14 climate tech investors share their H1 2022 strategies

Almost the same size as Florida, global warming has made Antarctica’s Thwaites Glacier increasingly unstable. This month, researchers are attempting to reach the “Doomsday Glacier” for study, but icebergs are slowing their progress.

The climate emergency is becoming more apparent, and investors are taking notice. Last year, round sizes for climate tech startups quadrupled, with more than 600 investments totaling over $40 billion.

Nearly a third of these were pre-seed and seed, with 182 deals closing just in in Q4 2021. The start of 2022 shows no signs of slowing, with more startups jumping into the fray to tackle one of humanity’s biggest challenges.

To examine the market forces and psychology driving climate tech, we surveyed an international group of investors to learn about how they evaluate new opportunities and what they’re looking for from the entrepreneurs who approach them.

We spoke with:

Alex Bondar, Acre Venture Partners

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

We’re fundamentally very bullish on the space. I think this is something that is a present day issue for us to solve. We’re food and agriculture investors, so we definitely have that kind of lens as we think about it. We’re constructive around things like voluntary carbon markets. We think those are standing up. You’re already seeing quite a bit of flow in there.

We have a different view wherein we see an inflection point around less of the corporate involvement and more on the consumer side. We’re investigating how the consumer engages with these markets to solve some of these issues rather than just relying on the Microsofts of the world to buy a bunch of carbon credits.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

If anything, I think all it does is validate the fact that it is a large opportunity. In some ways, it’s probably the largest opportunity in VC given its existential nature. I see it as a net positive that I don’t think there’s enough capital that we could put towards this to really find the underlying true issues here.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

Given where we have invested recently, we definitely saw health opportunities on the agtech side. One company is going after bettering soil health so that we can sequester more carbon through better ag practices. I think something similar can be done on the forestry side as well. As we think about carbon sinks, instead of going after these highly technical solutions, such as direct air capture, there are natural proven ways of doing it. So if we can accelerate that, I think that makes a lot of sense to me from a carbon removal standpoint.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

This is where we can integrate some of these carbon markets with the consumer. For example, what Moss is doing in terms of making these credits very easily available for just general applications, whether it’s loyalty programs or purchases that the consumers are making.

I think it makes it much more tangible in terms of engaging with some of these environmental solutions and digitizing those environmental assets. Those downstream applications are something new and there could be quite a willing audience to engage with than just simply relying on the corporate consumer.

A lot of this is bringing trust and credibility into the space. I think those tools allow for preventing things like double counting and tracking the provenance of these credits. That is where we see a lot of the benefits. It’s also a way to create a more frictionless pipeline between the projects themselves, and then some of these applications and things like instant offsets make a lot of sense, especially in some of these consumer applications.

Some solutions (e.g., electric scooters, replaceable battery technologies) generate a high volume of e-waste. How do you consider an investment’s overall environmental impact? How much do you consult with scientists or other climate experts before investing?

We definitely think through that when we do our diligence. It is an important component. You want to make sure that things you’re investing in are a net positive. There are always some indirect consequences at times, some of which you don’t realize until much later.

You have to be in business to make these investments. So there’s a component of making sure that you’re keeping your LPs happy and you’re providing the kinds of returns they’re seeking. That being said, I think a lot of this is also like a stage process. So some of the technologies that have been invested in could be foundational for other things that come in later.

Which metrics do you use to gauge the health or viability of your climate tech investments? Is there a metric that helps you be more comfortable when cutting a check?

We think we can make the types of returns that we’re seeking in venture-style investments. There have been a lot of catalysts and inflection points in the last few years, especially in fruit and ag. I’ve seen quite a bit of innovation just in the last five, six years since we started the fund. We have an impact mission, but the underlying underwriting still has to reflect the types of returns we want to see in this space.

This cannot be like a philanthropic endeavor. I think this has to be a market-based solution. Given the size of the problem, some of these opportunities, you’re going to see these types of returns, especially in food and ag in our space. I don’t know if this is true for all industries, but I think creating more sustainable solutions is something that we see consumer demand for as well. The consumers are willing to pay a premium for that and there is economic incentive to do that.

