Electrifying Investment

Better Place, the Silicon Valley startup geared toward providing the infrastructure for long-distance electric-car driving, has landed $350 million in a second round of investing the company is touting as a major vote of confidence in its business model.

Companies that are putting their money behind Better Place include HSBC, Morgan Stanley Investment Management, and Lazard Asset Management. They joined first-round investors Israel Corp., VantagePoint Venture Partners, Ofer Hi-Tech Holdings, Morgan Stanley Principal Investments, and Maniv Energy Capital. HSBC led the round with an investment of $125 million. Including the latest investment, Better Place has raised about $700 million.

“Today marks the end of an extensive process with the outcome being a decision by one of the world’s largest, most conservative banks, HSBC, to take the validating step of investing in a private company intent on bringing innovation to the trillion-dollar automotive and energy industries,” said Shai Agassi, Better Place founder and chief executive officer, in a press release. “The strong investment commitment and global relationships that HSBC, Morgan Stanley Investment Management and Lazard Asset Management bring to the table combined with the continuing confidence from our original investors enables us to scale up globally and execute against our plan.”

Agassi, the Israeli American software pioneer, established the model for his business around the idea that he can do just as the name of his company implies by building the infrastructure that will be necessary for the world to run on electric cars.

Better Place is headquartered in Palo Alto, California and was founded in 2007. But its business has stretched around the world, with deals to put its electric-car infrastructure—stations for recharging electric cars and swapping batteries—in place in Israel, Denmark, Ontario, Hawaii, and Northern California. Its first commercial-scale projects are expected in 2011, though it has some experimental stations in operation in Denmark and Israel.

“Better Place is a huge experiment in how you sell and fuel vehicles, and these investors are becoming convinced this will make money,” Rod Lache, an analyst at Deutsche Bank, told the New York Times. “It is a financial validation. Now we need to see technical validation and consumer validation.”

The Better Place investment follows a North American Auto Show in Detroit largely geared toward electric vehicles, and comes at a time when such major automakers as GM and Nissan are getting ready to roll out revolutionary new electric cars.

General Motors plans to roll out its Chevrolet Volt later this year, after years of effort. The Volt, a plug-in hybrid with a small gasoline engine that kicks in to extend its electric batteries’ range, has been in the works since long before GM tumbled into bankruptcy, and it's one of the vehicles the company is counting on to lead it back to the promised land of profitability.

But the Volt won’t come cheap when it comes to the masses, at least not at first. GM plans to price the first-of-its-kind American car in the $40,000 price range, the kind of cost one associates with a lower-end BMW more than a Chevy. But here’s a nice incentive from GM’s majority stockholder, the U.S. government. Buy a Volt and you’ll get a $7,500 tax credit.

That’s not a bad incentive, as incentives go.

GM has showed off the Volt at the auto show before. But this time, it’s on the eve of actually bringing the car to market.

GM isn’t the only one of the big automakers that will be showing off its new green colors at the show. Nissan’s Leaf, a rechargeable electric car, will make its debut at a U.S. auto show beginning today. While the Leaf, which lacks an engine to charge its battery, won’t go as far as a Volt, it will cost about $10,000 less.

If you want a Ford Focus plug-in or a Toyota Prius plug-in, you’ll have to wait until 2011.

And there were other electric offerings on display, but just for display. Volvo showed off an electric version of its C30, and Fiat showed an electric 500.

And, of course, none of these can claim the title of the first electric car to market. The electric car is already on the road and spinning off entire new companies.

Tesla’s pricey roadster, weighing in with a $101,500 price, went on the market in 2008 and already has showrooms in places like Los Angeles. Fisker Automotive, another venture-funded carmaker, will roll out its Karma sedan, priced at $87,900, later this year.

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Kent Bernhard Jr. is News Editor of Portfolio.com