Investors need time to embrace new tech
Cornish Lithium’s funding journey was longer and more winding than the company’s leaders anticipated.The company is trialing various technologies on hard rock as well as geothermal lithium. Its seed funding came from a high net worth individual, and was followed by crowdfunding by locals in Cornwall.
More recently, the business secured a $67mn funding package led by the UK Infrastructure Bank (UKIB) alongside The Energy & Minerals Group (EMG) and TechMet, to accelerate its progress toward the supply of battery-grade lithium compounds.
“As we de-risked the project, we went from high-risk investors and retail investors towards more institutional investors.”
Varshan Gokool, Chief Financial Officer
Having initially hoped to raise money through an OEM process, the company realized it was still at too early a stage: “We were definitely in that valley of death.” In addition, Inflation Reduction Act (IRA) incentives had drawn liquidity away from the UK and Europe and into the U.S.
“The one key lesson I would pass on is, don’t underestimate the length of time required,” Gokool says. “Because we’re dealing with novel technologies, it takes a lot of time to get investors comfortable.”
“Because we’re dealing with novel technologies, it takes a lot of time to get investors comfortable.”
Varshan Gokool, CFO, Cornish Lithium
Test detail gives investors confidence
Once contact with the ultimate investors was made, however, the process was relatively fast. For UKIB, the company represented an opportunity to grow a supply chain for lithium in the UK and feed into the EV sector, says Adam Howard, Director of Banking & Investments.
“The massive impact on the local economy in Cornwall is really important to us, in terms of the job growth,” he adds. “And crucial for us was bringing in EMG alongside us, who had been a big and significant investor in the resources sector.”
“The massive impact on the local economy in Cornwall is really important to us, in terms of the job growth.”
Adam Howard, Director of Banking & Investments, UK Infrastructure Bank
Gokool found UKIB and EMG responsive. Cornish Lithium’s detailed test work stood it in good stead at this point. The company was unable to answer some questions put to it by funders because the answers themselves required funding.
Gokool advises other companies: “Make sure your test work and everything you’ve done to date is rock solid, because then you’ll get investors who are a bit more understanding about totally ticking every checkbox on the due diligence piece.”
Deal based on values plus economics
For car subscription provider FINN, an alignment of values was key to its closing of a series C funding round of €100mn, led by sustainable investment platform Planet First Partners.
“The initial attraction was the scaling and the product market fit,” says Emil Mahjoub, Principal at Planet First Partners. “But from a macro perspective, we want to get more EVs on the road.” He saw FINN’s model as potentially useful in overcoming barriers to consumers’ EV adoption.
FINN’s track record was impressive, a reflection of the founders’ philosophy. “From the very first days, we very much focused on profitable unit economics,” says Maximillian Wühr, CEO. “As long as your operational business is performing well, and you have strong unit economics, there’s always interest from investors to back you, even as markets might not look as good as two or three years ago.”
EV demand and supply set to rebound
The mood in the EV industry has shifted significantly in recent months, Wühr notes, with lack of car availability and a loosening of the regulatory pressure that had driven market acceleration. However, he is highly optimistic about longer-term prospects. “What we are seeing in our data is that once people have switched to EVs, they aren’t switching back,” he says.
“What we are seeing in our data is that once people have switched to EVs, they aren’t switching back.”
Maximillian Wühr, CEO, FINN
He divides OEMs in the space into three categories. Electric challengers are becoming more aggressive as they strive to scale, while big players such as BMW are investing more in EVs. A third category of OEMs had overpromised on electrification, but will still be obliged by regulation to produce a bigger proportion of EVs.
Battery technology ‘right-sizing’ and future plans
For his part, Mahjoub is encouraged by the number of mid-market activity in the sector. “We’re seeing more companies in that middle space, trying to make an initial dent and get those first customers,” he notes. “Everything in battery components looks more interesting and more investable from our perspective.”
“We’re seeing more companies in that middle space, trying to make an initial dent and get those first customers.”
Emil Mahjoub, Principal, Planet First Partners