Think about plant-based alternatives to meat. People are paying a premium for those products. At the end of the day, it’s less about thinking about these like upstream solutions and more about figuring out where the consumer demand is, and then what the consumer is willing to pay for.

We’re seeing opportunities in terms of the consumer becoming more knowledgeable, more aware, and demanding better products, whether it’s for the environment or for their health. I think this is really consistent with the investments that we’ve made as well.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

I think it varies. It depends on the type of solutions we’re looking at and where in the value chain you are. So when you’re dealing with something like a biotech-driven company, like a seed genetics company, for instance, of course, there’s a more scientific background there. But as you move downstream, a lot of those founders may not be purely scientists.

Carolin Funk, Blue Bear Capital

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

EV battery maker LG Energy Solution becomes South Korea’s second most valuable firm in IPO debut

South Korea’s electric vehicle battery maker LG Energy Solution made a successful market debut on Thursday. The market capitalization of LG Energy stood at $98.3 billion (118 trillion KRW) at the close of trading on local stock exchanges, making it the country’s second valuable firm after Samsung Electronics.

The firm’s stock price opened at 597,000 KRW ($496), nearly 99% up from its initial public offering price of 300,000 KRW ($250) apiece before falling as much as 25% in early trade and ending the day 68.3% higher.

The world’s second-largest EV battery maker after Chinese CATL raised 12.8 trillion KRW ($10.8 billion), valued the company at $59 billion, last week in South Korea’s largest IPO.

LG Energy has approximately 23% of the global EV battery market with customers including Tesla, General Motors, and Volkswagen, according to a sector analyst. In comparison, China’s CATL topped with about 35% market share. The analyst also noted that Japan’s Panasonic and Chinese BYD account for roughly 13% and 7% share, respectively.

With the IPO proceeds, LG Energy plans to increase its production capacity in the global markets as demand soars for EV batteries. It also wants to form additional strategic partnerships with global car makers in the U.S., Europe and China to take on its global competitors.

Spun out of LG Chem in December 2020, LG Energy has more than 30,000 employees and develops lithium-ion batteries for EV, mobility, drones, ships, IT applications and energy storage systems. Its parent company LG Chem will hold an 81.8% stake in LG Energy after the listing.

Last June, the Seoul-based firm suspended its IPO process on the heels of a series of recalls from General Motors’ Chevrolet Bolt electric vehicles due to possible battery cell defects that could increase fire risk.

The company said in July its plan to invest $5.2 billion in battery materials by 2025. LG Energy announced earlier this week it will plan to build a $2.6 billion EV battery plant in the U.S with General Motors.

Volkswagen and Bosch set up JV to push European battery production

Volkswagen and Bosch have signed a memorandum of understanding to explore a joint venture dedicated to providing Europe with battery equipment solutions. The two companies aim to supply integrated battery production systems and on-site ramp-up and maintenance support for battery cell and system manufacturers, Volkswagen said.

The JV is expected to help VW reach its goal to build six cell factories by 2030, but it will also be available to serve other factories across Europe. The companies did not share how much they would invest in the venture.

As automakers set ever more ambitious targets to deliver millions of electric vehicles in the next few years, they’re working on becoming more self-sustaining and less reliant on getting their battery supplies from abroad, which has become even more problematic with pandemic-related supply chain issues. 2021 saw a string of battery joint ventures between automakers and cell suppliers keen to build battery cell production facilities close to home, but VW was already there with a 2019 JV with Northvolt and its first planned production facility in Saltzgitter, Germany.

“Europe has the unique chance to become a global battery powerhouse in the years to come,” said Thomas Schmall, a VW board member responsible for the automaker’s battery plans, in a statement. “There is a strong and growing demand for all aspects of battery production, including the equipment of new gigafactories. Volkswagen and Bosch will explore opportunities to develop and shape this novel, multibillion-euro industry in Europe.”

Volkswagen is also joining the growing trend of automakers finding ways to diversify revenues by offering services to competitors. On Tuesday, Ford and ADT formed a JV to provide a vehicle monitoring system that can be attached to any car make or model to help prevent thefts.

“Our decision to actively engage in the vertical integration of the battery-making value chain will tap considerable new profit pools,” added Schmall. “Setting out to establish a fully localized European supply chain for e-mobility made in Europe certainly marks a rare opportunity in business history.”

