Green Startups entered the lottery last year. Investors have been cautious since then, putting additional pressure on cash-rich companies to deliver better batteries, more durable materials and zippy electric cars.
According to Pitchbook, nearly 1,200 privately held green startups raised a record $45 billion last year, almost double the total from last year. Stability-affiliated companies publicly rallied as much as US stock markets, giving a once-capital-hungry industry a $90 billion war chest.
Whether or not investors make a profit, cash could offset the transition from fossil fuels if companies succeed for long-standing challenges in areas such as energy storage, sustainable products and raw material supply.
The scale of new liquidity could stall similar to the bust that ended the previous green investment boom. The bankruptcy of solar startup Solindra LLC and battery upstart A123 Systems Inc in early 2010 led to a year-long drought in funding.
“It’s the big difference this time around,” said Eli Aheto, who helped run the climate-focused fund at investment firm General Atlantic. “You have these businesses that are funded appropriately.”
Money was a game changer for many companies. Battery maker Frear Battery SA raised nearly $700 million last year, after pulling in nearly $30 million since its inception in 2018. Another battery company, Northvolt AB, raised $2.75 billion in a single fundraising round last year. Electric-vehicle maker Rivian Automotive Inc. raised nearly $14 billion in its biggest US initial public offering of stock since 2014.
“A lot of progress is being made,” said Robert Piconi, chief executive of Energy Vault Holdings Inc., an energy-storage startup based out of Los Angeles and based in Switzerland.
Energy Vault is one of several companies trying to store renewable energy when the sun doesn’t shine and the wind doesn’t blow. The company uses surplus renewable energy to lift 30-metric-ton blocks that look like elevator shafts, then lowers them when needed for energy production.
In the past six months, Energy Vault raised approximately $350 million and went public through a merger with a special-purpose acquisition company, or SPAC. Prior to this, it had raised around $60 million since its inception in 2017. It recently announced partnerships and investments from energy giant Saudi Arabian Oil Company—Aramco—and miner BHP Group Ltd. It expects to build its first commercial projects this year. ,
Companies like Energy Vault still have to prove that their technology works at scale and respond to skeptics who argue they are overvalued based on their current revenue. Shares of several publicly traded startups have fallen recently amid a selloff in riskier stocks. Investors say the changing market environment is slowing the pace of clean-energy fundraising and increasing pressure on companies.
Tom Jensen, CEO of Freyr, a Norwegian company working to make low-cost, durable batteries, said, “We have to build credibility. Freyr plans to open large battery factories in Norway, Finland and the US over the next several years.” Last year it raised about $700 million, which came from investors including miner Glencore Plc and a unit of private conglomerate Koch Industries Inc.
Swedish battery maker Northvolt was one of the biggest winners of the 2021 fundraising frenzy. It’s working to mass-produce the battery after it received $2.75 billion last summer from investors including Volkswagen AG, Goldman Sachs Asset Management and asset manager Bailey Gifford.
According to a Wall Street Journal analysis of SPAC Research data, about 40 companies associated with sustainability completed the SPAC merger in 2021, generating about $25 billion in cash led by electric-car startup Lucid Group Inc. Many of the SPAC deals that were announced in late 2021 are expected to close soon, raising billions more. Twenty-seven green companies went public through regular IPOs last year and raised more than $20 billion, a journal analysis by DeLogic data shows.
Cash floods often went to competitors in emerging industries, prompting some to try to outdo but run the risk of more failures. “The next few years are going to be an explosion” as companies ramp up their plans, said John Bissell, co-CEO of Origin Materials Inc., a startup that transforms plastics and other materials from wood chips and other plant-based products. working to make. ,
Origin, founded in 2008, raised nearly $500 million last year in its combination with SPAC. Two other companies working to create eco-friendly materials, Danimer Scientific Inc. and Footprint International, Holdco Inc., reached SPAC deals with investor commitments of nearly $1 billion over the past 18 months.
Never miss a story! Stay connected and informed with Mint.
download
Our App Now!!