P. Bonnick and J. Muldoon, Energy Environ. Sci., , 15, DOI: 10./D2EED
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Transcript
Phil Nadel: The Pitch, day 3, pitch 1
There&#;s a big problem with the millions of new electric vehicles hitting the road: their batteries.
We need a battery that charges faster, lasts longer, and doesn&#;t catch on fire. And we need it to do all this, with materials that are hard enough to find on the periodic table, let alone in the earth&#;s crust.
The battery technology we need, is something of a holy grail.
Today, a 21 year old founder walks in The Pitch Room, looking like he borrowed his dad&#;s suit, with a pitch for what he thinks could be that holy grail. But will results in the lab translate to money in the bank?
I&#;m Josh Muccio, welcome to The Pitch. Where real entrepreneurs pitch to real investors for real money.
Neil Sales-Griffin: Hey y&#;all, I&#;m Neil Sales-Griffin, Managing Director at Techstars Chicago
Phil Nadel: I&#;m Phil Nadel, I&#;m the Managing Director of Forefront Venture Partners
Jillian Manus: Hey, I&#;m Jillian Manus, Managing Partner of Structure Capital
Mark Phillips: Hi, I&#;m Mark Phillips, Managing Director of 11 Tribes Ventures
Victor Gutwein: Hello, I&#;m Victor Gutwein, I&#;m the Founder and Managing Partner of M25
The pitch for Natrion is coming up after this.
[break]
The information provided on this show is not intended to be investment advice and should not be relied upon as such. The investors on today&#;s episode are providing their opinions based on their own assessment of the business presented. Those opinions should not be considered professional investment advice.
Jillian: Hello. Hi.
Alex: Hi. Nice to meet you all. Yeah.
Phil: Who are you? What's your name?
Alex: My name's Alex. I'm the cofounder and CEO of Natrion. Yeah.
Jillian: Natrion.
Alex: Yeah, so uh at Natrion, we're actually based right here in Illinois, and what we're doing is - our mission, rather, isto realize a vision of safe, affordable and efficient electric vehicles.So our story kind of begins in high school. I would get rides to school with my friend in his dad's Tesla. And that would be my favorite part of the day. Loved that thing and so I've loved electric cars ever since. But to really make electric cars viable for the mass market, a couple of things need to happen first. These cars need to be able to drive further, charge faster, cost less, and most importantly, not catch on fire.
Jillian: Hate when that happens.
Alex: Yeah. Now electric vehicle battery fires are becoming alarmingly more common and it&#;s not just scaring away consumers, but it's costing billions in recalls for the auto makers. And so uh, I was a University of Illinois materials engineering student, and I started working on something called a solid state battery where um we essentially don't use any flammable materials.And this technology's been known in the industry to be a bit of a holy grail because solid state batteries are also way more efficient, but nobody's figured out how to make them at the scales that are required by the automotive industry yet. So I kind of pleaded with my professor, started getting time in their labs.Some of the stuff we were doing, OSHA would definitely not approve of, but uh it was enough to get us our first US Air Force contract to continue the research and that's how Natrion got started as a company.So fast forward to today, the suite of patented battery components that we make eliminate fire risk and they can make an electric car drive as far as 450 miles on a single charge. We can charge in as little as 15 minutes.We're currently piloting with ten auto makers and cell manufacturers where they're actually evaluating our materials and battery cells. And last year we raised a 2 million dollar seed round.And so what we want to do now is build out a pilot production line.That's why we're raising,a 20 million dollar seed round. So I guess that's why I'm here today and uh yeah.
Jillian: Why do you think others in this space have not been able to accomplish this?Just trying to figure out why you and your professor in the lab was able to accomplish this when hundreds if not billions of dollars have been invested in this space?
Alex: Yeah. No, I mean, we get that question all the time.
Jillian: I'm so predictable.
Victor: The too good to be true question?
Jillian: I hate being that predictable.