The European Battery Alliance has said a third of global batteries need to be produced in Europe by the end of the decade to cut dependence on South Korean and Chinese market dominants, but so far battery cell plants capable of generating under 900 gigawatt hours of capacity in Europe are set to make up only 16% of global production by 2029.

Tesla is planning to build a battery plant in Berlin with a capacity of 50 GWh next to its 300-hectare site to build Model Y vehicles, but both the plant and factory are still awaiting approval from regional authorities to begin production, despite CEO Elon Musk’s earlier promises that production would begin in November or December last year.

Volkswagen’s planned factory in Salzgitter is expected to produce 40 GWh, but if the automaker succeeds in ramping up production and building a total of six factories, it should have a combined output of 240 GWh.

Solid Power ramps up solid-state battery race with public market debut

Solid Power, the solid-state battery developer backed by Ford and BMW, is hitting the public markets running with a spike in stock price shortly after trading opened Thursday.

The company is one of a handful in the electric mobility space to have gone public via a merger with a blank-check firm. Solid Power announced the merger with special purpose acquisition company Decarbonization Plus Acquisition Corp III in June, at a post-deal implied market valuation of $1.2 billion.

The deal ultimately generated around $542.9 million to Solid Power, very near to the estimated $600 million due to the notably low number of redemptions prior to the shareholder vote. The cash includes $195 million PIPE and $347.9 million of cash held in trust.

It’s funds that the company will need, as it seeks to commercialize the world’s first solid-state battery for electric vehicles. Solid-state batteries — so named because they use a solid, rather than liquid, electrolyte — are considered by many to be the next breakthrough in battery technology. Developers say they minimize the fire risks associated with conventional batteries by eliminating the flammable electrolyte, in addition to offering superior energy density, or battery range.

Solid Power has been hard at work, expanding its Colorado factory footprint as it prepares pilot production of its commercial-grade, 100 ampere battery cells in early 2022. Those cells will head to investors Ford and BMW for automotive testing. Solid Power plans to use the capital from the transaction to fund operations through vehicle integration, which the company anticipates will take place in 2026.

The company’s long-term business plan is not to become a large-scale battery producer, like industry giants LG Chem or SK Innovation. The ultimate aim is to license out the cells to OEMs and manufacturers. “Long term, we’re a materials company,” CEO Doug Campbell told TechCrunch earlier this year. “We want to be the industry leader in solid electrolyte materials.”

Solid Power is not the only solid-state battery developer to go public via SPAC, nor is it the only one to have received investment from a big automaker. Indeed, it seems that the major automotive OEMs have been picking their horses in the solid-state race, with rival QuantumScape receiving backing from Volkswagen and Stellantis and Mercedes-Benz lining up their funds behind newer entrant Factorial Energy.

QuantumScape completed its own SPAC deal in November 2020. Like other mobility SPACs, it saw its fair share of stock price volatility, with shares cresting as high as $114 in December before settling around $20-25. Whether Solid Power’s stocks will face similar tumult remains to be seen. The company is trading under the ticker symbol $SLDP.

EV maker Arrival to build high-voltage battery module assembly plant in North Carolina

Arrival, the electric vehicle manufacturer that aims to break up the assembly line in favor of multiple microfactories, is investing $11.5 million to build a high-voltage battery module assembly plant in Charlotte, North Carolina. The plant will provide batteries for electric buses and vans produced at the company’s microfactories in Rock Hill, South Carolina and Charlotte, respectively.

Earlier this week, Arrival also agreed to collaborate with Li-Cycle, a lithium-ion battery recycler, to create a closed-loop EV battery supply chain. Like most other automakers, Arrival is recognizing the reality of supply chain delays and materials shortages and is working to vertically integrate as much of the process as possible, while also maintaining its commitment to sustainability.

“This was not always part of the plan,” Katie Blixt, Arrival’s head of PR and communications in North America, told TechCrunch. “As we’re figuring out the production plan and timeline and figuring out what makes sense to bring in-house and add to our vertical integration, we just decided that the best move was for us to be able to assemble these ourselves and have more control over the process.”

