Northvolt’s $15 Billion Downfall Argues for Continuous Technical Due Diligence

What We Can Learn From The Stunning Business and Operational Collapse of a European Tech Icon

On November 21, 2024, Europe's most promising battery startup, Northvolt, filed for bankruptcy and its CEO, Peter Carlsson, resigned. This stunning development came after the company raised $15 billion from elite investors like Goldman Sachs, BlackRock, and Volkswagen. Northvolt had secured over $50 billion in battery orders from major automakers such as VW, BMW, and Scania. Earlier in the year, JPMorgan led a record-setting $5 billion green loan package for the company. Northvolt symbolized Europe’s aspirations to compete in the critical battery sector.

The Broken Investment Process

While Northvolt’s failure was multifaceted, one glaring issue was the broken investment process. Established automotive manufacturers and financial institutions—both seasoned in due diligence—either overlooked or ignored critical technical flaws. These organizations collectively invest in and theoretically manage vast technology portfolios and deploy advanced diligence practices. Yet, they failed to identify or act on Northvolt’s fundamental production and technical challenges. That may be because the way many firms perform due diligence and technology reviews is woefully inadequate.

Flaws in Current Due Diligence Practices

Traditional due diligence tends to focus on initial assessments of finance, sales, marketing, IP, technology, personnel, and processes. In the majority of cases, technical due diligence is nowhere near as complete or sophisticated as financial, legal and other non-technology realms. Compounding this problem, unlike financial and sales reviews conducted regularly, technical reviews post investment are often sporadic or absent entirely. This gap allows problems to fester unnoticed. Effective technology governance requires systematic, ongoing technical evaluations that probe deeply into technology including leadership and personnel, platform and stack, architecture decisions, processes, operations, and metrics.

The Need for Ongoing Technical Governance

Continuous technical governance could have exposed Northvolt’s critical weaknesses early. Regular deep dives into key technology performance metrics would have flagged issues that required immediate attention. Regular tech audits might have prompted timely interventions and course corrections and this tragic outcome might have been avoided.

Many boards have no members with deep subject matter expertise in technology. In the same way that it became a critical priority for boards to add financial subject matter experts and to ensure that they had a properly functioning audit committee with a properly skilled chairperson, it is now time for boards to do the same with technology.

Without help, it's unreasonable to expect most board members to look at a system architecture or technology strategy or engineering and product metrics and judge the health of a project or product.

Boards should make it a practice to obtain second opinions on technology and innovation from external, independent, subject matter experts. To be successful, Boards must include deep knowledge of how technology initiatives succeed and fail, of what topics to prioritize, how technology works today and the driving forces of technological change.

The Inadequacy of Static Assessments

Technology execution in deep-tech companies like Northvolt - or any tech dependent company - is not static. Rapidly evolving fields demand continuous monitoring. Traditional corporate governance emphasizes financial metrics, but tech ventures require equal scrutiny of technical execution. Despite multiple funding rounds and sophisticated investors, Northvolt’s governance appeared to lack this critical dimension.

Lessons from Leading Tech Companies

The world’s leading technology companies—including Amazon, Apple, Google and Microsoft—routinely subject major technical efforts to frequent and detailed reviews. For Northvolt, similar diligence would have surfaced concerns about unrealistic production targets and revealed significant gaps in technical execution. Investors and the Board could have used this insight to guide corrective actions, potentially averting the company’s downfall.

A New Governance Model for Technology

The Northvolt case underscores the need for a technology governance model that integrates regular technical assessments. While Northvolt was a deep-tech firm, the same concern applies to all major enterprises today. Any business that seeks to scale and grow today must also be an excellent technology business, with deep capabilities around software, qualified tech leaders, and managing technology operations and security. Independent technology audits should be as routine as financial audits, and technical milestones should receive the same attention as financial targets. Talent evaluation, team cohesion, and technical red flags must carry substantial weight in decision-making processes.

Northvolt’s failure is not an isolated event but a warning about the disconnect between financial and technical governance. As more companies become materially dependent on world class tech execution, bridging this gap becomes critical. Continuous technical due diligence is no longer optional—it is essential for mitigating risks, preventing catastrophic losses, and enabling success in the increasingly complex world of technology-driven enterprises.

Anthony Bay is CEO and co-founder at Techquity. www.techquity.ai He has previously held senior roles at Amazon, Apple and Microsoft as well as early stage companies, served on multiple private and public boards and launched the world’s first social network before the Internet even existed. He has led product groups, M&A, CEO, and board governance for everything from early stage startups to large corporations.