Startups focused on climate technology are highly reliant on capital, have extended timelines, and their innovations are frequently regarded as “novel.” Furthermore, a primary selling point is the mitigation of pollution — an externality that, at its best, is inadequately valued by the market. These characteristics are typically not favored by stock investors.

Nonetheless, the public markets seem to be becoming more receptive to climate tech startups — or at least a select few.

This week, nuclear venture X-energy debuted publicly, garnering $1 billion through an expanded share offering that seemingly provided substantial returns for its backers, including Amazon. Retail investors appear to be eager, with the stock surging 25% during its initial trading hour. Additionally, geothermal company Fervo announced it has applied for an initial public offering. The details of the Fervo IPO remain undisclosed, but private investors have appraised the firm at approximately $3 billion, as reported by PitchBook.

The decision to go public corresponds with what investors shared with TechCrunch late last year. After years of lukewarm interest in climate tech firms, they anticipated public markets to begin embracing energy-related startups. Almost every investor consulted on the matter indicated that startups with the highest potential for going public focus on nuclear fission or improved geothermal technology. Fervo, in particular, was referenced multiple times.

Credit data centers for this shift. The AI trend has transformed a growing demand for electricity into an appealing and marketable narrative. Companies that were already positioned to benefit from the increase found themselves aligned with a compelling story that matched their technological advancements. Luck certainly favors the prepared.

The IPOs are also likely to please investors, enabling them to return funds to their limited partners. The recent scarcity of IPOs has kept a portion of climate tech financing tied up, during a time when many funds are eager to begin cashing out.

However, it isn’t solely about cashing out.

Fervo and X-energy have opted for the conventional path to the public markets, indicating there is confidence in a broad demographic of investors wishing to engage. If the goal were merely to unlock investor capital, the startups could have pursued the SPAC approach. (Several have.) Yet these two enterprises chose the more prolonged route.

Despite their accomplishments, a significant portion of climate tech may ultimately miss out on this IPO surge.

Firms not involved in energy markets will need to discover alternative methods to continue advancing — all while lacking access to the substantial resources provided by public markets. This divergence hints that the climate tech landscape is beginning to adopt a K-shaped trajectory, a notion Mark Cupta, managing director at Prelude Ventures, proposed when I spoke with him just over a week ago.

Companies remaining on the less affluent side of the IPO spectrum can still turn to private investors for support. However, a K-shaped trend seems to be emerging there as well.

According to Sightline Climate, venture capital and growth funds accumulated roughly $6.5 billion last year. This mirrors the amount in 2021, but due to the rise in the number of funds, each fund is now smaller. This could spell trouble for founders, as funds have fewer resources available. On the positive side, increased competition might lead to improved fundraising outcomes.

Simultaneously, larger funds continue to expand. Infrastructure dominated climate tech investment last year, with 42 funds accounting for 75% of all capital in the sector, according to Sightline Climate. This success is expected to transfer to the startup sector if the company possesses a mature technology ready for large-scale development.

Sightline noted that many new infrastructure funds are concentrating on renewables, grid solutions, and energy storage. In essence, the K-shaped phenomenon is unlikely to dissipate anytime soon.