Northvolt has become a decacorn in fewer than five years, leveraging debt, grants, and equity financing from suppliers, customers, and institutions. Its success factors to date include a strong, collaborative stakeholder ecosystem and having a talented C-suite team with key industry experience.

In conversation with CEO Peter Carlsson and former General Counsel Sofia Graflund, we discuss Northvolt’s gigascaling journey to date.

The Climate Brick: What were some of the start-up hurdles that Northvolt faced?

Peter: Firstly, bringing in competence and know-how from around the world was a challenge. We needed to know what clusters of competence we needed. Secondly, we are a scale business, i.e., go-big-or-go-home, with a huge entry capital expenditure hurdle, and we knew from the outset that there was a large risk that it wouldn't work. However, our belief that we could become a pioneer in Europe outweighed the risk of failing.

The Climate Brick: How important were partnerships and financing for Northvolt's success?

Peter: Partnering up with different stakeholders was a key enabler for us as it helped set a more solid foundation for pure financials to invest. Seeing strategics such as technology and/or car makers also lining up gave other investors comfort and helped lower the perceived risk in the beginning. The automotive industry is also undergoing a huge transformation, with so much happening both technically and on the investment side, and traditional customer-supplier partnerships are no longer working for everyone. We are therefore seeing more discussions around joint ventures, similar to our partnership with Volvo Cars, and other more strategic, integrated ways of working - a new era of supply chain.

Sofia: I agree that strong industrial backing was key, such as the one we had from BMW and Volkswagen, for closing the project financing – it showed the financial investors and the lenders that there was a large appetite for our batteries and that the industry believed we could execute on our strategy. Strong offtake agreements attracted the financial investors we needed, and LOIs alone wouldn’t have taken us all the way. Strong partnership agreements are however helpful even if they are not bankable. For Northvolt, we had strong commercial agreements in place from an early stage, and these had to be innovative due to lack of a mature product at that time, making the role of strategics again an important one.

From the supply chain point of view it was important for the project financing to secure the raw material required for the offtake agreements – we needed strong partnerships here as well, with partners that understood the complexity of the project we were building.

The Climate Brick: What was your approach to scale and were there any particular technical roadblocks?

Peter: The typical journey is to have a product, then to industrialize this product, and finally find a manufacturing concept based on that industrialization that is scalable. At Northvolt we took a middle step to scale. We funded Northvolt Labs, an R&D and industrialization facility. We assumed we needed roughly €100m. To date, we have invested over €500m, but the facility’s scale has also grown significantly. This acted as a first step to prove the product and process on the journey towards a larger industrialization. We think this is a key enabler, and it was difficult to properly value the company before this.

Moving all stakeholders step-by-step together towards a solid foundation was a necessary, but incremental, journey. The car makers needed to make financing investments, the suppliers needed to take risks selling equipment, and the regulatory and municipality support needed to be onboard. We had to construct the necessary stakeholder ecosystem as we understood no one would take the big jump individually.

Sofia: Doing what Northvolt is doing is maybe most of all an executional risk that the investors and lenders needed to be able to assess and to be comfortable with. Northvolt Labs gave us a chance to prove the team’s capability to execute.

The Climate Brick: What is your key advice for new founders?

Peter: You make a lot of mistakes. The most important thing is to recognize that you made a mistake and correct it as fast as hell and go on. Then don't think too much about it. Focus on going forward. Create a drumbeat for the organization, build KPIs, measures to track progress, and keep yourself to it. One of the biggest reasons we have gotten the funding we have to date is because we have walked the talk on our execution and financial plans.

The Climate Brick: How do you think a missing manual for how to scale climate tech will help?

Sofia: For founders, The Climate Brick will provide a checklist for inexperienced entrepreneurs and CEOs, which I believe will be super helpful. Some tech founders have great technical expertise but may lack knowledge about financing and running of a business operationally. Building a library for climate tech start-ups will help address this knowledge gap, and The Climate Brick is a great initiative to help spark this.