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BFD Expert Voices - Climate Deals

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The startup Pyka has raised a $37 million Series A to accelerate deployment of its pilotless, battery-powered crop duster, the Pelican, Alan writes.

Why it matters: The plane is currently being used for agriculture, but Pyka CEO Michael Norcia says the company plans to expand to cargo operations.

The details: The funding round was led by Piva Capital and Prelude Ventures.

By the numbers: Pyka has produced seven of its orca-shaped planes for clients.

The company counts two large agriculture firms in Latin America as clients, and says it's signed more than $320 million in MOUs and commercial agreements with customers.

Last summer, Pyka also unveiled an electric passenger aircraft.

What's next: The company is modifying the Pyka aircraft to fly cargo routes within a 200-mile radius — roughly the distance from New York City to Baltimore.

To expand U.S. operations, Pyka is seeking a 44807 commercial exemption from the Federal Aviation Administration, Norcia tells Alan. This would allow the transportation secretary to grant a waiver for an unmanned aircraft that would otherwise be too heavy under current federal regulations.

The aircraft is currently flying in the U.S. under "Special Airworthiness Certificates," Norcia says. The certificates can be used for experimental aircraft, including unmanned vehicles. 

1 big thing: Pyka lands $37M Series A 

A Pyka pilotless airplane flies above green crops.

South 8, a San Diego-based startup that makes a gaseous electrolyte component for lithium-ion batteries, raised $12 million in Series A funding, the company tells Megan exclusively.

Why it's the BFD: Batteries keep getting bigger to support homes, EVs and entire power grids, but battery makers haven't addressed existing safety or cost concerns with current battery technology. 

Driving the news: Anzu Partners led the round and will gain a board seat as part of the deal, South 8 CEO Cyrus Rustomji tells Megan. 

LG Technology Ventures, Shell Ventures, Foothill Ventures and Taiyo Nippon Sanso Corporation (TNSC) also participated in the round.

Rustomji declined to reveal the valuation on the deal.

How it works: Rustomji discovered a breakthrough while working on his chemistry Ph.D at the University of California, San Diego.

Instead of using solid- or liquid-state electrolytes inside a lithium-ion battery, he found that certain materials worked particularly well in a gaseous state.

He likened the process to a standard propane tank you can hook up to a barbecue or outdoor heater, but with a different base to become the "blood" of the battery with increased safety and performance measures.

South 8 makes the electrolyte replacement and is currently delivering prototypes to its customers, which make battery cells for the defense and automotive industries. South 8 is not involved in manufacturing and does not intend to own or operate any factories.

Once out of the beta phase, the company will license its technology to the manufacturers and collect licensing fees as revenue. 

Rustomji says a better-performing electrolyte replacement could help reduce the content of cobalt and nickel in future lithium-ion batteries, insulating the industry somewhat from supply chain constraints while decreasing battery cost.

State of play: Lithium-ion batteries were commercialized in the 1990s and have powered consumer electronics and more ambitious devices like EVs since. 

The underlying technology hasn't changed much, and large batteries with liquid electrolytes are a fire hazard due to the chemical reaction that occurs when the battery is damaged.

Full-scale electrification requires large batteries that are less combustible to power homes, vehicles and larger initiatives like defense or aerospace.

LG Technology Ventures, Shell Ventures, Foothill Ventures and Taiyo Nippon Sanso Corporation (TNSC) are all strategics that could become South 8 customers down the line. 

Yes, but: Building and scaling a new battery component, even if safer, is an expensive undertaking that will require the entire battery industry to rethink its manufacturing process.

Existing factories are often equipped to use South 8's technology, but the business relies on large customer contracts from down-stream manufacturers to get off the ground.

2. The BFD: $12M for battery startup South 8

Climate tech has seen the biggest gain since its last run-up and subsequent bust in the early 2000s, according to a new report Silicon Valley Bank provided exclusively to Megan.

Why it matters: If the industry can maintain this level of activity without buckling under its own weight, long-term growth could have wide-ranging impacts on climate change initiatives. 

Details: Silicon Valley Bank's report found that VC investment in 2021 was roughly eight times higher than the industry's previous peak, in 2008.

