For the better For part of the decade, venture capital firms and growth funds poured nearly $42 billion into battery technology startups, closing nearly 1,700 deals, according to analysis by PitchBook and TechCrunch. Moreover, about 75% of investments during this period were made only in the last two years.
Venture capital firms are not uncommon in the world of batteries. Five years ago, they were reliably closing 50 to 60 deals per quarter, totaling several hundred million dollars. The tide began to turn towards the end of 2020 with over $2 billion invested in several quarters over the last two years and the couple had over $3 billion. The number of deals has also increased, nearly doubling in 2021.
But a more remarkable story has to do with growth equity. In the past, private equity (PE) deals in the battery sector have been sporadic. However, they blossomed last year, with capital growth companies investing $13.4 billion in areas such as battery materials, manufacturers and recyclers.
The presence of PE reflects changes in both the industry and investor sentiment. Batteries are generally considered a high-risk, high-yield investment; what venture capital is for. But it’s also not very suitable for venture capital – the R&D process for batteries can be exceptionally long, often exceeding the usual five to ten years for venture capital to collect profits. And if it’s hard for venture capitalists to digest the risks involved in launching batteries, it’s even harder to swallow the pill for capital growth.
“Too much money” may explain the size of some of these bets, but it doesn’t explain their existence.
So what has changed? There are many reasons why both venture capital and growth stocks are sinking into accumulators. Let’s dig.
First, there is a lot of money in the economy waiting to be injected, and this may push some funds into territory they have not previously explored. Such a move might make sense for venture capitalists who are used to seeking out and evaluating risky technology bets, but not for growth capital.
“Too much money” may explain the size of some of these bets, but it doesn’t explain their existence. Rather, it is more likely that VCs and PEs have sensed that the world is changing and are adjusting their strategies accordingly.
Governments around the world have begun setting dates for the end of fossil fuel vehicles. Countries across Europe began announcing bans in the late 2010s. Norway will stop selling fossil fuel and light commercial vehicles by 2025. The Netherlands, Ireland, Sweden and Slovenia will follow suit with passenger cars in 2030, Denmark and the UK in 2035 and France in 2040.
Credit: techcrunch.com /