Alex: No, no fair question.So from fundamental material things to the fact that we want to be a component supplier rather than a full cell manufacturer. So we really kind of sat down with cell manufacturers, looked at their process, what machinery do they use right now, what does their cell construction look right now, and then designed a material that would fit that as much as possible, versus, you know, our competitors usually they have a new material, and it might have fantastic performance, but then they're trying to figure out how to build a cell around that, and that's why it's taken them forever and so much capital to get to the market in a meaningful way.
Jillian: So what component - what material are you using,that others have not tried.
Alex: So the core innovation is uhwhat's called a solid state electrolytes, so the electrolyte is in the center of the battery cell, it's what moves the lithium ions. And usually this is a liquid, that's why batteries right now are so flammable, it's a basically gasoline kinda liquid. And so what we do is what's called a hybrid composite material, so it's a material where we're blending polymers and ceramics.
Jillian: Have you patented this?
Alex: Yeah.So we have one patent issued on the ceramic part of the composite.
Jillian: Okay.
Alex: And then we have five more inventions currently pending surrounding the polymer, the composite itself, processes, methods of integration, into battery cells.
Phil: So that core hybrid material is the component that yo u want to sell to traditional EV battery manufacturers?
Alex: Correct.
Phil: Right.And they don't have to change the rest of the components of the battery?
Alex: Right now the way a battery is made is I mentioned there's a liquid in the middle of it. Really what it is is this kind of like porous cloth that's soaked with the liquid and then you literally sandwich it into the middle of the battery. So we made our solid state electrolyte mimic that cloth almost exactly, how thick it is, how flexible it is, how strong it is, right. So the machinery can stay the same, and as a result, there's actually very little that you have to change.
Phil: And just one another sort of technical question on the ceramic, the companies that use a ceramic approach,how far away are they from being able to process that at scale? And isn't that, if they come up with that and are successful, isn't that a better solution than the hybrid that you have?
Alex:I mean it's, you know, when you go to scale manufacturing, it's really the little things that'll kill you.Some of the companies doing ceramics out there, if they get their technology up to scale, will be truly amazing and umm-
Phil: But don't you believe that'll happen, you know, in the next several years?
Alex: Probably more than several is the thing. We're talking about millions and millions of EV as soon as, right. So really we need a solution in kinda the next five years.So there are companies that have solutions are gonna be fantastic in ten years time, but we need to fill that gap.
Phil: But doesn't that necessarily limitthe scope of your company to..you're like a band aid until the ceramic solutions are ready for prime time?
Alex: No, sosome of these ceramic companies, especially some of the ones who are publicly listed, fantastic results.We believe we have been matching them on performance or have been just right on their heels.just based on cell testing results.
Victor: Is the range improvement something that the kind of ceramic comps are able to do as well, going to like from what is it right now, 200? or 3 -
Jillian: 300 to 450.
Phil: The ceramics would provide a longer range, right?
Alex: Long story short, not necessarily.So when I say that we can increase range, that's because our electrolyte enables the use of lithium metal in the battery cells. So right now batteries use graphite. You switch to lithium metal, very easy to increase energy density by 50%.And so it's a little kind of minutiae like that. But as far as tech that'll be here in a couple of years, we're right we're need to be at, I believe.
Neal: Alex, one thing I want to acknowledge, just so you know, I have a potentially competing investment. Techstars Chicago invested in Halon Technologies, I don't know if you've heard of them.
Alex: Yeah, I know the Halon guys. Yeah.
Neal: Yeah, yeah, yeah. Not directly, cos they're doing drone batteries and what not, and they're one of those ten year examples, but just wanted to acknowledge that and let you know, like, I'll take a back seat here.
Alex: Sure.
Neal is conflicted out.
This pitch is probably the most technical pitch we&#;ve had on the show. Here&#;s what you need to know if you&#;re a little lost -
Alex isn&#;t building the most futuristic battery tech ever. But his tech is bridging the gap. It&#;s meant to be in cars 3-5 years from now, not 10-15 like the competition.
Also, instead of producing the entire battery from scratch, Natrion&#;s tech integrates into existing production lines.
When we come back, enough science - it&#;s business time.
