Diversity in Secondary Batteries
2023 was a fascinating year for me.
Real estate seemed to pass its peak; people were fervently investing in fabless semiconductor companies; the market capitalization of electric vehicle companies hit all-time highs; the valuation of Toss—a company co-founded by friends of mine and one I was involved in as a first angel investor—soared significantly; and the stock prices of the secondary battery industry swung wildly, like a roller coaster ride between highs and lows.
The only battery-related company in my portfolio is "Grinergy," which produces LTO anode secondary batteries.
At the time of investment, I believed that within the value chain, this was one of the last remaining areas worth exploring as a venture capitalist, and I felt it was a justified investment. Subsequent follow-up investments have been made, and the company is now pursuing large-scale loans for facility expansion. While there is still a long way to go, observing the market’s trajectory reassures me that it’s worth continuing its journey.
In the 2023 stock market, Nvidia and secondary battery companies looked as if they were in fierce competition to see whose stock price could perform better. Thereafter, Nvidia surpassed $2 trillion in market capitalization by year-end, while battery companies hit rock bottom as if the world were ending. This demonstrated how movements in the downstream market dictate the prospects of upstream material suppliers. AI, bolstered by tools like ChatGPT—an unbelievably convenient AI service —continues to advance, driving significant growth in GPUs, data centers, and power infrastructure. The emergence of alternatives to CUDA cores and the anticipated surge in energy consumption for large-scale AI computations suggest that energy efficiency will remain a critical focus of technological investment for the foreseeable future.
Analogy: Lessons from the Mobile Phone Market
As the mobile phone market expanded, the repeater market grew alongside it. Suppliers shared a common interest in baseband chips, which led Samsung to develop Exynos. This demand also inspired my first venture investment 17 years ago in a fabless company (Amicus Wireless), though it didn’t succeed. The WiMax technology it was banking on failed to become mainstream, as the market quickly transitioned to LTE. Establishing global standards from Korea proved challenging, and there was a prevailing belief that fabless ventures were difficult for Koreans. Unfortunately, this notion was validated.
Observing companies like Rebellion today reminds me of those early days—Rebellion’s GPUs feel akin to the WiMax baseband chips of that era.
Contrasts with the AI Market
In contrast, the battery market feels heavily driven by one individual: Elon Musk. He created excessive hype around electric vehicles, convincing the world to believe in his vision and invest accordingly. But hype inevitably creates valleys of disappointment. The fantastical narrative of the downstream market led even traditional battery makers to over-promise on futuristic technologies with significant physical barriers that are unlikely to materialize before 2030. They marketed these as if they would be ready within 2-3 years while struggling to address fundamental issues, such as battery fires, and recklessly built factories. While the hype had its downsides, the mantra "show must go on" applies here. Who could deny the future of electric vehicles or trivialize the importance of battery technology, which lies at their core?
The Emerging Battery Industry
The battery material business at POSCO and the rise of large corporations like EcoPro underscore the industry's growth. Individual investors as well as institutional investors, have profited significantly. So, who will be the next protagonist? Can my portfolio company become one of them?
The secondary battery market is likely to regain significant attention at some point, especially regarding solid-state batteries and supply chains. However, Moore's Law and other technology acceleration models don’t seem to apply well to this industry. If the market experiences another surge of interest, it will likely focus on utilizing future technologies to fuel stock market booms. However, such interest may not last long.
When another wave of hype arrives, it would be ideal to see diverse battery technologies tailored to specific applications—batteries optimized for vehicle use, infrastructure needs, and, above all, safety for humans. It would be wonderful if each technology could gain recognition and find its market. However, it’s unrealistic to expect the general public to grasp these technologies, nor can we fault the market for this.
As venture capitalists, we “pay forward” by investing in businesses and technologies, hoping that our interests align with those of the market.