Over the next several months, Arrival will be refitting an existing warehouse in order to start production in the third quarter of 2022, according to Blixt, who noted that Arrival’s battery chemistry supplier is LG. The plant should have a production capacity of up to 350,000 battery modules per year, which can be used across Arrival’s different commercial vehicle platforms and can be tailored to suit the customer’s specific battery requirements, according to the company.

Arrival has announced before that it hopes to build 31 microfactories by 2024. So far, it has three planned for 2022; Arrival aims to start production of its buses at Rock Hill in Q2 next year, vans in Bicester, England in Q3 and vans in Charlotte in Q4.

“We’ve withdrawn long-term forecasts on microfactory numbers beyond that because the advantage of the microfactory model is that we don’t have to plan several years in the future and the number will be determined by demand and access to capital,” said Blixt.

Whenever Arrival does start scaling up its microfactories, it will also now scale battery assembly plants alongside them, so it’s almost an opposite approach to the Tesla gigafactory style of production, said Blixt, noting that Arrival might build multiple regional battery assembly facilities to supply local microfactories.

The battery modules will be software-based and have self-diagnostic capabilities, so if there’s an issue with one, the module itself can be replaced instead of the entire set of batteries in the vehicle, said Blixt. If the software detects an anomaly, it will send information up to the cloud for Arrival’s technicians to diagnose and then send instructions back down to Arrival’s network of outside service providers. The company recently announced partnerships with companies like Valvoline and Firestone to provide Arrival customers with vehicle maintenance.

Toyota will build its first US battery plant in North Carolina

Toyota Motor will build its first battery factory in the U.S. in North Carolina, the company and state officials confirmed Monday, as more automakers seek to take control of the supply chain with in-house battery manufacturing plants.

Toyota will invest $1.29 billion in the plant, which will be called Toyota Battery Manufacturing, North Carolina (TBMNC), with production anticipated to commence in 2025. That investment is part of a wider pledge to invest $3.4 billion in automotive batteries in the U.S. through 2030.

Once operational, TBMNC will have four production lines, each capable of manufacturing batteries for around 200,000 electric and hybrid vehicles. Toyota’s aim is to expand the factory to at least six production lines, which would produce enough batteries for 1.2 million vehicles per year. The new factory will create around 1,750 new jobs and will use 100% renewable energy to make the batteries, Toyota said.

The news comes as Congress mulls a revision to the consumer tax credit for electric vehicles, which currently stands at around $7,500 for OEMs that have sold fewer than 200,000 electric vehicles. A group of Democrats have proposed adding an additional $500 if the vehicle’s battery was made in the U.S., and another $4,500 on top of that for EVs produced in the U.S. by unionized plants.

Toyota has been squarely against the tax credit revision, calling it “blatantly biased” in a letter to legislators. The bill has received support from the big three automakers — Ford, General Motors and Stellantis — as well as the United Auto Workers.

Toyota is just the latest major automaker to announce a battery manufacturing plant, part of a push to stay ahead of potential supply chain squeezes from raw materials or key battery components. As Rebecca Bellan wrote for TechCrunch+, partnerships and joint ventures with battery suppliers — like GM’s joint venture with LG Chem, dubbed Ultium, or Ford Motor’s agreement with SK Innovation — show that OEMs are realizing they need to take control of the supply.

GM to form new joint venture with POSCO Chemical aimed at key battery component

General Motors is deepening its commitment to operate a vertically integrated battery supply chain with the announcement that it would form a joint venture with South Korea-based POSCO Chemical to build a new cathode active material facility in North America by 2024.

Cathode active materials comprise around 40% of the cost of electric vehicle batteries, and the majority of both cathodes and anodes (the other building block of lithium-ion batteries) are produced in China, according to Benchmark Mineral Intelligence. This latest announcement brings the automaker one step closer to its goal of moving the majority of its battery production footprint to North America by 2025 — a huge geographical shakeup compared to where the battery supply chain exists today.

“We need to control our own destiny, especially when it comes to battery production,” GM executive Doug Parks said in a call with reporters Wednesday. “That’s why we’re pursuing a North America-focused vertical integration strategy for our proprietary platform.”

