'A graveyard of companies': Climate tech startups are feeling the heat from Trump 2.0

The climate tech sector is encountering significant challenges as recent policy changes under the Trump administration have raised alarms among startups and investors alike. A proposed overhaul of green energy tax credits has left many in the industry scrambling to devise contingency plans. Following the Republican-controlled House's approval of a bill that reduces tax incentives for clean energy, cleantech stocks took a nosedive in May. This shift has triggered widespread concern regarding the future viability of the burgeoning climate tech ecosystem, which had thrived during the Biden administration’s Inflation Reduction Act (IRA). Founders and investors have expressed fears that these changes could stifle growth ambitions, forcing many startups to reconsider their business strategies, downsize, or even close their doors entirely. Matthew Nordan, a general partner at Azolla Ventures, warned, "There will be a graveyard of companies," highlighting the severity of the situation. Some startups are already feeling the pressure. For instance, Spencer Gore, CEO of Bedrock Materials, a sodium-ion battery startup, announced on LinkedIn that the company would be returning most of its $9 million raised and ceasing operations. Gore attributed this decision to unfavorable techno-economic conditions rather than a lack of cash, citing the diminishing industrial policy landscape for climate tech in the U.S. As the political climate shifts, Europe is becoming an increasingly attractive destination for climate tech companies. Nordan noted a significant trend of startups relocating to Europe, where regulatory frameworks are more aligned with climate goals, contrasting sharply with the current U.S. landscape. Sam Kanner, CEO of Aikido, a floating wind turbine startup, is considering a move to Europe, stating that U.S. policies have dampened investor enthusiasm and project development. The absence of grant opportunities from agencies like the Department of Energy has forced many U.S.-based startups to pivot their focus entirely to European markets, where they may find more support. As Kanner explained, the shift in strategy is now predominantly directed towards European investment opportunities, benefiting from government funding and a more favorable energy landscape. Investors are recognizing the appeal of European initiatives, with the EU's proactive policies fostering a more supportive environment for private equity and infrastructure investments. Countries like the UK, France, and Norway have enacted measures that encourage investor participation in wind energy projects, drawing attention away from the U.S. Startups are also exploring options beyond Europe, with interests in emerging markets such as Brazil, India, and the Middle East. Max Kufner, co-founder of Again, a carbon capture startup, mentioned that while they are not yet affected by IRA cuts, they perceive the Middle East as a promising partner in the decarbonization effort. As the landscape evolves, many climate tech entrepreneurs are grappling with the implications of operating in the United States. Gore reflected on the current climate for startups, likening it to the challenges faced during Trump’s previous term. The ongoing global tech downturn, rising interest rates, and backlash against ESG initiatives further complicate fundraising efforts. Data from PitchBook reveals a stark decline in funding, with climate startups securing only $10 billion in the first quarter of 2025, marking a 50% drop from the previous year. The Trump administration’s attempts to roll back parts of the $369 billion IRA are raising concerns among startups heavily reliant on government grants. The repercussions are already manifesting, with companies like Climeworks, which previously received a $50 million U.S. grant, recently laying off over 100 employees due to policy changes. As Nordan predicts more layoffs and closures, sectors like offshore wind and solar face heightened risks, especially given the reduced workforce at the Department of Energy’s loan program office. Despite these challenges, interest in nuclear fusion and energy storage technologies is on the rise, fueled in part by the energy demands of the burgeoning AI sector.