Corporate investments in energy-focused startups rose 42% in the 2021, from 127 rounds in 2020 to 181 by the end of 2021. The estimated total dollars in those rounds increased four times over from $3.25bn in 2020 to $13.3bn last year.
That pace has not subsided in 2022 despite a bearish investment market overall. By the end of August this year we had already tracked 184 rounds (slightly more than in all of 2021), worth an estimated total of $12.82bn. Valuations of such enterprises appear to be still on the rise despite a prevalent risk-off attitude across asset classes. The other possibility is that many energy startups have simply reached the point of raising later stage rounds at higher valuations.
In the full energy report:
Energy deals continue to boom despite market downturn
Value of corporate-backed energy deals quadruples
Energy funds are back in vogue
Wave of job moves amid energy bull market
Funding spikes for university energy spinouts
PitchBook’s data on all VC-backed deals in energy and climate tech supports that theory. It suggests an increase in later-stage deals from 29% in 2020 to 33% in 2021 and 2022.
Clearly, the world is in a supply crunch for energy and natural resources at moment, which seems to have spurred much of the investment into energy startups. The big question mark remains whether that bullishness will be sustained if major world economies enter into a recession. A recession would lead to a significant drop in aggregate demand, including for energy. All of this remains yet to be seen.
Longer-term, however, the major drivers of innovation in the energy space – decarbonisation and electrification are here to stay, as the world grinds toward net zero.
The most active investors in emerging businesses from the energy space in the past year were oil and gas major Chevron, energy provider Constellation Energy and Shell. In the top deals, though, we saw a number of vehicle makers and diversified industrials increasingly active, especially in energy storage deals. Their interest in the energy and climate tech ecosystem is understandable and almost expected.
Swedish EV-focused lithium-ion battery developer raised $1.1bn of funding in the form of a convertible note, backed by carmaker Volkswagen and Goldman Sachs. Northvolth has developed lithium-ion battery for electric vehicles, and is building a number of factories across Europe.
Svolt Energy Technology, a China-based battery technology developer spun out of carmaker Great Wall Motor, closed a RMB6bn ($943m) series B-plus round featuring multiple corporates, including telecoms group China Mobile and insurance providers PICC Group and Taikang Life Insurance. Svolt is developing energy storage and related products including battery materials, cells, modules, packs and battery management systems.
US-based nuclear technology developer TerraPower raised $750m venture funding led by industrial manufacturer Gates and conglomerate SK Group, among other investors. Terra has developed a technology designed to provide an affordable, secure and environmentally-friendly form of nuclear energy. The company claims its technology to improve the reliability of nuclear plants. It intends to use the funds to develop small-scale nuclear reactors.
Carmaker Porsche provided $100m for Group14, a US-based developer of a silicon-carbon system for use in lithium-silicon batteries, in a move signalling the automotive industry’s ongoing shift toward electric vehicles (EVs). Porsche led the $400m series C round. Founded in 2015 in the state of Washington, Group14 is building a silicon-carbon powder system designed to substitute or improve graphite anodes that are widely used in EV batteries. The company additionally aims to electrify other industries encompassing medical, consumer and commercial fields.
US-based clean computing technology provider Crusoe Energy Systems secured $350m in series C equity funding from investors including conglomerate and principal trading firm DRW alongside $155m in debt financing. Founded in 2018, Crusoe uses waste gas, which would otherwise be burned at the well site, to power a network of data centres and minimise the use of new energy. It will use the funding to develop large-scale Bitcoin mining and cloud computing infrastructure while growing its team.
