Sarah Fleischer & Ksenija Milicevic Neumann, Co-founders at tozero: Building Europe’s first battery recycling plant

0:00Sarah Fleischer:Hello and welcome back to the Scaling Europe show presented by Deal. I'm Seb Johnson. Today I've got two amazing guests, Sarah and Ksenija, who are the co-founders of a very interesting startup building very hard stuff, opening Europe's first industrial demonstration battery recycling plant for lithium and graphite, which is a very hot topic given Europeans' push for sovereignty at the moment. Thank you for joining me both. How are you doing?

0:22Ksenija Milicevic Neumann:Hi, Sebastian. Very much looking forward to this podcast. Big fan of yours. So great to tell our story here.

0:29Sarah Fleischer:Amazing and last week you had some very big news Can you touch on the news that went out?

0:34Ksenija Milicevic Neumann:Yeah I guess it's one of the first time ever in Europe that we see one of the battery recycling firms to run and be launching a recycling plant It's our demo plant that went live last Friday at least we announced it last Friday so it's very exciting it's very hard work that our team went through the last six months setting it up from scratch

0:57Sarah Fleischer:How does it feel to kind of get it over the line?

1:00Ksenija Milicevic Neumann:Well, I think I leave it to Xenia. I think it's a dream come true from our side. I mean, three and a half years ago, Xenia and I sat down laying out the pitch deck, you know, like a typical PowerPoint. And seeing it now in real is quite bizarre. And I think Xenia has like a favorite quote that she has been repeating the last days, which is very emotional and very powerful. yeah i mean from my point of view this is what every deep tech founder dreams of and sometimes to be honest i need to pinch myself when i enter the plant to see wow yeah this is reality we really managed we really build it yeah and once again super proud of this milestone and what we have achieved

1:46Sarah Fleischer:amazing absolutely congratulations it must be a phenomenal feeling looking back three and a half four years ago why did you decide that this was the thing you wanted to build

1:57Ksenija Milicevic Neumann:i think i blame it on xenia i blame it on xenia although i i like i think we have to go far beyond it's probably two three years before we started to zero um xenia and i we met in the space industry i worked in the space agency and xenia uh working one of the coolest um space startups out of luxembourg building solar panels on the moon and mars and on the planet um and i planted the seed on her like, hey, why about not recycling lithium ion batteries? And three years later, she actually called me and said, hey, I actually got a tech. But maybe you can share more insights on that specific day and why you called me to start this company.

2:37Ksenija Milicevic Neumann:Yeah, I think that Sarah and I just have a very curious mind and we like to build something that has impact. We were brainstorming about many, many different topics, but there was this coincidence that battery recycling was also one of the projects during my postdoc at WTH Aachen University. And of course, with my background in metallurgical engineering and chemical engineering and the need, we are consumers and we all see what is happening out there. There is this era of electrification and we have so many electronic devices all around us. And there is this need for us to recycle those end-of-life lithium-ion batteries.

3:25Ksenija Milicevic Neumann:That's very straightforward and makes our business plan very easy, to be honest. Xenia, I thought you were going to pull out the romantic napkin story, why we started the company. Yeah, of course. On the other hand, first night when Sarah and I met, we actually signed on a napkin the contract that one day we're going to build a company together. Wow. Yes. That has happened. Three and a half years ago, we did this, and now we're looking at what we have built.

4:06Sarah Fleischer:What was it about that first meeting that made you both think, like wow this is somebody I've got to build something with the first meeting well actually

4:14Ksenija Milicevic Neumann:we just had this idea we need to build something and of course a lot of alcohol don't drink please this is not not a commercial for that but definitely made the atmosphere way easier and more talkable and and that's what led good wine good wine always helps good wine always helps No, I think like what's super powerful about us is like we just brainstorm, like we brainstormed about the world, about actually doing philosophy around what we think how the future looks like. And we just might. And I think that was like the moment where we captured it on that napkin and be like, hey, we're destined to be co-founders.

4:58Sarah Fleischer:That's amazing. And well, and here you are, right? however many years since that meeting but three or four years into bringing to building to zero and you've now got your first sort of plant up and running can you touch a bit about what that plant will actually be doing you know how much processing can it be doing what are the outputs

5:15Ksenija Milicevic Neumann:going to be yeah this is a demonstration plan so definitely serves for us to demonstrate that our technology is scalable and gives us the first real world indications about the profitability and all the different or the next stages that we're going to go through. So this plant is capable of processing roughly 1 ,500 ton of end-of-life batteries per year. And with that, we are producing lithium carbonate as products and graphite. And as kind of a byproduct that is also commercially viable is a mixture of nickel and cobalt that goes further to the customers.

