have invested in some S&P 500 stocks, and are now curious to expand your portfolio to PE. Before we dive deeper into the different investment strategies of PE, we thought we would give you a refresher on the main differences between public and private equity. 
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Public vs. private equity

Businesses seeking capital often choose between two asset classes: debt (loans) and equity (ownership). Debt is borrowed money that a business must pay back, usually with interest, over a set period of time. Equity, on the other hand, means giving investors a share of the company, which allows them to earn returns as the business grows. Equity investments come with higher risk, but they usually offer higher potential returns. 

Both public and private companies use equity to raise capital and grow. Public equity is dominated by established companies with l track records, offering relatively stable and predictable returns. Additionally, public equity is highly liquid, allowing for easy buying and selling of shares and making it accessible to a broad range of investors. 

In contrast, private equity is typically aimed at sophisticated investors and often requires accreditation with specific net worth thresholds but has higher return potential. Private equity is an illiquid asset class, with a long-term investment vision. Public equity is usually based on short to medium-term public speculation while private equity is a long-term investment based on the valuation increase of the company.  While there are some cases where there is an opportunity to create liquidity or exit your private equity position, one shouldn’t count on it and only invest capital you don’t need in the short to medium term.  

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The evolving landscape of climate tech investments

The climate tech sector has expanded and matured significantly over the last decade, now featuring a more complex and specialized capital stack. This means that climate tech companies now use many different types of funding (loans, investments, grants, etc) that fit their specific needs. The need for capital has intensified as technologies reach scale, and the opportunities have attracted larger funds and investment banks. This also means that as an investor, you have more choices in choosing different investing strategies. 

In this next part, we will explain the difference between several private equity strategies, four of which are relevant to Carbon Equity.

The different types of private equity funding

Here’s a look at the main types of PE funding for climate tech, their roles in addressing climate challenges, and their suitability for different types of investors depending on your risk tolerance and return appetite. 
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Please note that these are by no means the only options available, and they do not represent investment recommendations. They are simply intended to help people understand the various types of PE investments. 

In addition to differences in risk and return profiles, ticket sizes and funding strategies vary significantly across stages. Early-stage investments, like venture capital, typically involve smaller ticket sizes distributed across a larger number of portfolio companies to mitigate risk. Growth equity and buyouts, on the other hand, often require larger, concentrated investments, reflecting the higher capital needs of scaling businesses. Late-stage and infrastructure funding might leverage debt alongside equity to finance large-scale projects with more predictable cash flows.  

We’ve compiled a short list of companies to exemplify the different stages above and what each stage looks like for them. 

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Venture Capital (VC): Scouting transformational ideas

Magrathea: Magrathea is developing a pioneering electrolytic process to produce carbon-neutral magnesium metal from seawater and brines, a core material for decarbonization. In June 2023, Magrathea raised $10 million in a seed funding round. The funds are intended to scale production from concept to early deployment of Magrathea’s innovative electrolytic process. The best stage indicators are its focus on R&D, high growth potential, and lack of large-scale revenue yet. Early-stage funding from VCs reflects the high-risk, high-reward nature of its mission to revolutionize magnesium production.

Tibo Energy:  In January 2024, Eindhoven-based Tibo Energy secured €3 million in seed funding. Tibo Energy offers software to help businesses manage energy use, generation and storage thereby reducing costs, emissions, and grid congestion. The technology is still in its early phase, and the seed funding will be used to grow the team and begin expanding internationally. This funding stage reflects the company’s new and innovative solution, early signs of success, and efforts to find the right fit in the market.

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Growth Equity: searching for exponential growth  

Fervo Energy: This company is advancing geothermal energy technology by developing scalable and cost-effective solutions for tapping into geothermal heat sources. Fervo Energy’s approach enhances geothermal energy’s viability as a reliable and renewable energy source, helping to diversify the energy mix and reduce reliance on fossil fuels. Fervo has proven the potential of its geothermal technology with a successful 4MW pilot plant. In February 2024, Fervo Energy announced a $244 million funding round. This growth equity funding will be used to expand the technology to a commercially viable level and take the next big step: scaling its operations to build a full-scale 400MW plant. 

AIRA: AIRA is a provider of clean energy technology, specializing in the electrification of residential heating through heat pumps. Its innovative pricing model helps households switch from gas boilers to heat pumps with less upfront costs. Aira exemplifies a late-growth stage company with proven market fit, scaling operations, and strong investor confidence. It has secured €243 million in funding in total, including a €145 million Series B round in January 2024, and an additional €63 million in October 2024 to expand manufacturing and operations in key European markets like Germany, Italy, and the UK. This stage reflects Aira’s focus on scaling its clean energy technology, targeting five million homes, and solidifying leadership in the residential heating electrification market. With reduced investor risk and significant capital needs, Aira is leveraging growth stage funding to drive large-scale growth and impact.

Buyouts: leveraging scale to grow even further

VAC (Vacuumschmelze): VAC is a leading global producer of advanced magnetic materials based in Germany.  Its magnetic materials are utilized in a wide variety of industrial applications and are critical components for the transition to renewable energy.  As a well-established company with stable operations and ambitious expansion plans, VAC was a prime candidate for a buyout and was acquired, in October 2023, by Ara Partners.  The acquisition aims to support VAC’s expansion of manufacturing capabilities in North America, particularly to supply permanent magnets for electric vehicle motors. 

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Infrastructure: rolling out proven and essential technologies

Swish: was born from the carve-out of a French electrical engineering group. With a B2B approach, they help their clients install their EV charging stations (coupled to photovoltaic solar panels) and advise on how best to optimize their output with their software. In 2023, They secured €47 million financing from RGreen Invest.  This financing enables Swish to accelerate its development and finance future projects, with plans to install and operate over 80,000 charging points by 2030, focusing on standard AC charging points. 

Belenergia: Belenergia develops, builds, and operates renewable energy projects, focusing on solar and wind farms to accelerate Europe’s energy transition. In 2024, the company secured a €190 million investment from RGreen Invest and For Talents, enabling it to strengthen its operations and expand its renewable energy portfolio. This infrastructure funding exemplifies Belenergia’s focus on long-term, stable returns through capital-intensive energy projects that directly support European decarbonization objectives.
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More on climate infrastructure investments here. 
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Making the right investment choice

Ultimately, finding the right investment strategy for your impact goals and risk appetite requires a thoughtful understanding of private market climate tech investments. By familiarizing yourself with the various stages—from venture capital’s transformative potential to the stable, long-term opportunities of infrastructure—you can align your financial returns with your climate impact aspirations.

The evolving landscape offers something for every investor profile, whether you’re seeking high-risk, high-reward innovation or prefer more predictable, scalable solutions. Ultimately, the key lies in strategically building a diversified portfolio that aligns with your risk tolerance, financial objectives, and commitment to supporting the transition to a more sustainable future.