Our Next Energy Inc., the Michigan battery startup founded by Apple Inc. veteran Mujeeb Ijaz, has raised $300 million to help fund the first phase of a battery cell plant it’s building in the state.
The fundraising values the company at $1.2 billion and was led by two new investors, real estate-focused venture firm Fifth Wall and Franklin Templeton. Temasek, Riverstone Holdings and Coatue also joined the round, as did existing investors BMW i Ventures, Volta Energy Technologies and Bill Gates’ Breakthrough Energy Ventures. The funding round includes a $62.5 million convertible note, which closed last year.
The current economic environment, with tech companies slashing jobs and rising interest rates snuffing out investors’ risk appetite, made it more difficult to secure financing, said Ijaz, who founded the company in 2020 after leaving Apple to move back to Michigan.
Our Next Energy, or ONE, was lucky to find investors who “could see past this interim period of uncertainty into the longer term certainty that electrification is here to stay,” he said in an interview.
The growth of the electric vehicle market has brought challenges for the auto industry, including a shortage of batteries and soaring prices for the raw materials used to make them such as nickel and cobalt, the latter of which is fraught with ethical issues. At the same time, President Joe Biden is pouring billions into building an EV supply chain in the US to reduce dependence on China as geopolitical tensions between the two countries rise.
ONE is betting it can address both those problems by becoming a full-fledged American battery maker that can compete with global rivals from Korea, Japan and China. Its key innovation is a battery pack design that can eke out higher ranges from lithium-iron-phosphate batteries — a cheaper, more stable, but less powerful chemistry than the nickel-based batteries used by most automakers today.
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The company, which has secured 10 supply deals so far, is developing two main battery products: one, based solely on lithium-iron-phosphate, or LFP batteries, is targeting primarily last-mile delivery and commercial vehicles. A second pack design for the passenger car market aims to alleviate drivers’ range anxiety by achieving about 600 miles of range on a single charge with a backup battery based on more energy-dense manganese and nickel chemistry.
The Novi, Michigan-based startup is building a $1.6 billion, 20 gigawatt hour cell factory in southeast Michigan that will make lithium-iron-phosphate batteries and eventually hire more than 2,100 people. It’s scheduled to start production in 2024 and reach full capacity in 2027.
The new funding will also allow ONE to unlock $220 million in cash grants from the state of Michigan to help buy equipment for the plant.
Beyond commercial and passenger vehicles, the startup is also aiming to make stationary batteries for the electrical grid. “This was an auto-related use case,” said Baris Guzel, a partner at BMW i Ventures in San Francisco. “Now it’s becoming much bigger.”
Taking in new funding and building a factory, even as other tech companies retrench, will help the company gain scale and eventually go public, Ijaz said. “We’ll come out of this downturn in economics with a factory that we didn’t have before, at the same time that demand is rising,” he said.
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