Redwood Materials, the battery recycling startup run by Tesla cofounder JB Straubel, just raised $350 million in a funding round that pushes its valuation past $6 billion.
The deal, led by Eclipse with participation from Nvidia’s venture capital arm NVentures, supports Redwood’s surprising new role powering the generative AI boom.
At first glance, a company known for reclaiming metals such as cobalt, nickel, and lithium might seem far removed from the realm of large language models and GPU clusters. But as AI data centers multiply across the US, power has become a defining bottleneck. Redwood’s growing grid energy storage business aims to solve that.
Back in June, the startup unveiled Redwood Energy to help power the AI revolution by repurposing used batteries into energy storage systems. Its massive new battery installations store electricity at low cost, releasing it during high-demand periods to stabilize the grid and feed energy-hungry data centers.
Eclipse’s Joe Fath, a former T. Rowe Price fund manager who backed Tesla early on, helped drive the latest funding round. Nvidia’s involvement as a strategic investor is also notable as the chip giant seeks ways to keep the AI boom energized.
“This energy business is a really exciting opportunity for them to go attack,” Fath told Business Insider in an interview. “They have a unique opportunity to build out battery energy storage solutions and leverage all kinds of power generation, whether it be solar, wind, industrial gas turbines and ultimately nuclear, to power data centers that are off grid.”
Keeping the Fath
Straubel and other Redwood leaders initially pitched the energy business to Fath in August 2024 and the company went live with AI data center provider Crusoe this June, less than a year later.
“Time to market is extremely quick,” Fath added. “They have a very strong and proven ability to scale.”
Fath also likes how Redwood has evolved over time, with each new business getting better in terms of financial returns.
The startup’s original business of recycling EV batteries, which started back in 2017, was a “wedge,” Fath said. A more recent move to manufacture Cathode Active Material is promising but takes big upfront investment that will take time to recoup. In contrast, Redwood’s energy installations start generating revenue quicker, Fath said.
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He expects Redwood to add solutions in the future that help customers manage energy production and storage together more efficiently.
National priorities
Redwood’s two-pronged approach, critical materials and energy storage, positions it as both a new-age miner and power provider for the AI age. By recycling key minerals domestically and integrating them into advanced battery systems, Straubel’s company is tackling two national challenges at once: energy security and technological competitiveness.
“We need to have energy independence and protect sovereignty in the US,” Fath said. “So it plays into their strengths.”
The timing is critical. With foreign supply chains tightening and renewable generation still intermittent, Redwood’s US-made storage systems could help unlock stranded grid capacity and enable faster AI deployment. The company’s systems, designed with sophisticated power electronics and software, aim to complement natural gas and future nuclear plants, boosting efficiency and reliability.
Armed with fresh capital, Redwood said it plans to expand its refining, materials production, and storage deployments while recruiting engineers to “shape the next era of American energy leadership and critical minerals independence.”
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