VCs invested $56 billion in 2021, according to the report, and $7 billion in 2008.

By the numbers: Investments in later-stage companies (Series C and D) rose at the fastest rate in 2021 compared to the prior year — 138% and 128%, respectively.

But the early-stage market is most crowded with the highest concentration of experienced investors writing seed and Series A checks.

The report found just 84 experienced investors at the Series C and Series D stages compared to 476 early-stage investors.

The share of deals over $100 million has grown from 2% in 2017 to 8% in 2021, driven mostly by large generalist investors like Tiger Global and Temasek Holdings.

Electric vehicle innovation is projected to peak within the next two years, and has outraised its cohort of maturing industries to the tune of $25 billion since 2017.

Between the lines: The biggest funding deals are often going to companies whose technology was proven in the first cleantech wave, such as solar companies or EV makers.

There remains a large — and growing — early-stage cohort this time around with hyped areas like direct air capture and other carbon removal technologies. 

Many of these technologies haven't yet reached the proof-of-concept phase at scale. 

Silicon Valley Bank broke out a "hype curve" for climate technologies based on the projected time to widespread adoption.

Advanced nuclear and carbon capture were both in the furthest-out group at more than 10 years to widespread adoption.

Yes, but: Margins are also closing in for transportation and logistics startups and agriculture startups.

The report didn't identify whether the companies had higher burn rates to achieve growth projections in earlier stages or whether they had harder times finding additional capital to extend their runways.

3. Report: Climate tech is hitting peak maturity

Illustration of the earth on a large pile of money

Decarbonization Partners wants to be the fungi: A joint fund from BlackRock and Temasek signed its first investment in mushroom leather startup MycoWorks, our retail deals colleague Richard Collings reports.

Decarbonization Partners, the joint fund, is participating in MycoWorks' $125 million Series C round. The funds will go toward MycoWorks' first full-scale mushroom leather production plant, in South Carolina. 

Zeno Power raises $20 million Series A: Our friends at Axios Generate report that Zeno Power, a developer of advanced power systems using radioisotopes, has raised $20 million in a Tribe Capital-led Series A.

The startup is aiming to scale up the production of small-scale nuclear batteries that can power spacecraft and undersea technologies for years. 

Use cases would include powering deep-sea mineral exploration, supporting remote Arctic operations and space missions. Andrew Freedman has more. 

4. 🌡️ Temperature check

Illustration of three emojis: a thermometer, a hot face, and a cold face.

Kinexon, an automation firm, raised a $130m Series A led by Thomas H. Lee Partners, with co-investments from BMW i Ventures and Telekom Innovation Pool (TIP), Deutsche Telekom’s strategic investment fund. http://axios.link/D6IT

Yotta Energy, an energy storage technology startup for the rooftop C&I market, raised an additional $3.5m — including a strategic investment from inverter OEM partner APsystems — to bring its Series A round to $16.5m. http://axios.link/OG01

BattGenie, a Seattle-based battery charging startup, raised $1.5m in seed funding co-led by Powerhouse Ventures and VoLo Earth Ventures. http://axios.link/VM6a

Electra Battery Materials Corporation (TSXV: ELBM) (OTCQX: ELBMF) announced that Nasdaq has approved listing Electra's common shares on the Nasdaq Capital Market. Electra will begin trading Wednesday under ticker "ELBM." http://axios.link/sryV

Global X ETFs, a provider of exchange-traded funds, announced the launch of the Global X Uranium UCITS ETF on the London Stock Exchange and the Deutsche Börse Xetra. http://axios.link/0CGK

OriginClear Inc. (OTC Pink: OCLN) plans to spin off its "Water On Demand" startup, which finances private water utility programs. http://axios.link/NyQh 

Northleaf Capital Partners has acquired a majority interest in Uber Boat by Thames Clippers, a river-boat service in London, from AEG. http://axios.link/OaDj

Sensata Technologies (NYSE: ST), an industrial technology company, has agreed to acquire Dynapower Company, a provider of energy storage and power conversion systems, from private equity firm Pfingsten Partners for $580m in cash. http://axios.link/uOif

Arcosa, Inc. (NYSE: ACA) has entered into a definitive agreement to sell its storage tanks business to Black Diamond Capital Management for $275m in cash. http://axios.link/VcwR

