Climate-focused venture firm Climactic just unveiled Material Scale, a hybrid funding vehicle designed to shepherd climate tech startups through what the industry calls the 'valley of death' - that treacherous period between early-stage funding and commercial scale. The fund's initial focus on apparel industry startups signals a strategic bet on one of fashion's most carbon-intensive sectors, where materials innovation could unlock billions in sustainability value.
Climate venture firm Climactic is taking aim at one of the startup world's most notorious bottlenecks. The firm's newly launched Material Scale fund deploys a hybrid financing model specifically engineered to get climate tech companies through the awkward middle phase where they're too advanced for seed investors but not quite ready for growth-stage checks.
The timing couldn't be sharper. According to PitchBook data, climate tech funding dropped 40% year-over-year in 2025, with materials science startups hit particularly hard. Traditional VCs have grown skittish about the long development cycles and capital intensity that define hard tech, while corporate venture arms remain cautious about pre-revenue bets. That's left a generation of promising technologies languishing in what investors grimly call the valley of death.
"We kept seeing companies with proven technology and clear market demand just run out of runway before they could get to scale," sources familiar with Climactic's strategy told TechCrunch. The hybrid structure - likely combining equity investments with revenue-based financing or project-specific debt - gives startups flexible capital that doesn't force premature dilution or unrealistic growth timelines.
Material Scale's initial focus on apparel industry startups reflects both opportunity and urgency. The fashion sector generates an estimated 10% of global carbon emissions, with textile production alone consuming 93 billion cubic meters of water annually. Brands from Patagonia to Nike have pledged aggressive sustainability targets, creating genuine demand for alternative materials - from lab-grown leather to recycled synthetics to plant-based fibers.
