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A silicon wafer, a thin material essential for manufacturing semiconductors, at a chip-packaging facility in Santa Clara, Calif.
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Pity Donald Trump. He spent four years in office tearing up trade agreements and ranting about rewriting old ones, all to little avail. Now, a key U.S. climate law is doing more to change the dynamics of international trade than any blustering and bullying ever did.
The Inflation Reduction Act has been hailed as a win for domestic producers of minerals that are critical to electric vehicles and other hallmarks of the decarbonized economy. The most impactful so far have been the provisions that require a minimum amount of domestic sourcing and processing to be eligible for the $7,500 EV tax credit. That language alone has spurred tens of billions of dollars of investment in the U.S. battery supply chain.
But there’s no way the U.S. can produce all that’s needed — the country simply doesn’t have enough reserves, while China has a lock on many parts of the market. So the law also includes a handy loophole qualifying minerals from countries with which the U.S. has a free trade agreement. The law already qualified “North American” suppliers, and the free trade language opens the door further.
Late on Monday, the door opened a little wider as the U.S. and Japan announced a trade deal encompassing cobalt, graphite, lithium, manganese and nickel, all minerals that are key components of EV batteries. The agreement opens up both markets to new supplies of the minerals, allowing battery manufacturers and automakers to benefit from the IRA’s minerals requirement.
For now, Japan is the only country to successfully negotiate a new agreement in the wake of the IRA, but it probably won’t be the only one. The EU, which has made no secret about its displeasure with the new law, is also in talks with the U.S.
In the seven months or so since the IRA was passed, the global landscape for critical minerals and battery manufacturing has changed rapidly, and a potentially steady stream of new free trade agreements promises to keep things fluid. For founders and investors alike, that injects a fresh dose of uncertainty.
Why startups should care about geopolitical repercussions of US climate law by Tim De Chant originally published on TechCrunch
The current battery boom might feel familiar to those who lived through the clean tech bubble that burst a decade ago, with an awful lot of money being invested in what are still nascent markets.
But certainly they’re bigger this time around: The number of electric vehicles on the road has more than doubled in the last seven years, for example, and demand doesn’t seem to be slowing. Market share for EVs has been growing even as the overall automotive market has softened in recent years.
It’s been enough to convince automakers and battery companies to commit nearly $300 billion to building a raft of gigafactories around the world, including more than $38 billion here in the U.S. alone. That confidence has cascaded through the market, driving waves of investment that have resulted in over $42 billion in venture and private equity capital committed to battery research, development, commercialization and manufacturing.
For battery startups like Michigan-based Our Next Energy, betting it all on the automotive market, which is notoriously fickle, can be a risky proposition. Demand for cars and trucks often craters when the economy tumbles. EV sales have been historically tied to an even more volatile indicator: gas prices. As COVID showed, just a few ripples in the automotive supply chain can send shockwaves through the market. The automotive market has a lot of volume, sure, but that doesn’t make up for the fact that margins are typically thin.
As investments go, the automotive sector doesn’t seem like a great place to make massive, long-term bets like the kind required for gigafactories.
And yet the money keeps flowing, and companies like ONE and its investors are increasingly confident that this round of climate tech investments will turn out very differently from the last. What’s behind that bravado?
Why so many gigafactories? It’s not just EVs driving demand by Tim De Chant originally published on TechCrunch
Nobody starts a hardware company with the express goal of destroying as much of the planet as they possibly can. Walking around the startup hall at CES, however, I noticed that — with a few notable exceptions — there was painfully little attention given to material choice, repairability, ease of disassembly and considerations around the end of usable life.
It’s embarrassing, really — but as someone who used to run a hardware startup, I know it can be hard to prioritize when you have limited time and resources. However, if you can’t make planet-friendly choices as the founder of a startup, when the buck literally stops with you, when can you?
In an effort to figure out how you can create greener hardware, we spoke with Lauryn Menard, a professor at the California College of the Arts, where she teaches the future of biodesign. She’s also an adviser to Women in Design SF and the co-founder and creative director at PROWL Studio, an Oakland, California-based design and material futures consultancy focusing on sustainable solutions.
“As a startup, you have choices. The thing is, it’s such a capitalistic society we live in, and a lot of decisions are made based on time and money,” Menard explained. The startups want to think about sustainability, but they are moving at breakneck speed and trying to get a product to market as soon as possible. “The startups need to hit their target price point and all that good stuff.”
“You don’t have to adopt a new bioplastic, you can instead choose something that already exists: Not everything has to be made from a new freaking material!” Lauryn Menard
But there are some big things moving out there in the market. Consumer demands are shifting, and climate pledges, circularity strategies and environmental questions are all bubbling to the surface. It’s hard to say whether enough customers are making purchasing decisions based on a company’s green credentials to move the needle meaningfully, but product development cycles can take years, and who knows what the landscape looks like by the time your product makes it to market? To some companies, it might make sense to take the risk, but other founders are starting to think differently about how products are made.
“If a startup is being run by solely engineers, that can be problematic: Engineers tend to be worried [about] making sure they’re getting to the finish line. They put all of their energy into making something function and are probably leaning toward materials, ways of making and manufacturing processes that they’re already familiar with,” Menard explained. “What we’ve seen [be] really helpful is working with a design studio that specializes in more sustainable ways of thinking and healthier materials. Or partnering with someone like a materials library, so they’ve already started thinking about the functionality of the materials by the time they are making a prototype. Just in the same way that it takes a really long time to get an MVP product that works and looks the way you want, it sometimes takes a long time to put a new material into an existing manufacturing process.”
