A decade ago, the recipe for an electric car battery startup included several hundred million dollars in venture capital and a nice big factory.
That growth strategy collided with the complexity and prolonged timelines required to take hardware breakthroughs to market. The ensuing carnage claimed such rising stars as A123 and Envia. Advanced battery startups targeting the grid storage market also have floundered in recent years.
Equipped with that history and spurred by the booming demand for electric vehicles, a new generation of hard-tech startups has pursued an alternative approach. Some companies are eschewing big VC raises in favor of strategic partnerships with companies throughout the value chain of electric vehicle production, using the expertise of incumbents to grow rather than going it alone.
Automakers, battery materials suppliers and related equipment manufacturers all face a risk of being left behind by breakthrough battery improvements, while they stand to gain handsomely if they pick the right innovation.
These incumbents know what it takes to put a battery cell design into mass deployment; they can guide a younger partner on cost and performance targets needed to penetrate the auto manufacturing space.
Solid-state battery startup Solid Power provided a case study of this newfangled strategy when it closed a $20 million financing round last month.
Solid-state batteries promise better energy density and safety than current lithium-ion batteries; if and when they enter mass production, they could reshape the global electric vehicle industry, so heavyweights like Toyota, BMW and Volkswagen are paying close attention.
Getting new battery tech to market is an arduous feat, though, so Solid Power has leaned on the scale and expertise of partners to ease some of that burden.
“We’re constantly trying to minimize risk across the board in everything we do,” said CEO Doug Campbell.
Here are the key choices this company made to avoid the mistakes of battery startups past.
Stay capital-light
For all the gravity of its task, Solid Power survived six years before raising a Series A. The company kept itself afloat with non-dilutive government grants, revenue from bespoke non-transportation battery products and money from joint development agreements.
That’s a different approach from solid-state competitor QuantumScape, which recently raised another $100 million and has been valued at more than $1 billion, despite still being early in its development phase.
After years on a tight budget, Solid Power needed more capital to build out its commercial-scale factory near Boulder, Colorado. Expected online in the first half of next year, it will be able to produce up to 1 megawatt-hour of cell capacity per month — nowhere near gigafactory scale, but a big step up from the current hand-built process.
“The objective is to prove out manufacturing feasibility at scale,” Campbell said, noting that the production line under construction is “almost identical” to the machinery that would be used at a much larger factory.
After that, he’d be happy letting others manufacture his company's IP, through a joint venture or license agreement.
“I would be [hesitant] to try to raise a billion dollars and stand up a gigafactory in Colorado,” he noted.
Partners in high places
The names in the $20 million round matter more than the money itself: Samsung, a top-tier lithium-ion battery manufacturer; Hyundai, an automaker getting into electric cars and second life batteries; and A123, the car battery specialist (and survivor of the original A123's bankruptcy proceedings).
They were joined by Volta, a newer fund dedicated to scaling technologies for the clean energy transition, backed by strategic investors in the space and a research relationship with Argonne National Lab. Volta brought in money from Hanon Systems, an automotive equipment supplier, as well as Albemarle, a major lithium supplier and strategic investor in Volta.
“If you have physical technology to scale, the best thing to do is partner with those who will ultimately buy and use the innovation, because they will drive you to the right endgame in your product’s performance and cost,” said Volta CEO Jeff Chamberlain, who spent a decade at Argonne helping translate battery breakthroughs into commercial deployments.
If Solid Power’s batteries perform as expected when production scales up, it will already have close ties with all the players needed to get the technology into cars.
Albemarle would know what specification of lithium to deliver, Samsung would know how to turn it into cells, Hanon would know what ancillary equipment will be needed to make it work, and the automakers will know how to insert it into their cars.
These investors don’t yet have formal agreements to work with Solid Power, but it’s not hard to imagine their familiarity with the company turning into a deeper relationship.
“We’ll look back and see more and more investments like this,” Chamberlain predicted.
Solid Power does have a formal working relationship with BMW, which includes shipments of solid-state cells for the automaker to test, and a pathway to getting them into BMW cars, assuming development works out.
“We’re seen as somewhat unusual in how collaborative we are,” Campbell said. “This industry at times can be very secretive and opaque.”
QuantumScape has both an investor relationship and a joint venture with VW, with the stated goal of building a solid-state production line by 2025. It’s not clear from the company’s minimal web presence if it has partnered with other stakeholders in the battery production supply chain.
Know your limits
As noted above, Solid Power isn’t interested in becoming a massive manufacturer; it will compete on its IP, not on its ability to capitalize and operate gigafactories.
The startup has taken a circumscribed approach elsewhere, too. Right now, it’s really just focused on its inorganic solid electrolyte.
“We’re a cell manufacturer out of necessity rather than choice,” Campbell said. “There’s not a market right now for just solid-state electrolytes.”
Campbell sources cathodes and lithium-metal anodes to wrap around the electrolyte, rather than competing on those components as well.
The scientists also worked to design a production technique that minimally differs from industry-standard lithium-ion production. The ceramic electrolyte materials are malleable enough to be produced with minor tweaks to conventional roll-to-roll machinery, Campbell said.