GM has already aggressively pursued control of the remainder of the battery supply chain, including battery cell production with Ultium, its JV with LG Energy Solution, and its battery recycling agreement with Li-Cycle. The materials from this facility will go straight into the production of new Ultium battery cells — a nickel-cobalt-manganese-aluminum (NCMA) battery that forms the bedrock of the automaker’s $35 billion electrification strategy.

While company executives declined to specify where the plant will be located or the size of the investment, it’s almost certain to be significant. That’s because the materials produced by the new facility will supply “most” of the cathode active material needed for all four of the battery manufacturing facilities GM has planned under its Ultium JV. That will eventually bring the automaker to a total of 140 gigawatt-hours of cell manufacturing capacity in the United States.

The joint venture will have to move quickly if it wants the new facility to be up and running by 2024. The two companies said a site location could be announced as early as the first quarter of next year.

GM’s vertical integration strategy comes amid the ongoing chip shortage, which continues to affect industries from auto to consumer electronics.

“If anything, the semiconductor crisis has taught us that we need to have agility,” Parks said.

He added that moving more of the supply chain — including raw materials sourcing — to North America could help address some of the more painful realities of battery production, like human rights abuses in cobalt sourcing or environmental impacts.

“We think that the supply chain can be improved from what it is today, both from a security standpoint — a locational security, I’ll call that the North American approach — as well as environmental,” Parks said.

Stellantis, Mercedes-Benz invest in solid-state battery developer Factorial Energy

Factorial Energy, a startup working on solid-state batteries for electric vehicles, has added two more major automakers to its investor sheet: Mercedes-Benz and Stellantis, both of which plan to co-develop batteries in separate joint collaboration agreements.

Mercedes, a brand of Daimler AG, said it invested a “double-digit million dollar” amount in Factorial. Stellantis declined to specify its investment. The news comes scarcely a month after Factorial announced a separate investment and partnership deal with Hyundai and Kia, to co-develop and test battery tech in Hyundai EVs.

Many consider solid-state batteries to be the next forthcoming breakthrough in battery technology, not only for advantages in energy density but also safety. Liquid electrolyte solutions found in conventional batteries today are generally flammable, so solid-state batteries should pose less of a fire risk. Factorial says its technology, which includes a solid electrolyte material, increases range between 20% to 50%, relative to standard lithium-ion batteries.

The lure of a comparative battery advantage has proven irresistible to major automakers, who have poured billions into electrification and new startups that claim to be close to cracking the solid-state code. Factorial joins an increasingly competitive solid-state battery market, which until now has been populated chiefly by legacy battery makers like LG Chem, as well as new entrants like Quantumscape and Solid Power.

The latter two startups are also backed by major automakers. Quantumscape has received more than $300 million from Volkswagen, while Solid Power has landed backing from Ford and BMW. This latest news from Factorial – which has garnered backing from three major automakers since emerging from stealth in April – is a sign that a new horse has entered the race.

Our Next Energy closes $25M Series A for battery tech with backing from Bill Gates, BMW

Michigan-based startup Our Next Energy (ONE) has closed a $25 million Series A for tech that it says can double the range of EVs, as more and more startups take aim at surpassing the pitfalls of conventional lithium-ion batteries.

The 15-month-old company managed to attract major investors, including Bill Gates-founded Breakthrough Energy Ventures, which led the round. Assembly Ventures, BMW i Ventures (German automaker BMW’s venture fund), Singapore-based Flex and Volta Energy Technologies also participated.

ONE is developing a hybrid cell-to-pack system composed of two batteries: the Aries, a cobalt-free battery that the company says avoids fire risk from thermal runaway; and a battery range extender called the Gemini, which ONE estimates will be capable of a staggering 700-mile range on a single charge. The idea is that the Aries would be used for daily trips, while the Gemini could be used for the occasional longer trip. (ONE cites research on its website noting that 85% of vehicles are used at least once per year for a trip longer than 300 miles.)

