“It feels a lot like 2008,” said John Tough, founding partner at Energize Ventures Say Axios When asked about the battery technology investment environment.
Why it matters: Comparing any market to 2008 brings back unpleasant memories, and those who lived through Cleantech 1.0 had particular night terrors.
what happened: The frantic investment in battery technology and other hard technology areas in climate technology has investors reminiscing about the hype cycle and subsequent bust in clean energy in the early 2000s.
- Battery technology is one area of climate technology that has received a lot of attention as global bottlenecks around key materials limit the supply of lithium-ion batteries.
- At the same time, everyone from grid operators to EV owners is looking to add energy storage to prevent the variability associated with renewables.
By numbers: A sharp increase in the number and volume of deals underscores the enthusiasm.
- In 2012, there were 237 venture capital deals in the US in climate hard tech. Then there were 221 deals in 2017, but 386 deals in 2021 and 377 deals in 2022.
- Dollar volume followed a similar path, increasing from $2.6 billion in 2012 to $1.6 billion in 2017 before surging to $16.5 billion in 2021 and $9 billion in 2022.
flashback: In 2008, investors backed solar and wind start-ups that relied on expensive technology subsidized by federal funding.
- However, the timeline for these investments doesn’t match the software multiples some investors are used to.
Yes, but: Batteries are not software and often require sophisticated knowledge of chemistry.
What are they saying: “Investors will learn how difficult it is to invest in chemistry,” said John Tough, founding partner, Energize Ventures Say Axios. Energize Ventures is explicitly investing in software, Tough said.
- “It feels a lot like 2008,” Tuf said of the investment climate. During this time, Tough has invested in Kleiner Perkins’ sustainability startups.
Bottom line: Battery technology is a key part of the energy transition, and investors are racing to pick the industry’s next breakthrough discovery. However, the wrong bet could set the industry back.