6:00Sarah Fleischer:And what needs to happen? What do you need to prove to make this be, you know, the first of a long line of much bigger plants?

6:10Ksenija Milicevic Neumann:We just need to run it 24-7. So we need to transform this demonstration plant into the proper production plant. And this is our next step.

6:23Sarah Fleischer:And how are you going to do that? What are the barriers to getting you up and running, running at full capacity, proving the model?

6:30Ksenija Milicevic Neumann:I always say it's money.

6:36Ksenija Milicevic Neumann:Yeah, so basically we need the money to build the next stage. Yeah, I would maybe like add on here, you know, like a demo plant for sure is not perfect. That's why it's called demonstration. We're demonstrating that the technology actually works on this industrial scale. we need to run it several hours, hundreds of hours, maybe even thousands of hours, we'll see, to really create that blueprint of a fully functioning, perfect demonstration that we can then use for any future other scaling of future plants. And yes, and then money comes in, you fully inject that, and then you scale up via partnering or via yourself, industrial plants worldwide.

7:22Ksenija Milicevic Neumann:So this is actually the fundamental part, the last stage of future expansion, which is that's why this is like so fundamental for us. But for sure, lots of engineering work on the mechanical side, on the process engineering side that we're learning every single day when we're running this demonstration plan. And it's already life now. Right. So the teams are very busy. They were busy prior to this. Now they're even more busy.

7:49Sarah Fleischer:yeah i bet and you mentioned the need for money how how well versed are vcs in europe you know to to talk about and understand the problem right you must be what you're building must be incredibly technical are vcs you know adept to understanding the problem and understanding the technology that

8:09Ksenija Milicevic Neumann:you're building to solve the problem yeah you know like currently the era um we changed hashtags We changed the buzzwords. We used to be the climate tech company. Now we're a resilience company securing the supply chains of raw materials for the future for our energy independence. We were riding on those terminologies, but essentially we're a deep tech company that believes in regenerating critical raw materials so that we can become the miner of tomorrow, being the alternative source locally and not necessarily more expensive than miners, especially deriving from China or being operational in China.

8:45Ksenija Milicevic Neumann:you know in the first first pre-seed round i would say we just went with a pitch deck of course with fantastic results from xenia's postdoc research um that was quite easy to run through that fundraise um then this whole downer came here in europe with uh lots of criticality on geopolitics which i think was not easy for any any startup but we raised 11 million euros in our seed round so i think that's quite that's quite uh quite a lot um for any any startup um so So we're very proud that we raised that and we managed to raise that amount that got us this far. And yeah, as Xenia mentioned, we need lots more now moving forward.

9:23Ksenija Milicevic Neumann:We've done the most difficult part. And I think any investor, let's say commercial investor, should be quite happy because the tech is more or less mostly de-risked at this stage. We're just now fine-tuning to get to that blueprint and churn that tech into commercial activity as soon as possible.

9:43Sarah Fleischer:And can you touch on some of the pilots that you've been running?

9:47Ksenija Milicevic Neumann:Yeah, you can see some of them online. I can't mention further OEM logos. They have strict NDAs, but the ones that are public is BMW, MIN, our neighbors literally here in Munich. We're a Munich-based startup here out of Germany. Also, Webasto, that do a lot of power energy systems, where we demonstrated that we can recover more than 80 % percentage of that critical material, lithium, inside of those end-of-life batteries that Xeno talked about to demonstrate that we are, well, now five years ahead of time. We have those regulations by 2031 where we need to recycle and recover these critical materials by over 80%.

10:26Ksenija Milicevic Neumann:We can do that now. So there's like no excuse out there that we have to wait that long. And that's something that we demonstrated quite successfully and helped us to get a lot of momentum and we've done this also with several other oams quite successfully um so yeah those are some of the pilots i can we can mention publicly so you've got some regulations behind

10:46Sarah Fleischer:you that's going to help accelerate the business you feel there's a lot of like market tailwinds in this push to sovereignty you've got a lot of things that are going to help push the the business forward in terms of an ecosystem what are some of the things in the ecosystem that might hold you back or stop you from achieving the success that you want to see i think what's

11:05Ksenija Milicevic Neumann:important to understand is 2Zero's business model is not dependent on regulations. It helps us. It kind of enforces us. However, we demonstrate profitability in our business models that is independent of regulations. We aim to be able to produce critical materials here locally, at least at the same cost or price point or even cheaper than miners from outside of Europe, which makes it ultimately more attractive to our customers. Customers hate geopolitical constraints on these supply chains of these critical materials that we see more and more and more. I believe every month is getting worse, actually, from the last two, three months or even years in the last two years, right?

