For the better According to an analysis by PitchBook and Marketingwithanoy, VC firms and growth stocks have invested nearly $42 billion in battery technology startups in nearly 1,700 deals over a decade. Moreover, about 75% of the investments in that period were made in the past two years alone.
Venture capital companies are not uncommon in the battery world. Five years ago, they were reliably making 50 to 60 deals per quarter, which would be worth a few hundred million dollars in total. That started to change towards the end of 2020 — in several quarters over the past two years, more than $2 billion was invested, and a few had more than $3 billion. The number of deals has also increased, almost doubling in 2021.
But the more notable story was in growth ability. In the past, there have been sporadic private equity (PE) deals in the battery sector. In the past year, however, they have blossomed, with growth stock companies investing $13.4 billion in areas such as battery materials, manufacturers and recyclers.
The presence of PE reflects a shift in both the industry and the way investors view it. Batteries are normally considered a high risk, high return investment; the kind of thing venture capital is made for. But it’s also not a perfect fit for VC – the battery R&D process can be exceptionally long, often going beyond the usual five to 10 year timeline of venture capital to collect returns. And if the risks of battery startup for VCs are hard to bear, then it’s an even harder growth power pill to swallow.
“Too Much Money” might explain the magnitude of some of these bets, but it doesn’t explain their existence.
So what has changed? There are countless reasons why both venture capital and growth capital dive into batteries. Let’s dig.
The macro changes
For starters, there’s a lot of money in the economy waiting to be invested, and that could push some funds into an area they hadn’t explored before. Such a move could make sense for VCs, who are used to scouting and assessing risky technology-based bets, but not for growth potential.
“Too Much Money” might explain the magnitude of some of these bets, but it doesn’t explain their existence. Rather, VC and PE are more likely to have sensed the world is changing and are adapting their strategies accordingly.
Governments around the world have begun to set end dates for fossil fuel vehicles. Countries across Europe began announcing bans in late 2010. Norway will stop selling fossil fuel cars and light commercial vehicles by 2025. The Netherlands, Ireland, Sweden and Slovenia will follow suit with passenger cars in 2030, as will Denmark and the UK in 2035 and France in 2040.