Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in tech and biotech. Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here. I always enjoy hearing from you.
Jeff,
You have talked a lot about batteries and how lithium-ion batteries will be a limiting factor in electric cars and other battery-operated devices. You haven’t said anything about electric glass batteries. Is that because they aren’t a real contender? or because they haven’t been developed far enough? From what I’ve been reading, it seems like they could take over the world of batteries in 2-4 years. What don’t I understand?
– Greg L.
Hi, Greg. Thanks for your question.
I’m glad that you asked as this is an interesting topic. “Glass batteries” are a type of solid-state battery.
The idea came from John Goodenough in late 2016 as another iteration on solid-state battery technology. Goodenough is now 100 and was the original inventor of the Li-Ion battery. Pretty awesome considering he continued to innovate and invent into his 90’s.
I’ve shared a good deal of my thoughts on the potential for solid state battery technology. It’s exciting and very promising, but it’s not without its challenges.
Solid-state batteries have been testing well in laboratories, but at scale, they are proving difficult to manufacture. I gave a presentation on this topic last year.
From an industry perspective, solid state batteries are a major pursuit and business opportunity. Li-Ion batteries have undergone a slow, incremental improvement process for decades now, with no major breakthroughs. For consumer electronics devices and electric vehicles, solid-state battery technology may be that breakthrough that we’ve all been hoping for.
Solid-state batteries have higher energy density and lower weight. Said another way, they can carry the same amount of energy for less weight, or more energy for the same weight compared to a Li-Ion battery.
This is potentially a big deal, especially for electric vehicles. When we lower the weight of a car, we get more margin in the range of the vehicle.
What does this mean in terms of range? Some researchers estimate that solid-state batteries would result in 80% more range for an electric vehicle. We would be looking at potentially 400+ miles of range per charge. That’s on par with what we’d expect from a full tank of many gas-powered cars.
Those same estimates predict that charging time would also decrease. Charging a solid-state battery from 10–90% would take less than 20 minutes. That’s a game changer.
But it’s not without problems.
Silicon is the desired material for solid-state batteries. On the surface, it sounds great. Silicon can store ten times as much energy by mass compared to graphite, which is what is typically used in the anode to store the charged ions.
The issue is that silicon expands and contracts significantly through the process of charging and discharging. And it is also impacted by temperature. This can also result in fires.
With glass batteries, the “glass” is a conductive glass electrolyte through which the ions can travel. The glass electrolyte is formed from lithium hydroxide and lithium chloride.
There is a lot of nuances in different approaches to using silicon in solid-state batteries, using different kinds of conductive electrolyte, and different anode and cathode chemistries. Yet none of the approaches have been proven and commercialized for EVs. This is an area that we follow closely for fairly obvious reasons.
The technology is promising, but the EV industry will be relying on the more traditional lithium-ion battery technology for at least the foreseeable future.
And that means that the headwinds you mentioned – a limited availability of lithium mining and refining – are going to be a problem for the industry for some time.
Whenever I see positive developments in this space, my readers will be the first to know.
Hi Jeff,
I’m a Brownstone Unlimited subscriber and I’m really enjoying the service. Every update is educational, and I truly appreciate the effort.
With your latest Day One Investor update, it raised a question as to what an expected return might look like for someone who is investing the minimum with these companies. I’ve invested in six recommendations thus far, which equated to a minimum total investment of $1,000 (Skybound was $500, the other five were $100 each).
If you provide 50 recommendations over a 5-year period, and I participate in all of them, then I can assume that will be an overall investment of more than $8,000. Again, I’m using a minimum investment assumption. What type of return might one of these companies provide to a minimum $100 investor like me?
I’m not asking for you to forecast the results, I’m simply trying to logically understand if an $8,000 investment makes sense considering I’m only investing at the minimum.
– Brad F.
Hi, Brad. Thanks for being an Unlimited subscriber and for your thoughtful question. As I’m sure you know, I can’t offer personalized advice. But I can speak generally on this topic.
The important thing for us to know is that in percentage terms, returns will be exactly the same for all investors in any given funding round.
Our entry valuation is “locked in”, which is typically determined by a valuation cap. And our exit – typically an acquisition or IPO – will be the same for each investor in a specific funding round.
The decision on how much capital to deploy into each investment is a personal decision that each investor will have to make for themselves.