11:49Ksenija Milicevic Neumann:May it be logistics constraints or even geopolitical constraints, you see huge volatility on these critical materials. And industries that are dependent on these raw materials next to battery industry like glass, ceramic cement or even lubricant industries they have very small margins that cannot survive with these high fluctuations or they don't want to and they are dreaming of this local supply which europe doesn't have and i would say demand side is almost like a no-brainer here in europe these customers are as of now more or less in in terms in terms storming into our offices to sign contracts for future production, which is pretty cool.

12:34Ksenija Milicevic Neumann:I mean, it's amazing.

12:37Sarah Fleischer:Yeah, I mean, what more could you want? I mean, it's interesting. Deep tech and hardware are so different to software in the sense that you really do have real bottlenecks in the sales process. And I know that you've got some really ambitious targets by 2030. Like, what's the plan now? You know, you've opened this sort of like demo test plan. You've got big ambitions to be able to supply tens of thousands of tons. How do you get from where you are today to 2030 and the ambitions you have?

13:04Ksenija Milicevic Neumann:I can quickly jump in with the philosophy and maybe Xenia can share some details what this actually means. First off, we made it so far, so fast with the least money out there, right? Most of our competitors, they raise half a billion euros and didn't even get that far as where we are today at 2.0. Actually running a demo plant and learning as much as possible. And the philosophy behind it is understand your boundaries under technical terms and push beyond that and see what breaks. And take five steps back, go down into a smaller scale. So we had this rapid prototyping philosophy from day one that got us in a very uncomfortable engineering environment from day one that helped us to understand and feel comfortable as of today in that sphere.

14:00Ksenija Milicevic Neumann:I would say almost our industrial-sized reactor came at the same time as our prototype reactor, literally. So we were running both at the very same time, going beyond and going back. But I'll leave it to Xenia, what happens next now with this demo plant, what else we're trying to break as much as possible. And breaking is a great thing. You want to know the boundaries to make it more efficient. So that's kind of like the philosophy that we carry on.

14:31Sarah Fleischer:Amazing. Well, yeah, what's the plan, Xenia, for the next few years?

14:34Ksenija Milicevic Neumann:Yeah, to keep up with the same pace as we have built this demonstration plan. So that means really scale further to a commercial plant And you have seen that there is a big amount of batteries that we need to recycle and there is a supply sufficient for that. So it's a short period of time. But what Sarah has well mentioned, we have proven that within a very short time frame, we can scale as fast as possible and to build the plants. So let's just continue with the same pace. Let's build the plants that are necessary to recycle and to produce those critical raw materials.

15:13Sarah Fleischer:Amazing. And when you look at the business, you've mentioned you need a lot of cash, right? You're going to need a lot of money. Are you thinking about fundraising? Have you had interest since the announcement last week? How are you navigating, you know, trying to keep this capital intensive business well capitalized?

15:27Ksenija Milicevic Neumann:Sebastian let's start some FOMO let's say there's also philosophy behind fundraising at 2Zero as well we don't like to engage too much with investors while we're not too much fundraising we're keeping our doors quite in a way stealth for now but we're always fundraising so here and there we're always talking to investors and there's something going to come up quite soon exciting so there's definitely things going on in the background for sure 100 if something is

16:02Sarah Fleischer:tickling something is tickling amazing and when it comes to like building a product like this you know this is very different to so many other products out in the market at the moment whether it's like ai tools or labs or whatever how do you how do you look for partners you know what do you look for in a great vc partner or like firm to to help you on your journey which is very unusual and very unlike lots of other companies out there.

16:26Ksenija Milicevic Neumann:Yeah, I mean, like our past investors who have joined us until now are more generalists per se. Yes, we've got some strategics like Honda, Honda Motors, one of the greatest automotive companies out there out of Japan, or JGC, one of the largest engineering companies out of Japan that built 20 ,000 plants worldwide in the last 80 years. Like the first Aramco plants in Saudi Arabia have been built by Japanese engineering called JGC. They are our strategics. Of course, that's fundamental how we want to scale. So we've chosen them deliberately having that tight partnership with an automotive company, but also with an engineering company that knows how to build plants because that's not really our skill set as of now at 2.0.