[break]
Welcome back to the pitch lab. Alex is has explained his hybrid EV battery components &#; and the investors seem verrrrrry interested. Now, Natrion raised a $2M seed round about a year ago, but now Alex wants to raise a $20M series A. That&#;s a lot of cheddar and the investors on our show don&#;t typically chop that much cheese. Here&#;s Phil.
Phil: So you're raising 20 million -
Alex: Yes.
Phil: Right. And you're going to build the production facility?
Alex: Correct.
Jillian: And where are you going to do that?
Alex: We're looking around here, the Chicago area.
Jillian: Okay. And 20 million's gonna be enough or how long is that gonna take you?
Alex: Two years.
Phil: Does that get you to revenue generating? Or where are you after two years?
Alex: Where we want to be at the end of that is actually you know our first POs coming in and we'd be filling those.But conceivably, we'll be at A sample cells at that stage, something that you can start building EV battery packs and then getting those proven out and certified.
Mark: I know, commercialization is a tough thing to predict, but can you paint a picture of the next five years? What could this business look like financially?
Alex: Yeah. Soconceivably in two years, we could be in battery packs getting battery pack certified with an auto maker.After thatwe're actually bringing in revenue.
Mark: Got it. So that's 24 months away?
Alex: If all goes well, yeah.
Mark: Great
Mark As you talk to the auto manufacturers, right, what are those conversations looking like?
Alex: It's been interesting, becausewe're seeing a trend in the industry where the auto makers want to exert more and more control about what's actually going into the battery, rather than just kind of taking whatever the manufacturer's offering. So they want to invest in companies like us. They have robust R&D teams in house to prove out tech like ours. And they ultimately are trying to be the decision makers in cell chemistry.
Jillian: Have you discussed an investment fromany of their venture funds?
Alex: Yeah. umyou know the plan A for this round, so to speak, is we do have auto makers that are venture capital arms that have been quite involved in the evaluation projects we're running. Andit looks like we could get them to lead - one or both of them to lead the round
Phil: That seems like the natural kind of source of funding for this type of a round.And, and so what are they sort of waiting for?You mentioned briefly battery life - is that something that they want to see the results of first before they pull the trigger on investing?
Alex: That's pretty much it. So these two auto makers I mentionedare mostly interested in this lithium metal battery chemistry that we can enable. And why aren't lithium metal batteries here right now? They don't last very long. So we're trying to show that they do. And kind of what we literally have to show is that you can charge or discharge this battery a thousand times and still have 80% of the energy, the th cycle that you had the first time you charged or discharged it.
Jillian: And so where are you in that proof point?
Alex: So one of the auto makers, we're kind of on the edge of our seats, because we're supposed to hear back any week now.
Jillian: Have you proven this out, though, that it can be charged -
Alex: In house, yes.
Jillian: You have.
Alex: Yes.We've gone now to 400 cycles with less than 2% degradation and we have the coulombic efficiencies we need to get to so
Phil: So you think at a thousand, you'll be at 80% or above?
Alex: Exactly. Yeah.
Mark: - from a market perspective, that's extremely competitive. 400 cycles 2% degradation.
Alex: Oh absolutely.
Phil: So these manufacturers who could possibly invest, they're waiting for that data point, that proof point.
Alex: Pretty much.
Phil: So if you hit that, if they're satisfied, aren't they likely to just take the whole 20 million?
Jillian: Yeah.
Alex: Well uh-
Jillian: Or maybe you don't want to?
Phil: Let me put it a different way. If they didn't take the 20 million, I would be worried.
SUNJ ENERGY are exported all over the world and different industries with quality first. Our belief is to provide our customers with more and better high value-added products. Let's create a better future together.
Alex: Yeah. Um, the kind of checks that they cut, I mean, you know - 10 million dollar check, yeah, that would be pretty normal for them.And we've - kind of our strategy has been to start getting as many people to agree to potentially follow on once we get an auto maker to lead.
Jillian: Okay.
Alex: And start due diligence early just so we can have, you know, close as soon as we can.