It’s this hybrid approach that may allow ONE to succeed where others have failed. Key to the hybrid concept is in the chemistries: the Aries is a lithium-iron-phosphate (LFP) chemistry. This is significant because LFPs are an older, cheaper formula that’s conventionally viewed as less energy-dense than more powerful nickel-based battery chemistries. But ONE says its Aries battery pack has managed to increase range and reduce cost, all while avoiding the pitfalls of nickel-based batteries — namely, the reliance on scarce raw materials like nickel and cobalt.

ONE’s first customer, the identity of which the startup is not disclosing, will use the Aries as a replacement for a nickel-based pack, a company spokesperson said. If LFP batteries could be used as a drop-in replacement for nickel batteries, without the associated trade-offs in range and cost, it could be a game changer for the industry.

ONE CEO Mujeeb Ijaz. Image Credits: Our Next Energy

LFP batteries also tend to have a lower fire risk than nickel and cobalt chemistries, because they are more stable and require a much higher temperature to reach thermal runaway — a chain reaction that occurs when a battery cell is unable to discharge heat at the rate it’s being generated.

ONE was founded by Mujeeb Ijaz, a battery tech veteran who previously led the team at Ford developing its first hybrid fuel cell powertrain, before being poached from battery manufacturer A123 Systems to work on Apple’s mysterious car project. He founded ONE just one month after leaving the consumer tech giant.

The Aries will go into production at the end of 2022. ONE plans to manufacture the batteries in Michigan with a contract manufacturing partner, and the funding will be used to accelerate product development, Ijaz said in a statement.

Battery Resourcers raises $70M to grow closed-loop battery supply chain

Battery Resourcers, a startup that’s developing a closed-loop approach to lithium-ion battery materials, has closed $70 million in mid-round funding to scale its commercial operations across two continents.

The company, which is based in Worcester, Massachusetts, doesn’t just recycle batteries. It’s also engineered a process to turn that recycled material back into critical battery materials – specifically, nickel-manganese-cobalt cathodes and purified graphite, a material used in anodes. It intends to sell those materials right back to the battery manufacturer.

This latest round saw participation from new investor Hitachi Ventures, as well as existing investors Orbia Ventures, Jaguar Land Rover’s InMotion Ventures, Doral Energy, At One Ventures, TDK Ventures and Trumpf Ventures.

Battery Resources secured a $20 million Series B a little over five months ago. That funding was to accelerate the launch of the startup’s first commercial-scale facility, which will be able to process 10,000 tons of batteries per year. CEO Michael O’Kronley told TechCrunch in a recent interview that that plant will open in the first quarter of 2022, though the company has not yet announced where it will be located in the U.S.

With this new funding, the company will be opening two additional commercial-scale sites in Europe, which will be operational by the end of 2022. In all, Battery Resourcers aims to have 30,000 tons of recycling capacity by the end of next year across its three commercial-scale locations. Cathode material production will be added to these sites in the following year.

There are a number of reasons to look abroad, O’Kronley said, not least because Battery Resourcers anticipates Europe being an even larger market than the U.S.

“Europe has the same concerns the U.S. does about retaining critical battery materials in the supply chain,” he said, adding that European lawmakers currently mandate battery recycling on the part of OEMs, and will likely mandate the use of recycled materials in batteries. “Couple that with the amount and the number of gigafactories that have been announced in Europe, relative to the US, most people believe, including Battery Resourcers, we believe the European market will be larger than the North American market.”

CEO Michael O’Kronley Image Credits: Battery Resourcers (opens in a new window)

The lion’s share of critical battery materials are currently produced in Asia, but O’Kronley said the industry is shifting from being highly concentrated in specific locations to a more global operation.

“Whether it’s the Asian company that is moving to Europe or North America, or new entrants that are coming in and supplying Europe and North America – we’re a new entrant coming in supplying these regions – the battery material supply chain will absolutely have to be localized,” he said. “We’re part of that.”

O’Kronley added that the company has been in talks with a number of OEMs and consumer electronics companies, but declined to specify any details. However, he did say that vehicle OEMs and battery manufacturers have already taken the company’s cathode material and built it into batteries for testing and to compare it to “virgin” cathodes.

“It’s Battery Resourcers’ belief that long term, you need a vertically integrated supply chain, and to be able to extract the highest amount of value out of these spent batteries,” O’Kronley said. “We’re moving upstream in making these engineering materials that go right back into a new battery.”