KP alum cautions that battery tech may be overhyped - Axios

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Data source: Data: PitchBook; Chart: Axios Visuals

"It feels a lot like 2008," Energize Ventures founding partner John Tough tells Axios when asked about the battery tech investment climate.

Why it matters: Comparing any market to 2008 conjures bad memories, and those who lived through Cleantech 1.0 have particular night terrors.

What's happening: The mad rush to invest in battery technology and other hard tech areas within climate tech is causing investors to recall the hype cycle and subsequent bust in clean energy in the early 2000s.

Battery tech is an area within climate tech that has received much fanfare as global bottlenecks around critical 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 protect against the variability associated with renewable energy sources.

By the numbers: The sharp increase in deal count and volume underscores the sense of fervor.

In 2012, the U.S. saw 237 VC deals in the climate hard tech space. Then in 2017 there were 221, but in 2021 and 2022 there were 386 and 377 deals, respectively.
Dollar volume followed a similar path, going from $2.6 billion in 2012 to $1.6 billion in 2017 and then spiking to $16.5 billion in 2021 and $9 billion in 2022.

Flashback: In 2008, investors were backing solar and wind startups that relied on expensive tech subsidized with federal funding.

However, the timelines on those investments didn't match up to the software multiples some investors were used to.

Yes, but: Batteries are not software, and often require knowledge of complex chemistry.

What they're saying: "Investors will learn how hard it is to invest in chemistry," Energize Ventures founding partner John Tough tells Axios. Energize Ventures invests explicitly in software, Tough says.

"It feels a lot like 2008," Tough says of the investment environment. Tough previously invested in sustainability startups at Kleiner Perkins in that time period.

Bottom line: Battery technology is a critical part of the energy transition, and investors are scrambling to pick the industry's next breakthrough discovery. The wrong bet, however, threatens to set the entire industry back.

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