Ample: A Better Better Place?

August is supposed to be the doldrums in VC land, a time when everyone goes on vacation and companies shouldn’t expect to see any new term sheets. So it was a welcome surprise to see a cleantech funding round announced — and a big one at that: Ample raised a $31m Series A round. That’s a lot of money! Wait. Who are they? What do they do?

According to Fortune’s Term Sheet, they make “a platform that delivers a full charge to electric cars.” Neat! A full charge is way better than not-a-full-charge. Axios’s Pro Rata says they are “solving the energy delivery challenge for electric cars.” What are we talking about here: supercapacitors? ultracapacitors? ultra-fast charging? wireless charging? ultrasonic charging? The suspense is killing me!

Off to their website: a picture of a cold day in Chicago (hey, I live in Chicago, cool!) and a simple tag line: “Electric Cars for Everyone.”

Lots of non-electric taxis in the picture! (From Ample’s website and originally from Molly Porter on Unsplash)

To get some real answers, we need to head to the press release. The company offers an “alternative to traditional charging” using proprietary “autonomous robotics.”

If you’re using robots, delivering a full charge all at once, and calling it an alternative to traditional charging, in my mind there’s only one thing this could be: battery swapping. Drive your EV up to the station and a robot pops out the dead battery, switches it for a fresh one. In a few minutes you’re off to the races again.

That might sound familiar.

Back in 2013, Tesla built a battery swapping station before shuttering the program in 2016. Tesla’s pilot implementation was a little kludgy — it was designed as a temporary fix where car owners were required to come back and get their original battery back later (and pay $80 for the privilege).

Well before that, Shai Agassi launched Better Place in 2005 to build a network of swapping stations in Israel before expanding world-wide. There’s little question that the technology works. Here it is in action:

Battery swapping in action

Better Place has gotten plenty of ink through the years, both as it was growing, as it imploded, and in a recent book “Totaled: The Billion-Dollar Crash of the Startup that Took on Big Auto” by Brian Blum. Brian was recently a featured guest on Greentech Media’s Energy Gang Podcast where he recounted his own experience as the owner of a Better Place-compatible Renault. Regular listeners of the podcast know that Stephen, Katherine, and Jigar don’t pull punches, so it’s interesting to go back and listen to that episode with fresh ears.

Can this be a business? Can Ample succeed where Tesla and Better Place stumbled?

First, let’s take a look at the backers. This round was led by Shell Ventures and Moore Strategic Ventures, with Repsol Energy Ventures, Hemi Ventures, and TRIREC also participating.

Shell has a long history of making investments in cleantech and transportation deals and has lots of experience making early-stage venture investments. It’s easy to imagine Shell seeing battery swapping stations as the natural future of the filling station.

The other corporate strategic investor, perhaps not as well known here in the US is Repsol, a major Spanish oil and gas company. Repsol has increased its VC activity over the last few years. This is their second electric mobility investment this summer, following Silence, an electric scooter company.

Moore Strategic Ventures is an arm of Moore Capital Management, a Hedge Fund that makes some direct early-stage investments, including several in energy, electricity, and agriculture.

Hemi Ventures, a relatively new firm, has been very active in early stage deals across robotics, artificial intelligence, and automation.

Trirec is a relatively new cleantech-focused firm based in Singapore that doesn’t shy away from infrastructure-heavy deals.

What about the founding team?

Ample founders John de Souza and Khaled Hassounah are experienced executives, and both have undergraduate degrees in Electrical Engineering. According to their LinkedIn profiles, they founded and led MedHelp, an online portal and community for medical advice. The details here aren’t exactly clear: MedHelp was founded in 1994, long before the duo joined, and sometime around 2006, de Souza became CEO and led the company to an acquisition by a unit of Merck in 2014.

Back to the business at hand — the business

First, we can’t ignore the similarities. Better Place founder Shai Agassi made a fortune when he sold his previous company, and decided to enter the electric vehicles space. (And, for what it’s worth, that sounds a lot like Elon Musk too.) The initial pitch for Better Place was “an inexpensive car that anyone could buy.” It would be so cheap, it might even be free. (Of course, not actually free, but at least zero-money-down and a monthly subscription after that.) When Better Place was conceived, the best technology in the market was a Nissan Leaf that could get roughly 70 miles before recharging, so you couldn’t take a long road trip.