Phil:I'm an EV enthusiast. I've had many, many Teslas now. And so I love this space.It's not anything I know about technologically, right.And if it's too early at this point for the auto manufacturers to invest, it's certainly too early for me to invest.We invest in capital efficient companies, and this is anything but. This is going to require a lot of capital. When I hear building out a production facility, like I run for the door.It's just not a fit for us for those reasons. SoI'm going to pass. But thank you.
Alex: Fair enough.
Victor: Were you the one raising the first 2 million dollars?
Alex: Yep. So that was a seed.
Jillian: Who'd you raise that from?
Alex: It was led by Tech Nexus and Tamarack Global,and then Mark Cuban was the third biggest ticket. And that was a convertible note.
Victor: Okay.
Mark: And what was the - was there a cap on it?
Alex: Yeah. That was12 million. And right now, we're actually doing kind of a continuation on the note, we're bringing in another couple hundred grand just to give us a bit more runway if we need it. And that's at an 18 million cap, is the new round.
Mark: Is there any space left in that?
Jillian: Agree. Yeah.
Alex: Yeah. So the seed continuation, we have about 350,000 more space left in that.
Mark: I'm actually interested in that.I would like to invest in this round, and we'd be looking to write a $300,000 check.
Jillian: I'm gonna take 100 of your 300.
Mark: Love it. She's coming in.
Jillian: I love this space.I think you are the future. I mean, Neal always talks about how to invest in the future and what you want - what do you say, Neal?
Neal: Oh. The investing in the future I want, not the one I have to accept.
Jillian: That's right.
Neal: Yeah.
Jillian: So what's the future we want to see? And I think Alex,you're exactly who I want to invest in and this is your vision, this is your generation to either destroy or to rebuild.So if I could have 100 of that -
Mark: I would love for you to have 100 of that.
Jillian: Okay. Okay.
Mark: It depends on what Victor says, of course.
Victor: Yeah, I didn't want to spoil the moment or anything, but I - we do not take science risk.I also - I have no way to assess how well this is going to perform against all the probably really well-funded competitors.But the element of it being the future that I want - 100%.
Phil: So you finished up your fundraising on the note. Good for you.
Alex: Thank you.
Jillian: Thank you.
Alex: Thank you all so much.
Neal: You did great, man.
Mark: See you Alex. Good job. He&#;s great.
Jillian: Oh my god. You know, this is a long, you know, shot bet. But if we don't bet -
Mark: It's a pure zero or -
Neal: This is the last chance you got. This is gonna get priced up next time.
Jillian: Oh for sure. I feel someone's gonna buy this, truthfully. I don't think it's even gonna go all the way. I think some -
Mark: I think he's also a shockingly brilliant young man. Like, I think we just saw the surfaceI think we gotta talk to - we need to understand who the auto manufacturers are that he's talking with, who want to lead the round. So there's a lot of questions. But -
Jillian: Yeah. But there's -there's something about that young smoldering brilliance that lies behind him, you're just trying to -
Mark: Yeah, that's a good word. Smoldering.
Jillian: - you know that kind of genius.
Neal: Well, you hit him with the Uncle Ben, with great power comes great responsibility speech. I loved that. So inspirational, Jillian.
Mark: Yeah, you crushed it, Jillian. It'll be fun. It'll be fun. A little diligence together, huh?
Jillian: Absolutely.
Mark: And we'll ..
Jillian: Absolutely. There's a lot of digging here. But god there&#;s, you know - you always think that this is the kid who's going to change the world. And in my head, I kept thinking, he might be that one. He might be the founder of the holy grail.
Josh: This better not fall apart in due diligence.
[laughter]
Mark: Famous last words.
Ugh, past josh&#; You jinxed it! When we come back&#; our software investors find themselves a bit out of their element.
[BREAK]
Welcome back. So, Mark and Jillian are both in, and seemingly very excited to invest in Natrion&#;s seed continuation round. Or bridge round. Or seed+. Or mango seed, apparently that&#;s a thing? So, a few weeks after the pitch, Mark kicked off the due diligence process on a call with Alex.
Mark: Alex!
Alex: Hey Mark, Josh, how you doing?
