Checkbooks Open, But Risk-Off. What Should Climate Entrepreneurs Do?

Octopus as a businessman and his business plan for more money. Cartoon ilustration.

getty

The climate solutions sector got the clarity it was waiting for, at least in the U.S market. With the biggest questions around the One Big Beautiful Bill (OB3) now answered — which tax credits were taken away, what are the new the rules of the road — we’re entering a new phase. While the U.S. sustainability sector took some body blows in the first few months of 2025, at least there’s a lot less uncertainty about where the market’s growth potential remains strongest. Now the story shifts to what investors are going to do about it.

And here’s the thing: private equity and infrastructure funds are sitting on enormous amounts of dry powder. Depending on which survey you read, the number runs into the hundreds of billions globally. The fundraising for climate and infrastructure over the past five years was massive, and that capital hasn’t all been deployed yet. The cleared-up policy framework from OB3 has removed a huge source of uncertainty, so all that dry powder is eager to move.

That might sound like the start of a boom time, and certainly the 2026 outlook is increasingly rosy, at least from my seat. But there’s a wrinkle.

Easy Does It

Everyone is looking for “easy” deals right now. And in investor-speak, that usually means something that carries very attractive upside while minimizing perceived risk. A “flight to quality” of a sort. The collective trauma of high interest rates, policy jitters, and geopolitical unknowns has left decision-makers cautious. Nobody wants to explain to their investment committee why they swung for the fences in this market and missed.

So what does “easy” look like? It looks like growth equity into companies that already have a proven model, recurring revenues, and a clear glide path to scaling. It looks like clean energy, food, water, waste and transportation projects with limited technology risk and signed contracts in hand. It looks like platform plays where the first few acquisitions have already worked out nicely.

In other words, the checkbooks are open, but the pens are being guided toward what feels safest.

That’s not unusual — investors always prefer certainty. But right now, the tilt is especially strong. The appetite for big technology bets, or for backing pre-revenue entrepreneurs and project developers, is at a low ebb (with the exception perhaps of fusion power innovations). Even with valuations often being reset downward because of the challenges of the past couple of years, investors aren’t looking for bargains, they’re looking for obvious momentum.

The “Rich” Get Richer

This creates an ironic outcome. The entrepreneurs who are most likely to attract capital in this environment are the ones who least need it right now. They already have strong momentum in the market. Their customer traction, supply chain maturity, and capital return model are proven. They’re getting calls from investors not because they’re clearly in need of capital, but because they’re exactly the kind of low-risk, high-upside story that fits the current mood.

Take Fervo Energy as an example. They’ve spent years proving out their approach to geothermal power generation and project development. Now, with OB3 leaving geothermal incentives largely intact, and a market hungry for new sources of clean power, they’re exactly the kind of company private investors are lining up to back: proven tech, visible revenue, and a clear runway to scale. Compare that to the dozens of other geothermal power startups still pitching pilots or trying to close their first utility contract. The difference is stark — capital is chasing momentum, not potential.

You can see the same dynamic in the emerging “green data center” space. Companies like Soluna and Crusoe (note: my firm has backed some of Soluna’s projects) have built real projects around flexible data center operations that monetize stranded or curtailed renewable power, while also solving grid-balancing headaches. And in an era when AI demand is turning data centers into the steel mills of the 21st century — energy-hungry, grid-challenging, and politically sensitive — those models look potentially important for unlocking needed capacity. They’ve already scaled projects, raised serious capital, and inked contracts with big-name customers. That puts them in the “momentum” camp, while many other startups are still stuck pitching futuristic “green cloud” visions or unproven cooling technologies that won’t result in “shovels in the ground” for a couple of years out. Again, investors are rewarding execution and traction over promising but unclear visions.

If you’re an entrepreneur who’s just crossed the line over to revenue-stage with a backlog of orders, you’re suddenly very popular. If you’re still sketching out your first project finance deal on a whiteboard, not so much.

That’s frustrating if you’re on the outside looking in. But this is also the part of the economic cycle when industries consolidate. The players with momentum will get even more momentum, as they use new rounds of capital to roll up competitors and suppliers, expand product lines, or lock down customer contracts ahead of everyone else. The laggards, meanwhile, are still gasping for oxygen.

Merge Ahead

So what does this mean for the sector? Likely a looming period of consolidation (in fact, Crusoe just announced an acquisition). The winners of 2026 and beyond will be the platforms that had traction in 2025 and then hoovered up capital while the getting was good. They’ll use that position to acquire smaller players, or at least crowd them out of the most attractive markets.

2026 is also when the “risk-off” posture of today will hopefully give way to a new cyclical phase of risk-on behavior, as investors start to worry they’re missing out on a rejuvenated multidecadal megatrend. By then, the market growth that OB3 couldn’t stop will be once again obvious, the supply chains more stable, and the financial return potential more visible. Hopefully 2026 also marks a return to an easier fundraising environment for the venture capital investor community as well, so that they can replenish their own dry powder and get back to work.

It’s worth remembering: every wave of industrial transformation has a consolidation phase. Railroads, telecom, even the early internet — the script is familiar. The most successful entrepreneurs are not just the ones who build something great, but the ones who time their capital raises to match investor psychology. Right now, that psychology favors momentum players, not the dreamers.

For the dreamers, it’s not all bad news. This cycle will eventually turn. Solutions that look risky today may look de-risked by 2026. The key for them is survival — to keep moving forward even without the flood of easy capital.

But let’s be clear: the private equity checkbooks are open again, even if the pens are still being held in a death grip. If you’ve already got won market acceptance and momentum, go out now to raise more capital (even if you don’t “need” it) because now may be the time to strike while the iron is hot. Unfortunately, for those who still don’t have such market momentum and a full balance sheet, hope is not lost, but 2026 may feel a long way off.