Green Startups, Flush With Cash, Face Pressure to Make Climate Advances

Green startups hit the lottery last year. Investors have turned cautious since then, putting added pressure on the cash-rich companies to deliver better batteries, more sustainable materials and zippy electric cars.

About 1,200 privately held green startups raised a record $45 billion last year, roughly double the previous year’s total, according to PitchBook. Companies tied to sustainability raised just as much by going public on US stock markets, giving the once-capital-starved industry a $90 billion war chest.

Whether or not investors turn a profit, the cash could jump-start the transition away from fossil fuels if companies achieve breakthroughs for longstanding challenges in areas such as energy storage, sustainable products and supplies of raw materials.

The scale of the new cash could prevent a bust similar to the one that ended the previous green investing boom. The bankruptcies of solar startup Solyndra LLC and battery upstart A123 Systems Inc. in the early 2010s caused a yearslong drought in funding.

“That’s the big distinction this time,” said Eli Aheto, who helps run a climate-focused fund at the investment firm General Atlantic. “You’ve got these businesses that are properly funded.”

The money was a game changer for many companies. Battery maker Freyr Battery HER

FREY 1.96%

raised roughly $700 million last year, after previously pulling in about $30 million since its founding in 2018. Northvolt AB, another battery company, raised $2.75 billion in a single fundraising round last year. Electric-vehicle maker Rivian Automotive Inc. raised nearly $14 billion in the biggest US initial public offering of stock since 2014.

“There is a lot of progress coming,” said Robert Piconi, chief executive of Energy Vault Holdings Inc.,

NRGV -2.51%

an energy-storage startup based outside Los Angeles and in Switzerland.

Energy Vault is one of many companies trying to store renewable energy to provide power when the sun doesn’t shine and the wind doesn’t blow. The company uses surplus renewable energy to lift 30-metric-ton blocks in what look like elevator shafts, then lowers them when needed to produce energy.

Energy Vault CEO Robert Piconi in 2019.


Michael Short/Bloomberg News

In the past six months, Energy Vault raised about $350 million and went public through a merger with a special-purpose acquisition company, or SPAC. Before that, it had raised about $60 million from its founding in 2017. It recently announced partnerships and investments from energy giant Saudi Arabian Oil Co.—known as Aramco—and miner BHP Group Ltd. It expects to build its first commercial projects this year.


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Companies such as Energy Vault still must prove their technology works at scale and answer skeptics who argue they are overvalued based on their minuscule current revenues. Shares of many publicly traded startups have fallen lately amid a selloff in risky stocks. The shifting market environment is slowing the pace of clean-energy fundraising and increasing pressure on companies that promised breakthroughs, investors say.

Money is a sticking point in climate-change negotiations around the world. As economists warn that limiting global warming to 1.5 degrees Celsius would cost many more trillions than anticipated, WSJ looks at how the funds could be spent, and who would pay. Illustration: Preston Jessee/WSJ

“We have to build credibility,” said Tom Jensen, CEO of Freyr, a Norwegian company working to produce low-cost, sustainable batteries. Freyr is planning to open large battery factories in Norway, Finland and the US in the next several years. The roughly $700 million it raised last year came from investors including miner Glencore GLNCY 1.84%

PLC and a unit of private conglomerate Koch Industries Inc.

Swedish battery maker Northvolt was one of the biggest winners of the 2021 fundraising frenzy. It is working to mass-produce batteries after getting $2.75 billion from investors including Volkswagen AG

Goldman Sachs Asset Management and asset manager Baillie Gifford last summer.

About 40 companies tied to sustainability completed SPAC mergers in 2021, generating about $25 billion of cash led by electric-car startup Lucid Group Inc.,

LCID 4.14%

according to a Wall Street Journal analysis of SPAC Research data. Many SPAC deals that were announced late in 2021 are expected to close soon, raising billions more. Twenty-seven green companies went public through regular IPOs last year and raised more than $20 billion, a Journal analysis of Dealogic data shows.

The flood of cash often went to competitors in emerging industries, pushing some to try to get ahead but running the risk of more failures. “The next couple of years are going to be an explosion” as companies accelerate their plans, said John Bissell, co-CEO of Origin ORG 2.25%

Materials Inc., a startup working to make plastics and other materials from wood chips and other plant-based products.

Origin, founded in 2008, raised about $500 million in its combination with a SPAC last year. Two other companies working to make eco-friendly materials, Danimer Scientific Inc.

and Footprint International Holdco Inc., reached SPAC deals in the past 18 months featuring investor commitments for roughly $1 billion.

A factory under construction for Swedish company Northvolt, which plans to mass-produce batteries after getting $2.75 billion from investors.


handout/Agence France-Presse/Getty Images

Write to Amrith Ramkumar at

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