Mark: Good, man. Good to see you. How you been?
Josh: Hey guys.
They covered the basics&#;
Mark: The goal of Natrion is not to necessarilybe the manufacturer of the batteries. It is this unique substance that is a critical component of how the batteries are manufactured. Is that correct?
Alex: Exactly.
And also the hard stuff&#;
Mark: And then how much are you guys burning on a monthly basis?
Alex: Uh, at the moment our burn is about 75, 70 6,000 per month. Yep.
Mark: Uh, whew, uh, steep. That's a, that's a lot of burn.
Alex:Battery research is not cheap.we're using five tanks of argon gas every week, right?
And a few weeks later, Jillian joined in.
Jillian: Alex, it's been a long time, sir.
Alex: It has been. Yeah. Happy New Year.
Jillian: So, Alex, mark and I have activated our networks, I would say, andI'll give you sort of a high level.I was told by one person, That over 260 companies are trying to crack this chemistry code in the us, in just the US. And so on one hand we wanna get excited and there is something to get excited about, but it is unclear. Is it? Is it the time to. Completely, uh, committed to Natrions, uh, technology.There's still some outstanding questions that I'm not quite sure that I feel that you can answer, and I'd like to just fire a couple away.
Alex: Yeah.
Jillian: So question one, Alex. Are there, are any of the core patents that you have, would any of them enable you to block competition?
Alex: It is our belief that the combination of our battery components, temperature stability, Voltage stability and simultaneous performance within the battery cell, would be very extremely difficult if it's not impossible to replicate, with a different combination of materials.And that's just the materials themselves. And of course, we are also patenting out methods of implementing in actual battery cells.So, uh, those are of course, value to any OEM we subsequently work with.
Mark: Alex. Tell us a little bit more about your perspective on this OEM process where you're, you're doing the piloting and the testing.My understanding is these OEMs have a version of your product, right? and they're testing it. Is the series a contingent upon a successful testing of the product?
Alex: Correct. We did a first round of evaluation where they tested their coin cells. They look like the, the little battery you have inside the watch. Um, They're very easy to make. And very easy to get some, some early data. So they finished that, um, liked what they saw. Now what we have sent them are these, um, these pouch cells. So these credit card size batteries. And this is like what's inside your , right?They'll be doing other cycle life evaluation, but more pertinent to series A will be the safety, uh, testing of these credit card size battery cells. And so all we have to do in the safety testing is, you know, show that there's this improvement over conventional, uh, liquid systems that, that we say that we make.That'll be the main trigger.
So this puts Jillian and Mark in a bit of a conundrum - to feel comfortable investing, they need the auto manufacturers to approve Natrions battery technology. But by then, everyone will want to invest. And our investors will be priced out. The window to invest is now.
Mark: Yeah, that's the challenging part here. I think Alex, I love the control you have over the topic, man. You just, you seem to fully understand this space and, um, it's really impressive what you're doing and how you're doing it. Um, when we met in person, I think pilot and sort of going through these phrases that we, Are different in your world than they are in maybe a traditional software world. When I hear that word pilot, I think to myself, oh, okay, well there's an active product that somebody wants and they'll be working with it for three months and then it'll convert into a paid client. The risk of the, the, those safety testings and the OEM manufacturer's, um, evaluation of the product and the potential for that to be like, Hey, this is, this isn't what we're looking for. And kind of taking you back to step one, I hope and pray that isn't what's going to happen, but I think from an investor perspective, that creates a bit too much risk for us to wanna participate in the seed round.So,I think this is gonna be an opportunity we'll have to pass on at this point becausewe're just not able to take the risk where it isn't something the OEM wants to move forward with.
Jillian: Yeah, I'm on the same boat. I'm just gonna add one more layer to this, which is the advisors that I that I reached out to, all of them said, um, that as an angel, would really need to hire, what the, their words were, were to significantly invest in diligence from experts. And because this is so outside my domain, that, um, I would really need someone to walk me through this. Um, I want you to succeed, Alex. I do believe that you could. Actually be, um, delivering the Holy Grail to all of us. But this is just too early for me as an angel and for the fund, given the fact that this is not an area that we feel we have complete competency in. So, um, I am going to pass.
