Startup News: Key Lessons and Strategic Steps for Entrepreneurs Inspired by Redwood Materials' 2026 Pivot

In the entrepreneurial world, agility and the ability to navigate challenges with strategic foresight are non-negotiable. As the tech industry experiences significant contractions while simultaneously grappling with unprecedented innovation, the recent development at Redwood Materials serves as a prime case study for startups navigating the thin line between expansion and efficiency.

In late 2025, the battery recycling pioneer, Redwood Materials, a company founded by ex-Tesla CTO JB Straubel, announced a 5% workforce reduction. The announcement comes on the heels of a $350M Series E funding round that pushed the company’s valuation to an impressive $6 billion. From the outside, the dual announcements of significant fundraising and layoffs might seem contradictory. But as a serial entrepreneur with over 20 years of experience across the globe, I recognize this as a sharp example of strategic reallocation. Let’s break down the story and explore key lessons for startup founders and business leaders.

Table of Contents

Strategic Shift Behind the Scenes

Since its foundation in 2017, Redwood Materials has tackled one of the most pressing challenges of the 21st century, how to sustainably recycle materials like lithium, cobalt, and nickel for reuse in EV batteries. The company initially focused on recycling scrap from battery cell production and used EV batteries. Yet, to remain competitive in an increasingly complex market, Redwood pivoted to include cathode production and, more recently, integrated recycled battery cells into grid-scale energy storage solutions.

What we’re seeing here is a business navigating the challenges of focusing on a high-potential market, grid-scale storage for AI-driven data centers, and needing to cut costs elsewhere to support that pivot.

For context, the cutbacks affect several dozen individuals among its workforce of 1,200 employees. While minimal in scale, the layoffs signify the company’s intent to realign resources with its new strategic focus.

Key Takeaways for Entrepreneurs

For entrepreneurs and startup founders like myself, this case study is rich with actionable insights. Here are the most noteworthy lessons:

1. Growth Doesn’t Excuse Inefficiency

Even with $350M in funding, Redwood Materials chose to cut 5% of its workforce. Why? Because in the startup world, cash doesn’t give you carte blanche for inefficiency. This is a lesson that founders should internalize early. Every hired individual, ongoing project, or additional resource must align with the company’s trajectory. If something doesn’t add tangible value, it needs to be reevaluated, even during growth cycles.

2. Follow the Growth Markets

Redwood’s move into grid-scale energy storage is no coincidence. The surge in power demands from AI-driven infrastructures, such as data centers, has created new opportunities to repurpose old EV batteries. By pivoting towards this lucrative market, Redwood is demonstrating one of the most important entrepreneurial principles: adapt or perish. Startups must constantly monitor market trends, even, and especially, when they are successful in their current niche.

3. Funding Isn’t a Safety Net, It’s a Catalyst

A $6 billion valuation and a hearty dose of venture capital don’t guarantee smooth sailing. In fact, that kind of attention increases the scrutiny of your financial health. Funding must be viewed as a temporary boost for achieving desired objectives, rather than as long-term security. If Redwood Materials hadn’t prioritized their next big direction, grid-scale batteries, their competition very well might have.

4. Transparency and Communication Matter

One of the most glaring loose ends in Redwood’s decision-making process was the handling of its layoffs in terms of public relations. Spokespeople declined to comment, a choice that leaves narratives vulnerable to speculation. Entrepreneurs should take note: if cuts must be made, communicate the “why” to your stakeholders, employees, and partners. Failing to articulate long-term plans can damage your reputation, even for justifiable actions.

Have You Pivotal-Proofed Your Startup?

Sometimes, it’s not always about what your company is doing “right” but whether it is prepared to face the unpredictable. Here’s how you can prepare your startup for strategic pivots:

Evaluate Viability of Existing Revenue Streams: Regularly reassess whether your current core business is sustainable in light of market trends. If the demand falters, have alternative strategies ready.
Map Resource Allocation to Upcoming Opportunities: Just as Redwood Materials shifted focus towards energy storage, startups should identify at least one high-potential market segment ready for development within their expertise.
Lean Into Data-Driven Decisions: Before initiating large-scale layoffs, leverage analytics to review where your company’s investment in human, technological, or financial resources is yielding results, or falling short.

Common Mistakes to Avoid

The Redwood Materials case also highlights potential pitfalls entrepreneurs should avoid when scaling their businesses:

Over-prioritizing short-term results: While layoffs may improve short-term cash flow and productivity metrics, over-pruning teams risks losing critical institutional knowledge.
Ignoring Market Diversification Risks: Moving into AI-driven infrastructure was the right choice for Redwood, but diversification always carries risks. Founders must establish enough balance to avoid becoming overly dependent on a nascent sector.
Lack of Leadership Communication: Declining to make a public statement about layoffs doesn’t inspire confidence among stakeholders. Transparency can soften the impact of difficult decisions.