The important thing for us to do is to only deploy capital we would be comfortable “locking up” for potentially years. And we should remember that there’s always the chance these companies fail altogether. If, after considering this, an investor decides to allocate the minimum level, there’s absolutely nothing wrong with that.
This isn’t a bug of private investing. It’s a feature. And it’s happened to me on several occasions. I’ve ben an angel investor for years. I have several hundred private companies in my portfolio. Some of them were incredible standouts.
I was able to invest in Coinbase years before the company held its IPO. I invested in a company called harvest.ai before it was acquired by Amazon at a valuation that was multiples higher than my entry level. And I was able to invest in Bolt Financial. At its current valuation, I’d say my return is roughly 100X from my entry level.
But of course, there were others that simply didn’t pan out. I invested in a company called Tesloop that offered self-driving car services with Tesla’s full self driving (FSD) technology. The company shut down and I lost my entire investment.
I invested in Planetary Resources, which was developing technology to mine asteroids. The company was acquired at a level more than 90% below my investment level.
It’s never fun to see a private investment fail. But as private investors, we should absolutely expect it to happen to at least a few companies.
That’s why it’s so important to build a portfolio and be rational with our position sizes. Because all it takes is one or two “home run” returns to build generational wealth.
What sort of returns could we expect? As I’m sure you can imagine, that’s difficult to say with any certainty. But to give readers some idea, let’s have a look at one of our portfolio companies.
In February last year, we invested in a company called Mighty Monkey (now called “Mightylicious”). It’s a company with a proprietary rice milling technology that produces delicious gluten-free cookies and, eventually, other baked goods.
This is a massive market that’s growing. Here’s the chart I shared in the original research.
This is a massive market that’s growing. Here’s the chart I shared in the original research.
We invested at a $15 million pre-money cap. It really was “day one” for the company. What sort of return could we expect from Mighty Monkey/Mightylicious? We can get some idea from recent acquisitions in the space.
In 2019, Mondelez International – a multinational confectionary company – acquired Tate’s Bake Shop for $500 million. Tate’s is similar to Mightylicious in that both started as humble cookie companies. But I’d argue that Mightylicious has a superior product, especially for consumers looking for gluten-free products. If we were to see an acquisition at similar levels, it would result in a 3,200% return on investment.
Of course, that isn’t a guarantee. But that is the sort of potential I see with Mightylicious. And of course, it’s just one of thirteen companies in our portfolio. And since our mission is “five years, fifty deals”, it means we have thirty-seven more opportunities coming down the line in the years ahead.
Thanks for your question, Brad. So long as we stay disciplined in our strategy, I believe we’ll be very happy with our portfolio at the end of this journey.
Dear Jeff,
As a Brownstone Unlimited member, I am always all ears on following your superb research. Because you’re an expert in bleeding edge technology and biotech, I have a personal question for you.
I am aware you can’t give any personal financial advice, but my question doesn’t have any financial interests. Instead, it’s about my wife suffering from SLE (Systemic Lupus Erythematosus) ever since the birth of our first child 13 years ago. Life has been up and down for my wife, but lately with a lot of downs.
The corticosteroid (prednisolone) medication, in combination with chloroquine phosphate, has lesser and lesser impact. That’s the reason why I’m writing to you.
I was wondering if you know a (private) biotech company who has special interest and R&D in treating patients suffering from SLE?
If you do so we would be grateful for any advice or tips. Thank you in advance for your feedback.
– Ignace
Hi, Ignace. Thank you for being a subscriber. And thank you for sharing your story. I’ve always said that we – along with our loved ones – are the best advocates for our health.
SLE is a terrible disease. Medical interventions and lifestyle changes can help control the symptoms. But as you know, there’s currently no cure. As it happens, there is a small biotechnology company looking to change that.
Last October, Cabaletta Bio (CABA) announced a new therapy dubbed CABA-201. It’s a one-time CAR-T therapy designed to refractory systemic lupus erythematosus (SLE) and other autoimmune diseases. The company is currently in preclinical trials. From there, it will move into Phase 1 trials.
If you are doing research on clinical trials for SLE, I’d have a look at Cabaletta. You can learn more about CABA-201 right here.
My best wishes to you and your wife. Best of luck in your journey and I’ll keep my fingers crossed that you find therapeutic support that helps your wife.
Regards,
Jeff Brown
Editor, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