Wolfspeed, Inc. (NYSE: WOLF), providing silicon carbide technology and production, opened its Mohawk Valley Silicon Carbide fabrication facility in Marcy, New York. http://axios.link/8LLA

Iteris, Inc. (Nasdaq: ITI) was awarded a $3.7m contract from California's Orange County Transportation Authority for a regional smart mobility, safety and sustainability program. http://axios.link/yxD2

Yotta Energy was awarded $1.97m by the Department of Defense's Environmental Security Technology Certification Program for a solar-plus-storage microgrid project at Nellis Air Force Base. http://axios.link/OG01

Enterprise Products Operating, a subsidiary of Enterprise Products Partners (NYSE: EPD), and Oxy Low Carbon Ventures, a subsidiary of Occidental (NYSE: OXY), have executed a letter of intent to work toward a potential CO2 transportation and sequestration solution for the Texas Gulf Coast. http://axios.link/EOkJ

Ocean Wind 1, a joint venture between Ørsted and PSEG, awarded construction contracts for New Jersey's first offshore wind project to JINGOLI Power and Burns & McDonnell Engineering Company for the installation of high-voltage substations and underground cable. http://axios.link/nnbo

Clear Hydrogen UK Ltd. is expanding its agreement with Proton Technologies to produce "clear hydrogen" from offshore oil assets while sequestering carbon dioxide as solid carbonate. http://axios.link/amRt

Reliable Robotics, developing autonomous aircraft systems, was awarded an Air Force Research Laboratory contract to test autonomous aircraft capabilities on Air Force platforms. http://axios.link/i5jY

ReVolve Renewable Power Corp. has established a new division to focus on distributed generation sub-20MW renewable energy projects in the U.S. and Mexico. http://axios.link/ROSl

Bechtel has signed memoranda of understanding with 12 Polish companies for the potential development of two new civil nuclear power plants in Poland. http://axios.link/XlKQ 

Faraday Future Intelligent Electric Inc. (Nasdaq: FFIE) says it's selected Brembo as the main supplier of full brake caliper assembly for the company's — wait for it — "ultimate intelligent techluxury" EV. http://axios.link/ZCDD

5. Hot deals

Dr. Scott Litzelman is joining Stripe as climate program lead. Litzelman was most recently a program director at the Advanced Research Projects Agency-Energy (ARPA-E). http://axios.link/L05Q

Deonne Cunningham Nauls is joining energy storage company GlidePath Power Solutions as general counsel. Nauls was previously associate general counsel at Symmetry Energy Solutions. http://axios.link/R1z2

Eric Hickert has joined ReVolve Renewable Power as head of ReVolve Renewable Business Solutions to lead efforts in distributed generation. Hickert was previously vice president of sales for Centrica Business Solutions Mexico. http://axios.link/ROSl

ReVolve Renewable also formalized the appointment of Cecilia Aguillon as consultant for U.S. and Mexico operations. http://axios.link/ROSl

Azure Power Global Limited (NYSE: AZRE), a sustainable energy provider and power producer in India, announced that its board of directors has accepted the resignations of CEO Ranjit Gupta and COO Murali Subramanian. Chairman of the board Alan Rosling will oversee Azure in the interim. http://axios.link/Xugs

6. It's Personnel

We've got a full slate of deals today, so let's get right to it.

👩🏻‍💻 Situational awareness: Megan's panel on the future of climate tech with Silicon Valley Bank is today at 1pm ET/10am PT. We've got a preview of SVB's report below. RSVP to join the chat: https://bit.svb.com/3M3FU3l

✈️ Megan is catching the red-eye to D.C. tonight, so any tips and tricks on how to survive Wednesday are more than welcome. And if you happen to be in SFO between 8pm and 10:30pm PT tonight, please say hi! 

👨🏼‍⚖️ Alan is delighted by the return of "Better Call Saul" — a show that, in his view, surpassed "Breaking Bad" with the introduction of the Germans storyline in Season 4. 

Thanks for reading Climate Deals! Please share with your friends, family, attorney, secret-construction co-workers and travel companions.

April 26, 2022

1 big thing: Pyka lands $37M Series A