Battery Boot Our Next Energy announced this morning that it has closed a massive $300 million Series B in a bid to get its $1.6 billion gigafactory up and running.
The new round values the company at $1.2 billion post-money, marking a stunning increase for the two-and-a-half-year-old company, which closed a $25 million Series A in October 2021 and a $65 million Series A1 in March 2022.
Founded by Mujeeb Ijaz – a veteran of Ford, A123 Systems and Apple’s automotive efforts – A has focused its efforts on finding low cost, highly available materials for its battery chemistry. The gigafactory in question will be pumping out lithium-iron-phosphate cells, better known as LFP.
Ijaz told businessupdates.org that the first 2 gigawatt hours of capacity at the Michigan plant will come online late next year and the remaining 18 gigawatt hours will be added in stages over the next three years.
The new round was led by Fifth Wall and Franklin Templeton, and was joined by investors in growth stocks Temasek, Riverstone Holdings and Coatue; venture investors AI Capital Partners and Sente Ventures; and ONE’s Series A investors, including Breakthrough Energy Ventures, Assembly Ventures, BMW i Ventures and Volta Energy Technologies. Also participating in the round are two unnamed strategic investors, “a manufacturer of EV technology solutions and a provider of renewable energy,” the company said.
The addition of Franklin Templeton is notable because it represents a shift from straight venture to inclusive growth equity. The investment will give the company a seat on the board and can become a source of debt for the purchases of ONE equipment. “We actually see that as the start of a long-term relationship that will go beyond Series B to Series C and possibly when we go public,” said Ijaz.
ONE’s move to large-scale manufacturing comes as the U.S. battery industry is revitalized by the Inflation Reduction Act, which provides substantial incentives for companies to develop domestic supply chains and manufacturing. As a result, US battery startups are beginning to embrace their role not only as R&D stores licensing their technology, but also as manufacturers competing with largely Asian-based giants such as LG Energy Solution, CATL and SK Innovation.
While ONE has received significant government support, including $220 million in grants from the state of Michigan, the decision to build an LFP gigafactory is not without risks. Although LFP was invented in the US, most of its production today takes place in China.
That’s partly because pioneering battery company A123 Systems bet big on chemistry only to see the market for its cells evaporate. That led to the company’s bankruptcy, where it was bought for a song by a major Chinese auto parts company. Chinese companies also stepped in and bought the rights to many LFP-related patents, several of which only expired last year.
After the successful launch of the Tesla Model S, LFP cells failed to deliver the range consumers expected and fell out of favor in the US and Europe. In the past decade, Chinese companies have developed huge factories that can produce cells at low prices.
In some ways, ONE’s gigafactory business mirrors that of A123, and that story didn’t end well. I asked Ijaz, who was an executive at the company during the rise and after the bankruptcy sale, if he thought things would be different this time.
“I thought about this a lot when I had that experience up close,” he said. “I think there are four differences.”
