“It’s been a turbulent few months”, admits David Frykman, founding partner of Norrsken VC, one of Europe’s largest venture capital groups. Frykman, whose firm mainly invests in European start-ups, is referring to politics across the Atlantic.
On January 20, Donald Trump entered the White House with a promise to “drill, baby, drill”, signing executive orders to remove the US from the Paris climate accord and pause more than $300bn of green infrastructure funding from Joe Biden’s signature Inflation Reduction Act and bipartisan infrastructure law.
The new president’s moves on climate have had repercussions far beyond the US, rippling through the European climate tech start-up ecosystem from investors such as Frykman to founders and accelerators.
Beyond the direct impact on US green investment and global climate diplomacy, the move by the Trump administration is damaging for climate tech because it reinforces the “anti-climate narrative . . . that sustainability is an economic burden rather than a driver of innovation and competitiveness”, warns James Cole, head of the Cambridge Institute for Sustainable Leadership’s Canopy accelerator. “But it doesn’t mean that everything necessarily stops”.
Some investors and accelerators see Trump’s administration as a potential opportunity for the continent. “From a European perspective, it is a very welcome wake-up call,” says Lena Thiede, general partner at green tech investment fund Planet A Ventures.
Europe’s climate tech sector, which has previously lagged far behind the US, is beginning to catch up. A report in January by market intelligence company Sightline Climate found that Europe’s start-up gap with the US — a metric based on the number of start-ups that have completed a funding round since 2020 — was just 7 per cent in 2024, down from almost 25 per cent the previous year.
“Europe is almost going through the part of the climate tech cycle that the US was going through two years ago”, a stage of “spark, excitement and momentum” that “came out of needing to and wanting to compete” with the US and the IRA’s climate tech incentives, explains Kim Zou, Sightline chief executive.
The continent now has “a better chance than [it had] under Obama, Biden, or even the first Trump administration” to lead on climate tech, says Eric Weber, chief executive of German start-up accelerator SpinLab.
Planet A’s Thiede has already seen top-tier US talent and funding “flowing towards Europe”, with American cleantech funds “doubling down on European companies” and European founders in her network receiving more applications from US candidates.
Beyond US funding, experts argue that private investment in Europe needs to improve to allow its start-ups to compete. Trump’s policies — while providing “a massive opportunity for Europe to pick up the slack” — “accelerate the need to have a self-contained European market for climate technology”, encompassing start-ups, investors and corporate customers, says Tommy Stadlen, Founding Partner at Giant Ventures.
Since Trump’s election victory, Stadlen has already seen a “swell of movement in European finance” towards green investment, especially from Scandinavian pension funds. Giant Ventures is backed by German companies such as Allianz, BMW, and Henkel — companies already “putting their money where their mouth is, in terms of investing in climate tech”.
Europe needs to “leverage the strengths we already have”, including in sustainability, adds Lisa Ericsson, founder of Stockholm-based accelerator KTH Innovation. On top of increased deeptech investment, she argues for greater intra-European collaboration.
Thiede agrees. “What is it that [Europe] can realistically be a leader in?”, she asks, noting the continent’s strength in biotech and semiconductors, as well as its past inability to fully harness and commercialise its “stellar” research landscape. Cole reiterates the latter point, highlighting the UK government’s recently revived plans for the Oxford-Cambridge Arc.
Nonetheless, Europe presents broader practical challenges to start-ups. Sightline’s Zou notes the difficulty of financing and scaling across “different geographies, different languages, different governments” — a difficulty that a streamlined pan-European start-up entity such as the proposed “EU Inc” could help to counter, Weber suggests.
In addition, investors and hub leaders agree that Europe’s infamously bureaucratic regime needs to be simplified. Weber recalls how a former SpinLab software start-up, Replex, was in talks with a big German company for “months and months and months”, before speaking to the company’s US arm and receiving a contract “within three weeks”. “We need to be faster, more pragmatic,” he says, instead of all this “talking, talking, talking”.
Beyond Europe, investors view Trump’s presidency as less of a blip than it may seem. “It’s an intense microcosm of what’s happening with climate tech generally,” says Stadlen: the death of the green premium, or the additional cost of a sustainable technology over a non-sustainable one, a cost borne either by governments, corporate customers, or consumers.
Thiede warns that start-ups working in the voluntary carbon market, carbon capture, and ESG compliance software will struggle under Trump.
In contrast, thanks to their competitive price point, investors expect renewable energy sources such as solar — the largest vertical for climate tech investment in 2024, according to Sightline — to continue to grow. Stadlen adds that nuclear energy — currently experiencing something of a renaissance — fits in well with a narrative of “American dynamism” and the “muscular nationalism of the era”.
Regardless of Trump, investors, founders, and accelerators are resolved to stay the course on climate tech. “I don’t foresee that much of a change,” notes Frykman of his firm’s investing: “we just look for great founders building great businesses.”
“The reality is, climate change is real,” says Stadlen, “and it doesn’t matter who’s in the White House.” Decarbonisation is “a bigger opportunity than the internet”, he adds. “Europe has an opportunity to be among the winners.”
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