Alex: Yeah. Uh, no. Uh, fair enough. Uh, no. I really appreciate the time and consideration and words of encouragement and, andit makes sense and, uh, you know, we understand that, uh, our particular proposition here isn't, uh, isn't for every investor for sure.
I caught up with Alex after that call, and he says he&#;s used to this kind ofthing - generalist investors get stuck in due diligence all the time. And he gets it, there&#;s a lot of risk investing in something you don&#;t fully understand.
Alex: I wish, you know, Jillian or Mark would've reached out to some of our prior investors. Cause I think they might have been able to welcome through some of the tech risk that, that they've already evaluated in their own due diligence. For example, we&#;.we'll take kind of perhaps more generalist focused VCs who are interested and have them talk to. The Tech Nexus who was the lead in our seed round, or, or Tamara Global, which was the other big ticket in our seed round. And those conversations usually, usually help, um, move due diligence along. And I think that is why we tend to work more with clean tech focused, or, you know, strategic VCs rather than more generalist VCs.
Josh: I mean like, only time will tell right? But like if you raise that series A in a couple months, it's gonna look like the investors in our show just completely missed the boat.
Alex: Yeah, i mean, you know, uh, I mean, I'll do my best to prove them wrong.
In the meantime, it&#;s been a busy few months for Natrion. They&#;ve brought in some new employees, and they&#;re working with the Department of Defense now - doing contract work creating batteries for things like handheld radios.
They&#;re even working on doing a test for their batteries in space. As you know from every space movie ever, fire in space&#; very very bad.
So they&#;re hoping to send their batteries up to the the International Space Station in the next few months, and test them out. Which is pretty cool.
Josh: What's it like to go from the guy, like in a lab, in college, trying to come up with a, the holy grail of battery technology to running a company that's pitching for millions of dollars in government contracts?
Alex: I haven't had the chance to kind of reflect on it too much, I guess, but. You know, it's just, you know, I'm, I'm just here to do whatever, whatever the company needs for me to do. So, um, yeah, I wish I did more lab work like I used to. That's, that's my favoriteYou know, I never, I never went to, to business school I just, I just kind of pick things up as I go along. I made mistakes, fortunately, not enough to get us in too much troubleAndit's worked so far. Uh, hopefully it'll keep working for me, but I think I've been okay at it so far.
Ugh! Anyone wanna take some science risk with me and help me due diligence this thing? If it&#;s in every Electric Vehicle in the next 5 years, I&#;m gonna be pissed. I don&#;t wanna miss out!
There are only two episodes left of this season&#; so, if you&#;ve been enjoying it so far, don&#;t let your friends miss out! Go to pitch.show/text, on your , and send them a text. You would be the best friend if you did that.
Next week on The Pitch&#;
Victor: Are these contracts signed?
Elias: Yeah. They're signed.
Victor: But how sure - how sure are you that you're gonna do $3 million next year?
Elias: I'm very sure.
Jillian: I mean, there's no guarantee,because the retail business is just not predictable right now. In fact, it's predictably bad right now, if anything else.
Elias: Definitely. I think that is time for the knight in shining armor.
That&#;s next week in The Pitch Room. See you on Wednesday.
The deadline is fast approaching to pitch on our next season. We&#;re recording this June in San Diego CA. So if you&#;re a founder raising pre seed or seed round, go to pitch.show/apply and upload your pitch deck.
And if you want more from us, subscribe to Pitch+. You&#;ll get ad-free listening to the entire catalog and occasional bonus content. Plus, it&#;s a really good way to support the show. Just go to pitch.show/plus to learn more.
The Pitch is me, Josh Muccio, Lisa Muccio, Kerrianne Thomas, Anna Ladd, and Enoch Kim.
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The Pitch, Inc. and their respective employees and affiliates do not provide investment advice or make investment recommendations. The information provided on this show should not be used as the basis for making investment decisions. Listeners should conduct their own research and consult with their own investment advisors before making any investment decisions.
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