Better Place’s Stumbling Blocks

Better Place had huge issues with its swapping stations — it couldn’t co-locate them with service stations in Israel, they ended up being way more expensive ($3m each) than originally planned, required huge cooling infrastructure to charge the batteries without degrading them. The company also grew much more quickly than any revenues could support — they had around 1000 customers but were burning $1m per day on salaries.

At the very least, with Shell and Repsol on board, Ample should be able to secure locations at filling stations.

Better Place also had a hard time getting manufacturing partners on board. Renault joined because they didn’t have any plans for a Hybrid vehicle and saw this as their path towards an EV.

This excerpt from the podcast says it all:

Brian Blum:
“When he [Agassi] went to GM and tried to convince them to make a battery-swappable version of the Chevy Volt and they said ‘No, we’re not doing that, we’ve already got our version of the vehicle and we’re well along the way, but we would be interested if Better Place would be the infrastructure provider for the electricity [presumably referring to the traditional charging infrastructure] here in the United States and then we’ll see what happens.’”
“Maybe if there was more money, and the company hadn’t spent so much, and the company hadn’t gone out of business, maybe other manufacturers would have come on board.”
Jigar:
“But they would have never come on board. This is what people don’t understand, even today, no one has used Tesla’s charging infrastructure and protocol. Car companies don’t work together, and the reason they don’t work together is because they believe they’re the smartest people in their industry. Every one of them believes they’re in the hardware industry. They don’t wanna all make the same thing. They don’t wanna follow a standard. They love being different from everyone else. Right, so the fact that everyone would have adopted the same battery swapping technology was ludicrous, so for him to think otherwise was equally ludicrous.”

Is Jigar right here? If he is, Ample must be doing something else—they must have a business model that doesn’t require signing up a bunch of manufacturers to conform to a new swapping standard.

What does the future for battery swapping hold?

Brian Blum has certainly made up his mind:

“[Switching] big batteries, you know consumers switching them out in expensive infrastructure, that’s not going to happen, we’re not going to see that again.”

And my guess is Ample won’t be getting project finance from Jigar for a Better Place clone any time soon:

“The thing that I always found so fascinating is how awful [Shai and team] were as entrepreneurs. The thing I want to make sure people understand is that these things are entirely avoidable through due diligence. Like, it’s not a foregone conclusion that people have to make these ridiculous mistakes. I want to make sure that its clear that like as we try to change the world and the infrastructure that powers us because we want to decarbonize the world, there are good ideas and bad ideas, and this was a really bad idea.”

Is this the next cleantech success story?

Of course, only time will tell and with limited information on a stealth-mode startup, it’s hard to predict what will happen.

We don’t know what the proprietary technology is, but Ample definitely isn’t building its own EV. Frankly it wouldn’t surprise me if they’ve licensed the Better Place patent portfolio, which is now largely owned by Renault.

I hope I’m safe in saying that Shell and Repsol wouldn’t invest in a new Better Place. If they wanted to do that, they could have bought the assets back in 2014 at fire-sale prices.

So, maybe it’s the business model that’s different. Is Ample promising individually owned cars on a monthly payment plan? Or are they offering a battery-swapped electric taxi fleet? Busses? Or an on-demand, electric car network like Car2Go?

We don’t see $30m Series A rounds in this space all that often, so there’s reason to be excited. Until they come out of stealth, here’s hoping Ample has figured out a better way to make the Better Place dream of cheap electric cars for everyone come true.

No, Tesla batteries are not a global warming disaster

But, we probably should think about the supply chain.

A new report from the Swedish Environmental Research Institute has attempted to quantify the emissions tied to EV battery manufacturing. The study aims to better understand where emissions accrue in the supply chain and to shed some light on where we can do better.

In an early piece on the Swedish website NyTeknik, another researcher from the Swedish Environmental Research Institute, not involved with the original study, did some rough calculations and came to the conclusion that you would need to drive your new Tesla for 8 years (or drive a Nissan Leaf for nearly 3 years) just to break even on CO2 emissions. This later got picked up by English-language outlets eager to publish more “EVs are actually bad for the environment” takes.

But, of course, the devil is in the details. The payback conclusion gets complicated depending on where you live, how you charge the EV, and what your alternatives would be. This means some big differences depending on whether you live in the U.S. or Sweden. For example:

Swedes drive less than we do,
Swedes buy more efficient conventional cars than we do, and
Swedish gasoline/diesel is cleaner than ours.

(On the other hand, charging from the grid is likely to be much cleaner in Sweden. More on that in a moment.)

The payback period assumes someone drives 7,650 miles/year, fuel is 18% bio-based, and that the average tailpipe emissions of new cars is 208 g/mile.

