EnergyX’s $75M Raise from Small Investors: A Strategic Move Post-VC Funding

For many startup founders, ensuring sufficient cash flow to fulfill their vision is a primary concern. While most typically seek to attract venture capitalists early on—exchanging equity and board seats for necessary funds—Teague Egan of EnergyX has taken a different approach by courting retail investors.

EnergyX, which has been at the forefront of developing innovative methods to extract lithium for electric vehicle (EV) batteries from subterranean briny water, has successfully raised over $90 million from traditional investors like GM Ventures, Posco, and Eni Next. However, it has also raised over $80 million from retail investors, including a substantial $75 million offering that recently closed.

Egan emphasizes that this approach "democratizes investment," providing more equitable access to investment opportunities while shifting some power away from traditional venture capitalists, who often push for unfavorable terms. By leveraging SEC Regulation A, which allows companies to raise up to $75 million from unaccredited investors annually, EnergyX has been able to broaden its funding base. In exchange for this access, the company submits to minimal SEC oversight, including the requirement to file semiannual reports. Unlike an initial public offering (IPO), a Regulation A offering keeps the company private, meaning investors cannot sell their shares on public exchanges.

Regulation A has garnered praise for enabling unaccredited investors—those with a net worth below $1 million—to invest in private companies before they go public, potentially reaping substantial profits if the startups succeed. However, the regulation has also faced criticism for allowing smaller investors to gamble on high-risk ventures. For example, Aptera, a solar-powered EV startup, has raised over $120 million through crowdfunding but has failed to deliver any vehicles after nearly 15 years of promises.

In contrast, EnergyX has secured additional venture investments alongside its Regulation A offerings, allowing it to refine its approach to direct lithium extraction (DLE), which involves drawing lithium from water. While several startups, including Lilac Solutions and Aepnus, are pursuing DLE, EnergyX employs a hybrid methodology, processing brines through various techniques depending on the source of the water. “All these brines are very different, and there’s not a one-size-fits-all technology,” Egan notes.

During the height of the SPAC frenzy, Egan considered going public through a special purpose acquisition company but ultimately decided against it. “We need to be getting substantial, positive EBITDA before we go public,” he explains. Instead, EnergyX secured a $450 million deal with investor Global Emerging Markets, which will provide funding through a private investment in public equity (PIPE). If EnergyX goes public, the firm will receive warrants and a fee, as well as discounted shares when the startup accesses that equity.

However, the timeline for EnergyX's IPO remains uncertain, likely several years away. “We’re at least going to do one more major institutional round, our Series C,” Egan shares. “If that gives us enough capital to execute on our first commercial projects that will start generating revenue, then it’s a discussion with the board of directors if we feel like we should go public to raise more capital and get some liquidity for early investors. Or maybe we’re just crushing it so hard that we can start paying dividends. Or maybe those acquisition offers start flowing in from big oil and gas companies.”

In addition to crowdfunding and the PIPE, Egan has developed further strategies to mitigate risk. EnergyX aims to sell its DLE equipment to major lithium mining companies like Posco and ExxonMobil. However, Egan acknowledges the lengthy sales cycles involved, often requiring multi-hundred million to billion-dollar investment decisions. To take control of its destiny, EnergyX also plans to extract lithium directly and sell it to customers, securing its resources and operational autonomy.

Currently, EnergyX has secured a lease to explore 90,000 acres in Chile and has submitted a letter of intent to lease an additional 15,000 acres in Texas. In the first half of next year, the company plans to commission demonstration plants at both locations, each designed to produce 50 tons of lithium annually. Egan anticipates that the first commercial-scale plants will be operational by 2027.

With its Regulation A offering providing a financial cushion for at least two more years, EnergyX can avoid the pressure of traditional venture capital funding, which often demands preferred stock in exchange for investment. Egan retains 47% of the company’s shares on a fully diluted basis, positioning himself to maintain greater control over EnergyX's direction. “There’s an extremely high percentage of startups where the founding CEO gets booted because of venture capitalists,” Egan observes. “That’s not where I want to be.”