For the better part of a decade, venture capital firms and venture capital funds have invested nearly $ 42 billion in battery technology companies in nearly 1,700 deals, according to an analysis by PitchBook and NaukriMela. In addition, about 75% of investments in that period occurred in the last two years alone.
Venture capital companies are not uncommon in the battery world. Five years ago, they reliably made between 50 and 60 bids per quarter, which would be worth hundreds of millions of dollars in total. That began to change in late 2020: several quarters of the past two years saw more than $ 2 billion invested and a couple had more than $ 3 billion. The number of offers has also increased, almost doubling in 2021.
But the most notable story has been growth equity. In the past, private equity (PE) operations in the battery sector have been sporadic. In the last year, however, they have flourished, and growth capital companies have sunk $ 13.4 billion in areas such as battery materials, manufacturers and recyclers.
PE’s presence reflects a change in both the industry and the way investors view it. Batteries are usually considered a high-risk, high-reward investment; the kind of things for which venture capital is made. But it also doesn’t fit perfectly into the VC: the battery R&D process can be exceptionally long, and often extends beyond the usual five- to 10-year term of venture capital for fundraising. And if the risks of battery starts are hard to bear for VCs, then it’s an even harder pill to swallow for growth equity.
“Too much money” may explain the size of some of these bets, but it does not explain their existence.
So what has changed? There are countless reasons why both venture capital and growth capital are plunging into batteries. Let’s dig.
THE MACRO CHANGES
On the one hand, there is a lot of money in the economy that is waiting to be invested, and that could be pushing some funds into territory that they had not previously explored. Such a move may make sense for VCs, who are used to looking for and evaluating risky bets based on technology, but not for growth equity.
“Too much money” may explain the size of some of these bets, but it does not explain their existence. On the contrary, it is more likely that VC and PE make sense that the world is changing and that they are adjusting their strategies accordingly.
Governments around the world have begun setting end dates for fossil fuel vehicles. Countries across Europe began announcing bans in the late 2010s. Norway will end sales of fossil fuel cars and light commercial vehicles in 2025. The Netherlands, Ireland, Sweden and Slovenia will follow suit with cars in 2030, as well. such as Denmark and the United Kingdom in 2035 and France in 2040.
https://naukrimela.in/batteries-have-become-vc-and-pes-most-electric-investment-opportunity-naukrimela/
Batteries have become VC and PE’s most electric investment opportunity
