Sifted - Trouble at Northvolt

Good morning there,

First Darktrace, now (possibly) Deliveroo; it looks like the London Stock Exchange (LSE) is falling even further out of favour with tech companies, as Reuters broke the news yesterday that the listed UK food delivery company held talks with its US competitor DoorDash about a takeover. 

If Deliveroo were to be acquired, it would set off down the same path as cybersecurity company Darktrace, which announced its acquisition by PE firm Thoma Bravo for $5.3bn (and plans to delist from the LSE) in April. (That deal is still subject to regulatory approval, but is expected to conclude by the end of 2024.) 

Deliveroo listed on the LSE in March 2021 at a £7.6bn valuation — in what one of its bankers called “the worst IPO in London’s history” — and saw its share price plunge immediately (although it rallied later that year). It’s now valued at just £2.1bn.

That makes the food delivery company — which began operating at a profit for the first time last year — a prime target for M&A, argues the FT’s Lex column. 

And if it does get acquired, I’m sure it’ll be far from the last big European tech company to fall into American arms. Do you agree? Hit reply.

Elsewhere today:

• Trouble at Northvolt: safety concerns, scrapped orders and a factory up in the air 
• The Entrepreneur First-backed startup building a novel device for the anal sex market
• Tesla alumni raises €6m to build a cheaper, faster direct air capture plant

— Amy Lewin, editor

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Trouble at Northvolt

Sweden’s Northvolt has long been the jewel in the European climate tech crown. It’s Europe’s best-capitalised battery manufacturer, and was one of the first startups to get the likes of BlackRock, Goldman Sachs and Baillie Gifford to open their wallets and back the new generation of green tech. 

But despite carrying the weight of Europe’s domestic battery hopes on its shoulders, it’s coming off the back of a bad week.

Shareholder BMW pulled a multi-billion dollar battery order, citing production delays, and Northvolt’s currently reassessing the viability of one of its factories. On top of that, there are concerns over worker safety after a number of deaths at the company's facility in northern Sweden.

€2bn BMW contract pulled

Northvolt, which makes batteries for electric vehicles and sells them to automotive companies, has one gigafactory up and running in Sweden and three more in the works. 

It delivered its first battery cell to a customer in 2022, but since then delays have left others waiting. 

Last week, it was reported that a €2bn contract Northvolt had with German car maker BMW had been cancelled because of production delays. The contract, signed in 2020, was worth around 4% of Northvolt’s order book, which stands at $55bn according to its 2022 annual report. One industry source told Sifted that Northvolt was two years behind schedule on the order when it was cancelled.

“Several factors weighed into the mutual decision,” Matti Kataja, Northvolt’s communications director, told Sifted. The order was for prismatic cells, used in two current BMW EV models. Both companies hope to keep working together on next-generation cells, Northvolt added. 

Northvolt was also late delivering cells to Swedish truck maker Scania, which opened an electric truck factory in September last year but had to wait until the start of 2024 before it could begin production.

It has some big contracts with others vehicle makers. Northvolt’s largest order is with Volkswagen, which ordered $14bn worth of cells in 2021 to be delivered across a 10 year period. Sifted asked Northvolt and Volkswagen how many cells should have been produced by mid-2024 and how many had actually been produced, but did not receive comment from either company.

A factory up in the air

Last week was a particularly tough week for Northvolt. Alongside the cancelled BMW order, Swedish media reported that its plans to open a fourth factory, in Borlänge, Sweden, had been abandoned.

Northvolt has since issued a statement saying no final plans have been made, and it is conducting a review of the site. 

“The sale of our site in Borlänge has been one of several options under strategic review,” Kataja said. “Discussions remain ongoing and no decisions have been made.”

“A dark day” at Northvolt

Three Northvolt staff who worked at Northvolt Ett, a gigafactory under construction in Skellefteå in northern Sweden, have also died this year. All three passed away at home, rather than at the factory site.

Kataja described the deaths as “tragic”. He said that the police had conducted an investigation into the first two deaths and found no cause for suspicion or cause to suspect any connection between their passing and their workplace. After the third person died, the investigation was reopened, a decision Northvolt told Sifted it supports.

The deaths this year come after two people who also worked at Northvolt Ett died in two separate accidents last year.

Peter Carlsson, CEO and cofounder of Northvolt, said in a comment to Sifted at the time that it was a “dark day” for the company.