By contrast, in the U.S. we drive around 11,000 miles/year, our passenger fuel is mostly gasoline with 10% ethanol, and average tailpipe emissions are about 350 g/mile.

Of course, we also need to think about the emissions related to charging the EV during use. The Tesla driver in Sweden can top up with very low-emission power: Sweden’s energy mix is nearly 50% Nuclear and 50% Hydro. The average U.S. energy mix is more like 65% fossil, giving us emissions per EV-mile of something like 176 g CO2.

Once we account for higher-emission conventional cars one the one hand and charging from a higher-emission grid power on the other, it seems like the CO2 payback period is about the same in both countries.

Tesla’s Gigafactory is Carbon Neutral

The report assumes that the energy used in manufacturing the battery is 50% fossil-based. Tesla has long committed to making its Gigafactory carbon-neutral, and appears to be working towards that goal. The original research states that about half of the CO2 impact of battery manufacturing occurs at the battery plant, while only 10–20% comes from mining and the rest comes from materials production. That means, for the Tesla batteries at least, the CO2 emissions payback is halved.

A Cleaner Grid Matters Here

We saw the same debate play out a few years ago when researchers showed that if you charge a car from a coal-fired grid, your emissions reductions are limited. While that’s certainly true, the grid is getting cleaner over time. Today you could charge your Tesla from your home solar system, or — soon — from Tesla’s all-solar Supercharger stations.

The Bottom Line

Under the assumptions above, the CO2 payback for a 100 kWh Tesla battery comes out to about just under 3 years in the best case and 6 years in the worst case.

The average car in the US lasts for about 8 years, but many don’t expect EV batteries to last that long. On the other hand, lots of people are trying to figure out how (or whether) to give the batteries a second life, for things like stationary storage.

This research is a great step towards understanding the climate impact of a long supply chain, and it highlights the need to think about responsible sourcing and energy-efficient manufacturing. It should also highlight, yet again, that as transportation becomes increasingly electrified, a clean and reliable grid is more important than ever.

But, it doesn’t give you an excuse not to buy a Tesla.

ARPA-E: Commercializing Energy Innovation

Commercializing Energy Innovation

Last week the energy innovation community gathered outside Washington, D.C. for the eighth ARPA-E Summit. The event brings research and commercialization together in a way that few other events do. ARPA-E staff pitch their ideas for the future of energy, transportation, cities, and food. Leading scientists explain how they push the frontier of innovation in energy and materials. The technology showcase lets ARPA-E awardees highlight the progress they’ve made over the course of their 3-year grants.

But the Summit doesn’t just spout techno-optimism. The conference balances technical sessions with panel discussions, keynote speeches, and fire-side chats that offered practical advice on how to commercialize those innovations. It was fascinating to understand how these experts think about building and scaling cleantech companies.

I had the honor of moderating a panel featuring some of the smartest people in the field:

Ira Ehrenpreis of DBL Partners, a Director on the board of Tesla and one of its first investors;
Mike Biddle of Evok Innovations, who built one of the world’s leading advanced recycling companies and now is an early-stage investor; and
Michael Horwitz of Greentech Capital Advisors, an expert on mergers and acquisitions in the cleantech sector.

The discussion was lively and featured plenty of tales from the trenches. The summit also featured an excellent discussion with Ajay Royan of Mithril Capital Management, which he co-founded with Peter Thiel and has $1.5B under management, and a panel on alternative capital solutions that featured Jeffrey Sirr of Munich Re, one of the world’s largest re-insurance companies.

Throughout these sessions, the conversation kept returning to the importance of Risk, Markets, and Team. Of course, startups in any sector have to think about these factors but the investors explained why the nature of energy and cleantech has a multiplying effect on these challenges. As Ajay put it: You have to focus on quality of market, then product, then founder. It doesn’t work in the reverse order. The biggest problem in commercializing hard tech is the friction cost associated with entering the market. He calls this “artificial friction” and emphasizes that this makes it more challenging.

What follows are some of the most interesting things I heard at the Summit — things I think anyone in the sector should keep in mind as they build and grow their business.

