Sila Nanotechnologies just won another $170 million of venture and corporate funding to develop advanced battery materials that improve power performance of electric vehicles and consumer electronics.

The Alameda, California-based startup, founded in 2011, is looking to commercialize a new set of high-performance silicon anode materials that could replace the commonly used graphite in lithium-ion battery anodes.

This latest funding round was led by Daimler AG along with Joe Lonsdale's 8VC, joining earlier investors Sutter Hill Ventures, Bessemer, Samsung, In-Q-Tel, Matrix Partners, Changwei Capital, Next47 (Siemens' VC arm), and Chinese battery builder Amperex. This round brings the firm's total funding to $295 million and puts Sila in unicorn valuation territory, according to reports.

Sila makes a number of claims on its website and in its press releases: high cycle life, ultra-low swelling, high energy density, and getting its product into "millions" of consumer devices electronics this year with a "drop-in manufacturing process." The startup suggests that its materials can increase the capacity of a lithium-ion battery by 20 percent to 40 percent.

Sila has reputable investors and a founding team with strong battery pedigrees. CEO Gene Berdichevsky was employee No. 7 at Tesla, where he worked on battery system development for the Roadster. But 40 percent capacity improvement is an audacious claim and remains to be proven in the real world. It would be a breakthrough — although this writer is reminded of the words of Thomas Edison regarding battery entrepreneurs.

Cracking the code on silicon anodes

“We’ve cracked the code on silicon thanks to eight years and 35,000 iterations developing our materials to improve battery storage capacity,” said the CEO in a release.

Battery expert David Snydacker of Dosima Research told GTM: "Recently, a new class of silicon anode technologies has emerged based on porous silicon particles. These porous silicon particles mimic the conventional graphite particles, offering mechanical stability and lower surface area, while also enabling higher energy density."

That's the new class of materials that Sila is developing. Silicon stores more charge than traditional graphite anodes, and so thinner anodes can be built that speed up charging without sacrificing energy density.

This injection of cash will allow Sila to build a manufacturing facility in Silicon Valley as it works to qualify its products with major battery manufacturers.

Will batteries replace the internal combustion engine? Not without "fundamental breakthroughs in energy storage," according to Berdichevsky in a previous interview.

VC expectations and new battery tech

Sila appears to be a materials supplier, not a battery builder. This positions the company as a component supplier in a wildly competitive and rapidly commodifying business with plummeting average selling prices. Those are difficult business conditions for a startup — but if its claim of 40 percent performance improvement is real, then plenty of automotive manufacturers are going to be interested in learning a lot more about Sila's technology.

There's always been a bit of a mismatch between investor expectations and new battery technologies. Faced with the harsh reality of thermodynamics, battery startups have to make enormous efforts in time and capital to make just incremental performance gains. VCs are conditioned to seek product improvements that wreck markets, rather than incremental gains.

Despite the challenges of battery science and manufacturing, automakers and venture capital firms invested more than $1.3 billion in energy storage technologies last year, according to Wood Mackenzie Power & Renewables. These battery aspirants include:

  • Solid Power, funded by investors such as Hyundai and Samsung, claims its technology provides "substantially higher energy than conventional lithium-ion" while also reducing the system-level costs of safety precautions. 
  • QuantumScape landed a $100 million funding round last year for its solid-state battery that eliminates the liquid electrolyte typical of today's batteries. Investors include Kleiner Perkins, Prelude Ventures, Lightspeed, Capricorn and Khosla Ventures. 
  • Ionic Materials' plastic-like polymer serves as an electrolyte, and can work with active battery materials like lithium, zinc and aluminum. 
  • Sion Power has been working on advanced batteries for decades and claims that its lithium-sulfur materials system has the highest theoretical gravimetric and volumetric energy densities of any battery system.
  • Prieto Battery is developing a three-dimensional lithium-ion structure to increase energy density and cycle life with funding from Stanley Ventures and Intel. 
  • Sakti3, acquired by vacuum builder Dyson, has been developing solid-state batteries, as was the Bosch-acquired Seeo with its polymer electrolyte. 

Chinese lithium-ion battery developer and manufacturer Farasis received a $790 million investment last year. China's Skio Matrix raised $159 million for lithium-ion battery and EV development.

The rapid growth of a viable EV industry is driving the advanced battery industry to new heights in revenue and technological progress. This is why venture capitalists are eager to invest in batteries relative to, say, solar hardware. Assorted forecasters peg the 2025 market for electric car batteries as ranging from $36 billion to $125 billion a year. That's big enough to get a VC's attention.

Berdichevsky is adamant that the performance and cost of electric vehicles will depend on the battery itself.   

And so, despite the less-than-stellar track record of VC-funded battery firms such as A123EnviaAquionImergyAlevo et al., there is still a massive movement of talent and capital into the battery business.