Why some VCs are taking notes from a niche battery group

Intercalation Station is where all the cool battery kids hang out.

The newsletter, co-founded in 2020 by battery scientists Nicholas Yiu and Andrew Wang, goes deep on the research and business developments in the battery and energy storage spaces. Over the last three years, it has grown to ~4,000 readers—members of the industry, academics, investors—and has become a community constantly discussing and comparing notes on the future of this foundational tech.

Now, Yiu and Wang are looking to tap into that expert audience to help fund promising battery startups. The pair announced their angel investment network, Intercalation Collective, in mid-December.

Innovation in batteries, as in many essential areas of climate tech, requires extensive scientific knowledge. Yiu wrote that this network will “share companies we believe are game-changers” in the space and aims to “remove barriers to angel investing” for individuals who want to back those companies by accepting investments as small as £1,000 (~$1,200). But beyond helping to fund battery startups in their earliest stages, the group could serve another function, according to the VCs we spoke with, some of whom advised Yiu and Wang on creating the group: It could help less-specialized but deeper-pocketed VC firms build their knowledge of the complex battery landscape.

In general, specialized angel investors tend to have deeper knowledge of everything happening in a specific space, which can be seen as a potential investing advantage and also create an opportunity for more general investors to learn from them, Ryan Panchadsaram, technical advisor to John Doerr at Kleiner Perkins, told us in an email.

“Great investors immerse themselves in the topics they care about. They participate in these communities. They contribute and learn from them,” he said.

Some larger climate-tech investors like Voyager, which raised a $100 million fund for early-stage startups focused on decarbonization last April, have turned to the Intercalation community as a resource on batteries, Sarah Sclarsic, co-founder and managing partner at investment firm Voyager, told us.

“We really appreciate and value the perspective that Nick and his colleagues bring as experts in battery chemistry, in manufacturing, and their ability to both speak to the current state of the industry and look years—even a decade—ahead at what’s coming down the line,” Sclarsic said. “That certainly does positively influence our ability to make great decisions as investors, and I do know that other other funds feel similarly.”

Cell community

Electrifying transportation and adding renewable energy to the grid will mean more batteries, for things like EVs and stationary storage applications, will be needed each year. Demand for batteries is expected to grow by about 30% annually, reaching nearly 4,500 Gwh by 2030, according to McKinsey estimates.

But fundraising can be tricky in the earliest stages, and getting new chemistries from the lab to the market can often take five to 10 years. One benefit that a group like Intercalation Collective could have is a sort of crowdsourced due diligence from its members, who understand the risks involved in developing battery tech, James Frith, principal at Volta Energy Technologies, told Emerging Tech Brew.

“I think there [are] a lot of potential benefits that this type of model could bring to the industry in terms of thinking further down the time horizon,” he said. “It is really a capital-intensive and time-intensive industry—investing in the battery space. So I think the more of these focused early-stage investors we have, the more early-stage companies are going to kind of make it through to their first and potentially second funding round.”

Input from experts early on could also help reduce the chance that investors with less battery knowledge get “burned” by potentially risky startups, Frith said.

“If you have investors who don’t understand the space…and they’re putting their money into ventures that are not going to work out for various reasons, that’s going to put them off the industry. And in the long run, that’s going to be damaging,” he said. “If you can have educated seed-stage investors who know the risks that they’re taking…it means that if things do go south, that they’re not going to feel that they have been misled on their investment.”