Navigant Research Blog

How to Build a Successful Battery Startup

Sam Jaffe — May 5, 2014

In the course of doing the research for our upcoming report, Next Generation Advanced Batteries – and the accompanying webinar, “Beyond Lithium Ion” – we encountered more than three dozen battery-related startups.  Some produce battery materials, some produce battery components, and others are planning on becoming full-fledged battery manufacturers.  It would be unreasonable to expect all of them to survive.  In fact, given the nature of the battery industry, it would be a surprise if more than two or three of these companies are successful over the long term.

Based on our understanding of the advanced battery industry, here are our three top tips for how to shepherd your battery startup through the valley of death and into the gates of post-IPO paradise:

  • Forget about becoming a manufacturer: Making batteries is hard.  It has taken the battery heavyweights decades to perfect their combinatorial chemistries and manufacturing processes so that they can operate enormous factories at speeds that boggle the mind (in a modern cylindrical cell factory the cells literally shoot through the machinery so quickly that their forms are blurred to the naked eye), and at efficiencies that are very difficult for new companies to match.  It’s also nearly impossible to scale battery manufacturing upward.  Starting small and slowly building out the manufacturing infrastructure over time is not an effective strategy when your competitors (such as Tesla) are building 50-gigawatt-hour factories from scratch.  The best path to market for a battery startup is to align with an existing manufacturer and let it do the capital-intensive and laborious task of building assembly lines.
  • Understand manufacturing completely: If you’re not going to manufacture batteries, then why do you need to understand manufacturing?  Because the lithium ion (Li-ion) industry has become so large, with so much manufacturing infrastructure behind it, that a new battery chemistry that requires a complete retrofit to the factory is not going to succeed.  To become attractive, any new battery technology has to have a “drop-in manufacturing process,” meaning that it can be made in pre-existing factories with similar equipment with minimal changes.  If a whole new factory, or even an exotic piece of equipment, is required, that’s a black mark against your technology.  And to understand how to create a drop-in manufacturing process, you have to intimately grasp the details of the manufacturing process in real battery factories today.
  • Niche markets are the lily pads that can keep your company afloat: Navigant Research expects that by 2023, the world will buy 245 gigawatt-hours of rechargeable batteries, which is more than three times the size of the market today.  It’s tempting to claim that your battery will be the one that fills that market and replaces all other chemistries.  It probably won’t.  But specialization in the battery world is no longer a dirty word.  Many applications that were previously considered niche, such as defense applications, power tools, and wearable electronics, are now billion-dollar markets.  Each of these requires special form factors or cell specifications that may not be met by mass-produced Li-ion batteries, opening up key areas of opportunity.

Following all of these tips won’t guarantee success in the rapidly advancing battery industry.  But the companies that do make it to the major leagues will have established these recommendations as core business principles.  For more information, join us for our webinar, “Beyond Lithium Ion,” on Tuesday, May 6 at 2 p.m. EDT.  Click here to register.

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