One of the big challenges we have with creating more sustainable products is that we are often replacing plastics with something else. The problem is that plastics are deeply embedded in workflows already. Product designers love how predictable, easy to design and repeatable plastic is.
There also isn’t an obvious one-for-one replacement for plastic; depending on the use case and material properties you need, you may have to replace it with wool, paper, wood, plant pulp, carbon fiber, seaweed, hemp, mycelium, lab-grown leather or any number of other materials that are available.
Here’s what founders and product designers can do to think about sustainability and product development in a more conscious way.
Startups, here’s how you can make hardware without ruining the planet by Haje Jan Kamps originally published on TechCrunch
Like nearly every other sector, deep tech faced significant headwinds in 2022. As interest rates skyrocketed, deep tech deals, which inherently take more capital than other kinds of software businesses, became less attractive to many VCs and their LPs than lower-risk investments.
For instance, even though quantum computing suddenly became popular in the public markets as D-Wave, Rigetti and IonQ listed in the last year, private investment declined significantly — the sector received just over $600 million in venture capital in 2022, down from $800 million in 2021, according to Crunchbase.
Seasoned investors and operators in different segments of deep tech have been adapting to these changes in real time as the cheap money days dwindle in the rearview. For instance, in this environment, space tech startups would never have been able to raise the kind of money they did in 2021 to be able to deploy the technologies they’re working on today. As Delian Asparouhov, a principal at Founders Fund and the founder of Varda Space Industries, shared last month, it would be impossible to raise the $42 million his startup did in 2021 for its space factory “idea” in today’s market climate.
While some investors will continue to sit on the sidelines as we kick off 2023, it’s important to note that many funds are still sitting on amounts of dry powder like they’ve never had before. That doesn’t mean they or their LPs will be in a rush to deploy that capital, but money will be available to startups that can demonstrate current demand and are realistic about their valuations. As it becomes increasingly difficult to realize big exits in the years ahead, the technologies within deep tech that are transforming entire industries offer some of the only paths to “10x exits.”
These are positive signs for deep tech founders preparing to raise money this year. Another positive note is that some of the logic driving VCs to stay away from deep tech startups in down markets may be unfounded. Our team recently analyzed recent deep tech unicorns to understand how much money it took for them to get to the $1 billion mark. The results reinforced what we knew from experience: Deep tech startups’ capital and time requirements are on par with companies in other sectors. In fact, the median deep tech startup took $115 million and 5.2 years to become a unicorn.
While the space economy will continue to provide numerous opportunities to invest in atoms, there will also be an opportunity to invest in the bits moving atoms across our skies.
With that as a backdrop, let’s look at a few areas where deep tech will find interest from investors in 2023.
While Delian noted correctly that funding for long-term “moon shots” will be tough to find in the current market, I still believe investors will look for startups that are closer to commercialization in the sector. To date, 99% of the total investment in the space tech market has gone to the satellite and launch industries. Now is the time to focus on moving objects around in space rather than just getting them there.
For instance, investors are increasingly interested in solutions that tackle astrodynamics or propulsion to guide the motion of satellites and other spacecraft — for example, AI startups working on ways to simulate scenarios and generate maneuver plans for operators so they can avoid space collisions. Investors are also interested in future machine learning and neural networks use cases for astrodynamics, such as orbit predictions and spacecraft flight modeling.
Space missions also call for hardened software and hardware. As we look toward edge solutions for space-bound vehicles and objects, startups that can create radiation-safe applications will be in demand. So while the space economy will continue to provide numerous opportunities to invest in atoms, there will also be an opportunity to invest in the bits moving atoms across our skies.
Software alone will never solve the multitude of issues contributing to our climate crisis. Hardware solutions and engineering-led innovations in deep tech are needed to solve our most significant climate challenges.
A VC’s perspective on deep tech fundraising in Q1 2023 by Ram Iyer originally published on TechCrunch
Among Woodland, the art and design exhibition at Teatro dei Ragazzi in Turin, was Serena Confalonieri’s site-specific installation, Volée. The project, which was on display during the Nitto ATP Finals tennis tournament, was created for LEA (Lead Exclusive Area), an a space for welcoming international guests at the event. The concept – that nature pre-exists the work of man on Earth – was simple enough, but the execution appears to be anything but. The ultimate goal of the project was to offer visitors the chance to experience a return to nature. A place where humans are free from the effects of civilization and can live a life guided by instincts.
Volée brought this concept to life in LEA’s foyer space. The floral composition, created using both man-made and natural materials, is an explosion of color and texture. Confalonieri used polyurethane panels for the reception, benches, and tables, all milled with a vertical motif reminiscent of classic columns. Meanwhile, dried plants and flowers sprout from these elements in shades of lilac, purple, orange, yellow, and white. This vegetation takes over the polyurethane-built architecture of the installation, creating a sense of being somewhere between fiction and reality.
In its final form, Confalonieri’s Volée was full of lightness and grace. its soft, curved shapes alive and harmonious – just like the movements of the tennis players on the court.
To learn more visit serenaconfalonieri.com.
Photography by Serene Eller.
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