On Markets and Market Adoption

Ajay channeled Warren Buffett in his focus on the market first: If you put a brilliant team up against a tough market, the market always wins. He emphasized repeatedly that energy is so tough because it’s a commodity. It’s difficult to price a premium product. In any industry, he said, new products hit a barrier of market access. Even if it’s a great product and it works well, no one adopts it. Energy startups need to think about how they will break that wall, even on day one. How will they ease that friction? According to Ajay, the only way to do that is through product. He offered a particular challenge to energy startups: If you have a great innovation that then needs a whole support mechanism and consulting firm to work with customers to get it adopted, it’s not likely to work. This really matters because even though you can show — analytically and through pilots or demonstrations — that this product works, you end up spending all your capital on adoption friction costs. So then you need to raise another $100 million just to get the product in the customers’ hands. So what’s the result? New innovations aren’t being adopted as fast as they’re being created.

Perhaps Ajay would be interested in the solution proposed by Jeffrey Sirr of Munich Re who has been exploring new ways to insure against the risk of adopting new technologies. For instance, suppose an energy storage startup had a new flow battery technology and found a customer who was interested in the improved technology, but was unwilling to take the risk that the batteries didn’t live up to expectations. Munich Re would do their technical due diligence and underwrite the performance of the batteries. If the batteries failed, the insurance policy would pay out and make the customer whole again. This approach seems like it would assuage at least some of the fears of technology risk. Of course, insurance adds cost, but Jeffrey maintains that the insurance underwriting can also help secure less expensive debt to finance the project which may make up for the additional cost. A general overview of these types of mechanisms can be found at the Climate Policy Initiative. This is an exciting space to watch and it will be interesting to see if the model is sustainable for earlier stage smaller deployments.

On Team

Ira, Mike, and Michael acknowledged the realities of the cleantech markets, but for them this means the team is even more important. When they evaluate an investment, they ask themselves whether this team can “stare death in the face and survive.” Each shared a story where the company would have gone under but for the extreme resilience of the founding team.

For founders, the message is clear: you have to be fully committed to the business. As Ira said “This company can’t be the second or third most important thing in your life. If you want to make it, the company has to come first.” Building a business, especially in this sector, requires complete dedication and investors need to see that commitment.

On the Sector and Investment Theses

Based on his evaluation of the Market, Ajay shaped a contrary investment thesis at Mithril. “Cleantech was being talked about as religion. But most people in the world were still going to use oil and gas, and 20% of power was nuclear. This is where we started spending time.” He went on to emphasize that it is key that the underlying product is “long on technology” — meaning that as technology improves in the future, the product gets more competitive, not less. He used solar as an example — emerging technologies like thin-film solar were “short” innovation. As Chinese manufacturers glutted the market and costs came down the learning curve, the new technologies couldn’t compete. He likened this to companies in the IT sector: Cisco would be hurt by foreign innovations in router technology, while Facebook, Apple, Netflix, and Google can all take advantage of it.

On Long Technology Development Cycles

Mithril isn’t afraid of long development cycles — they have invested in nuclear fusion startup Helion Energy. When asked how they can make decisions about a company that has such a long road ahead, Ajay said you have to do all the underwriting up front. He says they treat diligence meetings as board meetings that will happen in the future. He asks the founders “What is it that you would talk about at a board meeting next week?” What challenges are you facing right now? What are the strategic decisions you need to make in the next 6 months? He emphasized that this is good for founders too, because “capital is marriage and you want to be with investors who you can talk to about the really thorny issues.”

As for the long time-horizon, Mithril has the added advantage of being structured as a 12-year fund (as opposed to the more common 10-year fund). Here, he channeled Buffett again: “Time horizon arbitrage is avail to all of us. If you can operate rationally on a five-year horizon, you are in an elite category.” It is certainly an open question whether a 12-year fund is long enough for breakthrough energy technologies that still have 5+ years of R&D before they’re commercially ready. If 12 years isn’t enough, those companies must find other ways to fund their development in the interim.

On Exits

Venture capital is a high-risk, high-reward business. At the end of the long road of technology commercialization, a startup turns into a successful business selling product and delighting customers. But, for companies backed by outside investors, that reward can only be realized when the startup goes public or gets acquired. One of the biggest problems facing cleantech companies and their VC investors in the last decade was the lack of acquirers. It looks like things may be changing. According to Michael Horwitz, there has never been more activity in cleantech M&A than there is today — this is great news. The pathways to IPO, unfortunately, may not be looking any brighter. As Ajay put it “you have to be the last company that matters in your market before you can go public” and contrasted this with the go-go market in the mid-1990s: “Go read S1 filings from ‘95.”

I’m very grateful to Danny Cunningham at ARPA-E for the invitation to moderate the panel and to the rest of the ARPA-E staff who made the event a success.