At present, EnergyX is asking investors to assign the company a pre-money valuation of $54.115 million. This amount would be high even if it were generating a few million dollars in revenue and if it owned its patents. For a pre-revenue business that won’t be generating sales until at least late 2022, it’s off the charts. It is because of this that EnergyX’s price score is quite low. 

Fortunately for EnergyX, it fares a little better on the topic of market potential than it does price. According to one source we found, the global lithium-ion battery market is valued at about $44.2 billion this year. The expectation is for it to continue growing at a rate of about 16.4% per annum. If this comes to fruition, then by 2025 it should expand to $94.4 billion in size. A different source pegged the opportunity at $36.7 billion in 2019, with growth of 18% per annum increasing the market to $129.3 billion by 2027. And a third source pegged the market at $36.4 billion in 2019 with an eye at $116 billion by 2027 assuming a 15.6% annualized growth rate. 

At first glance, this looks great. It will be impressive if management does, indeed, make good progress when it comes to next-generate battery technology. However — from the way it has been framed by the company — that is still a distant dream. The real opportunity for EnergyX right now is on the lithium extraction side of the space. One source we found pegged the global lithium market at $4.2 billion last year. Its forecast was for the industry to grow at a paltry 1.9% per annum until 2027. Though this is more in-line with what investors might expect, a better way to value the opportunity might be from the bottom up. 

At present, management intends to generate revenue through technology licensing fees. Other revenue will come from product sales and initial implementation of its technologies. The licensing fees side of the equation will be, by far, the real opportunity for EnergyX. Their goal here is to charge $1,000 per ton of lithium extract. One source we found estimated that global lithium extraction should expand from 354 thousand tons this year to 820 thousand tons by 2025. A second source pegged the market at 500 thousand tons this year with the potential to grow to 1.5 million by 2025. If we take this range, we are looking at upside potential of between $820 million and $1.5 billion in sales annually. 

Taking all of this together, the market is certainly small for EnergyX. This is, of course, unless it ultimately does make real progress into the next-generation battery category. Absent that, I would say that the opportunity is disappointingly small. Balancing the small market opportunity against the market’s positive growth rate, EnergyX’s market score is middle of the road. 

When it comes to the success of a startup, the team managing it can go a long way. At present, there are two key team members in charge of EnergyX. The first of these is Teague Egan, the company’s founder and its CEO. Prior to starting EnergyX, Egan was a Managing Partner at Innovation Factory VC. Before that, he served as an Advisory Board member for The Nantucket Project, and prior to that he was the CEO of 1st Round Enterprises. That firm operated as a sports agency and record label. Very little of Egan’s past experiences seem to pertain much to the market he is in today. 

The other key person at EnergyX is Bob Wowk, the company’s CFO. Prior to serving as CFO of EnergyX, he was the CFO and Director/Advisor at Gulf Cryo, an industrial gases and services company. Before that, he worked as Interim CFO at Fluence Corporation. There, he helped to build out the finance operations for the firm’s distributed water and wastewater sector. He also aided in the integration of RWL, LLC into the public Fluence entity. His role before that was as a Managing Director at Tyczka Air Austria. At that firm he led the negotiations and acquisition of a minority stake in an industrial gas company. While none of these activities relate directly to the market that EnergyX is in, Wowk does have substantial experience that should serve him well in his current role. 

Due to the lack of relevant industry experience or prior entrepreneurial endeavors, EnergyX rates below average on its team score.

Though there are some weak spots for EnergyX, an area where the firm is very strong is on the differentiation side. Simply put, the firm’s technology and its licenses are highly valuable. And it is clearly and radically different compared to the existing technologies on the market. The speed with which the technology works and the implications it has for cost reduction should help industry players as well. Additionally — due to the technological complexity of EnergyX’s product — it is unlikely that a competitor will easily replicate the company’s tech. Thus, EnergyX earned a high differentiators score. 

When it comes to performance, EnergyX has some good points and some bad ones. On the bad side, you have the fact that in 2019 the company generated nothing in the way of sales. During this time, it generated a net loss of $786,027 and a net cash outflow of $665,061. You also have the fact that management does not expect real commercialization to occur until late 2022 or early 2023. On the other hand, the technology is under development and the intellectual property looks secure. This has allowed the firm to plan for between two and four pilot tests in 2021. This is made possible through its partnership with four of the top 10 lithium producers in the world, plus an unnamed energy major. Due to this early traction, EnergyX’s performance score is above average. 

Right now, there are some bearish things for prospective investors in EnergyX to consider. For instance, it will still be some time before the firm can successfully generate revenue. That’s an issue because it will likely mean subsequent capital raises and possible dilution. Throw in the high valuation and the increased likelihood of that resulting in a potential down round in the future, and there’s plenty of risk for investors. The team is also not as qualified as it could be, and the true market potential, while offering strong growth, is on the small end of the equation.

Even with the bearish considerations, there are some bullish ones that investors should keep in mind. For instance, the intellectual property and differentiation of the firm is an obvious strong point. The fact that the business has pilot tests planned and arrangements with major lithium producers is excellent. The relationship with Dr. Goodenough and the company’s goal of tackling battery technology is attractive as well. 

Putting all of this data together, it’s clear that EnergyX is an intriguing firm. There are plenty of risky attributes that investors need to weigh. The high price, small market potential, and inexperienced founding team bring risk to the company. But these appear to be more or less balanced by the bullish considerations — the clear advantages of the tech, upcoming pilot programs, and the exclusive licensing held by EnergyX. All in all, these considerations are what makes EnergyX a Neutral Deal.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.  

Analysis written by Daniel Jones.