Redwood Materials raises $700M to expand its battery recycling operation

Redwood Materials CEO JB Straubel shared his aspirations last year to turn the startup he co-founded in 2017 into one of the world’s major battery recycling companies. Now, the former Tesla co-founder and CTO has the money to accelerate those plans.

Redwood Materials said Wednesday it raised $700 million from high-profile institutional investors and venture firms, providing the capital needed to expand its existing operations well beyond its Carson City, Nevada home base to locations throughout North America and even into Europe.

The Series C round was led by funds and accounts advised by T. Rowe Price Associates, Inc. and included Goldman Sachs Asset Management, Baillie Gifford, Canada Pension Plan Investment Board, and Fidelity. Previous investors Capricorn’s Technology Impact Fund, Bill Gates’ Breakthrough Energy Ventures and Amazon’s Climate Pledge Fund returned to put more capital into Redwood. Valor Equity Partners, Emerson Collective, and Franklin Templeton also participated, the company said.

Redwood previously raised $40 million in a Series B and some seed money, which brings its total raise under $800 million, according to the company.

The company’s post-funding valuation is $3.7 billion, according to a source familiar with the investment round. Redwood declined to comment on the figure.

Redwood Materials is aiming to create a circular supply chain. This closed-loop system, Straubel says, will be essential if the world’s battery cell producers hope to have the supply needed for consumer electronics and the coming wave of electric vehicles.

Redwood recycles scrap from battery cell production and consumer electronics like cell phone batteries, laptop computers, power tools, power banks, scooters and electric bicycles. It then processes these discarded goods, extracting materials like cobalt, nickel and lithium that are typically mined, and then supplies those back to its customers, which today includes Panasonic at the Gigafactory in Nevada that it operates with Tesla and Envision AESC’s battery plant in Tennessee. Redwood has also partnered with Amazon to recycle EV and other lithium-ion batteries and e-waste from parts of their businesses.

“In our view, the need for these materials will grow exponentially over time as we enter the era of de-carbonization,” Joe Fath, portfolio manager of the T. Rowe Price Growth Stock Fund said in a statement, adding that “Redwood is well-positioned to be at the forefront of tackling this emerging and critically important problem.”

Straubel sees a bottleneck coming as the whole supply chain seeks to access critical materials. That will affect the growth rate and challenge automakers like Ford, GM and Volkswagen that have laid out ambitious plans to electrify their portfolios.

That problem is likely to compound as the number of automakers going down the electric path grows. Last week, Mercedes-Benz said it will spend €40 billion ($47 billion) plan to become an electric-only automaker by the end of the decade. The German automaker determined it will need battery capacity of more than 200 gigawatt hours. To hit meet those needs, Mercedes plans to set up eight battery factories with existing partners and one new partner to produce cells.

Straubel said it’s time for Redwood to scale more aggressively.

Those plans were already well underway even before it closed the $700 million round, Straubel noted. The company announced in June it had purchased 100 acres of land near the Gigafactory that Panasonic operates with Tesla in Sparks, Nevada. Redwood now has some operations at the site.

Redwood is also in the process of nearly tripling the size of its existing 150,000-square-foot facility in Carson City, Nevada. The new 400,000. addition onto the recycling facility is expected to be operational by the end of the year.

To support the growth, Redwood started hiring more employees with plans to add more than 500 jobs over the next two years. Redwood employs more than 130 people today.

The company has expanded in others ways as well, including the launch of a program that allows consumers to send in their personal electronics such as smartphones to be recycled.

“This additional equity to some extent helps us finish all those things, but it’s not really the primary purpose for all of it,” Straubel said.