The Swedish Work Environment Authority, together with the police and the prosecutor's office responsible for investigating work-related accidents, opened an investigation into the incidents, which Northvolt said has now closed. 

An IPO?

Northvolt has raised $13bn in debt and equity to date, including a $5bn loan in January – the largest green loan ever raised in Europe. 

At the same time losses for the first three quarters of 2023 increased eightfold from the year before to almost $1.1bn. 

“This is a capital-intensive industry, but investment is required to establish the manufacturing position we intend to hold,” Kataja said.

“Northvolt was founded with ambitious plans, and challenges remain in the ramp-up of cell manufacturing capacity which is an incredibly tough endeavour,” he added.

In 2022, Northvolt said it envisaged an IPO within the next two years, which would mean this year. Recent reports, however, suggest that the company will push back its listing until 2025, after a challenging IPO market and a series of operational hurdles.

The company’s IPO will be an interesting one for the climate tech world. It'll mark the first time a green startup of the current era has opened itself up to the scrutiny of the public markets. Hyped as they are, none of the new infrastructure startups have had their valuations put under the spotlight in the way a public market debut would.

For more analysis and news on Northvolt, and other leading European climate tech companies, sign up to our weekly climate tech newsletter.

— Freya Pratty, senior reporter

🍑 EF-backed sextech Polari Group has raised a pre-seed round to fund the development of a novel product for the anal sex market. The company is developing a ball-shaped device designed to be inserted into the rectum before anal sex, to prevent what it calls “faecal accidents.”

• It’s raised $539k from investors including VC Chasing Rainbows, Ada Ventures's angel programme, angel network Ventures Together and family office Little Green Bamboo Capital.

🏭 Direct air capture (DAC) startup Sirona Technologies, a Belgian climate tech founded by former Tesla engineer Thoralf Gutierrez, has raised a €6m equity seed round led by VCs LocalGlobe and XAnge. It hopes to open its first production plant, which will use DAC technology to remove carbon dioxide directly from the air, in Kenya.

• It’s not the only DAC company to head south: Kenya’s emerging as a hotspot for companies working in the sector. Swiss startup Climeworks, which already has a DAC plant in Iceland, is building its second production site in the African country, and says that it plans to be removing at least 100k tonnes of CO2 per year from 2028.

🎓 Mairi Gibbs, the new head of Oxford University Innovation — the UK uni’s tech transfer office — told The Times that there’s a proof-of-concept funding gap in Britain holding back hundreds of scientific discoveries from being readied for VC funding each year.

• “This early-stage funding is vital to demonstrate a proof of concept to potential investors and commercial partners, showing that it will be commercially feasible to develop a new and useful product or service based on that research,” she said.
• More translation funding was one of the recommendations put forward by a UK government-commissioned review into the state of the country’s spinout ecosystem, published last year.

🫒 Could Greece become the next big ecosystem success story in Europe? (Sponsored by Endeavor Greece).

Europe's 100 most promising B2B SaaS startups

A new tech era has begun, and for now at least, it belongs to AI companies. Find out more in our latest ranking — the ultimate list of B2B SaaS startups we believe will reach $1bn-plus valuations. So who made the cut? 

Manchester, UK-based Be.EV, which specialises in electric vehicle charging networks, raised £55m in debt funding from NatWest and KfW IPEX-Bank.

Leuven, Belgium-based Augustine Therapeutics, a biotech focused on neurological diseases, raised €17m in Series A funding. Asabys Partners led the round and was joined by investors including Eli Lilly and Company, Charcot-Marie-Tooth Research Foundation, AdBio partners, V-Bio Ventures, PMV, VIB and Gemma Frisius Fund.

Helsinki-based Valpas, a pest control startup, raised €4m in seed funding. Zenith VC led the round and was joined by investors including Icebreaker VC, Finnish Industry Investment, Canon Marketing Japan MIRAI Fund, Activum SG Ventures, Houghton Street Ventures, Rockaway Ventures and Morrow Ventures.

Copenhagen-based Viio, an AI-based spend management platform, raised £2.7m in funding. North Ventures led the round.

Ghent, Belgium-based Otamiser, which develops software to help improve positioning in search results on travel platforms, raised $3m in funding. Pitchdrive VC led the round.

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