EV Batteries in the Motor City

Our Next Energy, and the search for a better mousetrap

“Thank u, next” - Noted climate scientist Ariana Grande, who is a real person that we were definitely aware of before googling for thematically appropriate memes. 

We at Coral are fans of infrastructure companies and what we call “keystone problems;” ie, companies that, if they succeed, will enable larger-scale vertical and economic transformation. Among the highest-profile such problems is that of EV batteries, which, despite the efforts of many remarkably intelligent people, simply do not have current feature parity with ICE engines. 

Before we get burned at the altar of Elon, a word here; We love EVs, and are planning to own two of them within the year. It is also true that charging a top-end Tesla Model S at a fast-charge station takes 45-60 minutes from 20-80% power, that such a vehicle gets approximately 400 miles of range under perfect conditions (temperate, flat & fast roads), that many parts of the country lack the density of chargers to ensure convenience at any distance, and that chargers get broken a lot. We wish deeply that this was not true, but EVs are a worse consumer experience than ICE today. 

Fortunately, we are not alone in this assessment, and many climate-positive companies are working on aspects of the EV problem (we say “climate-positive” because these companies largely do not brand themselves as climate-centric, and we deeply respect their for-profit focus). Among the most interesting of these enterprises, and the keystone of our focus on Detroit for this month, is Our Next Energy, the battery behemoth based in Detroit. 

What is it?

The next big thing in batteries, maybe. ONE, founded by former Ford & Apple scientist Mujeeb Ijaz, is a 3 year old startup that has raised a cool $1.6bn (ed; holy shit!), in order to produce battery packs based on a Lithium-Iron-Phosphate technology for EVs and grid interconnection. Think of it like Solar City, except with better tech and not designed to keep Elon’s little brother gainfully employed (sorry, we had to). 

Why LFP? More about this in an upcoming piece, but the company claims that it can deliver superior energy density to traditional battery chemistry, translating to double the range of EVs, while being significantly less prone to battery fires, and made from cheaper and more readily available materials. 

It’s a huge keystone problem, assuming the company can pull it off. 

So like, can they do it?

We are cautiously optimistic. Ijaz is a serious scientist and accomplished executive, and reeks of founder / market fit to solve this particular problem. The company has delivered early versions of their Aries product to customers for testing, is scaling production facilities to in-house critical activities, has great investors, and appears to be thinking long term. 

This isn’t a 15-years-out pseudo-grift like Commonwealth Fusion, or a right-now grift like the scooter companies or, god forbid, Running Tide. We like that BMW has invested serious capital in the company, and that their Series B was led by Fifth Wall, whom we consider some of the most diligent VCs in the space. 

ONE has also been precise about designing their GTM wedges to create genuine consumer value; A cheaper, longer-range, safer battery pack is not a difficult thing to sell. We also love that ONE started and is staying in Michigan. We get the sense that Ijaz is spending much of his time talking to the legacy automakers, all of whom are his neighbors, about the product lines they need to develop in order to take on the Tesla Goliath. Ford, his old employer, is seeing a declining market position, and still has $170bn in annual revenue to invest in catching back up. A deal for ONE to provide the batteries underpinning the next-gen MachE, for example, would make the company a unicorn and transformative climate business overnight. We hope this happens. 

Look, it is certainly true that no 3 year old company with minimal revenue is really worth $1.2bn or should be able to raise as much as ONE has. But investment is a game of asymmetric bets, and this one has a chance of working at massive scale. We approve.