Conclusion

As an entrepreneur, one of the greatest lessons I’ve learned is that fundraising success doesn’t mean you’ve “arrived.” Securing millions of dollars in funding isn't the endgame, it’s the gateway to even greater challenges. Redwood Materials’ recent moves, while seemingly contradictory at first glance, highlight the fine balance required to maintain innovation while funding new directions.

For business owners and startup founders, the takeaways are crystal clear: Stay focused on the future, strategically manage resources, and don’t let growth obscure inefficiency. And above all, never stop adapting. As JB Straubel and the team at Redwood Materials demonstrate, even great ideas need constant refinement to thrive in a competitive market.

FAQ

1. Why did Redwood Materials lay off employees after raising $350 million?
Despite raising $350 million in its Series E funding round, Redwood Materials cut 5% of its workforce to strategically realign resources and focus on new business opportunities, primarily grid-scale energy storage for AI-driven data centers. Learn about the layoffs

2. What is Redwood Materials' main business focus?
Redwood Materials specializes in recycling important materials like lithium, cobalt, and nickel from old batteries to produce new battery components. Recently, the company expanded into cathode production and energy storage solutions. Discover Redwood Materials’ focus

3. Who founded Redwood Materials?
Redwood Materials was founded in 2017 by JB Straubel, the former CTO of Tesla. Learn about JB Straubel

4. How many employees were affected by the layoffs?
The layoffs impacted several dozen employees, approximately 5% of Redwood Materials' workforce of around 1,200 people. Find details of the layoffs

5. What is the valuation of Redwood Materials after the funding round?
After the $350 million Series E funding round, Redwood Materials’ valuation was approximately $6 billion. See the valuation breakdown

6. Why is Redwood pivoting to energy storage solutions?
Redwood Materials is pivoting to energy storage solutions to cater to growing demand from AI-driven data centers, a rapidly expanding market for recycled EV batteries. Understand the pivot’s rationale

7. What materials does Redwood recycle, and who are its customers?
Redwood Materials recycles lithium, cobalt, and nickel from battery waste and sells them to customers like Panasonic. Learn about Redwood’s operations

8. Is energy storage Redwood's main market now?
Energy storage is becoming a primary market for Redwood Materials as it shifts focus from EV batteries toward supporting power-intensive AI data centers. Explore Redwood’s new market

9. What challenges does Redwood face in its recycling and growth strategies?
Redwood faces challenges in balancing operational costs with resource reallocation amid a competitive and rapidly evolving market, especially in its cathode production and energy storage ventures. Review industry challenges for Redwood

10. Did Redwood comment publicly on the layoffs?
Redwood Materials did not issue a detailed public statement about the layoffs, leaving room for speculation and criticism of its handling of transparency in workforce reductions. Learn more about public perception

About the Author

Violetta Bonenkamp, also known as MeanCEO, is an experienced startup founder with an impressive educational background including an MBA and four other higher education degrees. She has over 20 years of work experience across multiple countries, including 5 years as a solopreneur and serial entrepreneur. Throughout her startup experience she has applied for multiple startup grants at the EU level, in the Netherlands and Malta, and her startups received quite a few of those. She’s been living, studying and working in many countries around the globe and her extensive multicultural experience has influenced her immensely.

Violetta Bonenkamp's expertise in CAD sector, IP protection and blockchain

Violetta Bonenkamp is recognized as a multidisciplinary expert with significant achievements in the CAD sector, intellectual property (IP) protection, and blockchain technology.

CAD Sector:

Violetta is the CEO and co-founder of CADChain, a deep tech startup focused on developing IP management software specifically for CAD (Computer-Aided Design) data. CADChain addresses the lack of industry standards for CAD data protection and sharing, using innovative technology to secure and manage design data.
She has led the company since its inception in 2018, overseeing R&D, PR, and business development, and driving the creation of products for platforms such as Autodesk Inventor, Blender, and SolidWorks.
Her leadership has been instrumental in scaling CADChain from a small team to a significant player in the deeptech space, with a diverse, international team.

IP Protection:

Violetta has built deep expertise in intellectual property, combining academic training with practical startup experience. She has taken specialized courses in IP from institutions like WIPO and the EU IPO.
She is known for sharing actionable strategies for startup IP protection, leveraging both legal and technological approaches, and has published guides and content on this topic for the entrepreneurial community.
Her work at CADChain directly addresses the need for robust IP protection in the engineering and design industries, integrating cybersecurity and compliance measures to safeguard digital assets.

Blockchain:

Violetta’s entry into the blockchain sector began with the founding of CADChain, which uses blockchain as a core technology for securing and managing CAD data.
She holds several certifications in blockchain and has participated in major hackathons and policy forums, such as the OECD Global Blockchain Policy Forum.
Her expertise extends to applying blockchain for IP management, ensuring data integrity, traceability, and secure sharing in the CAD industry.

Violetta is a true multiple specialist who has built expertise in Linguistics, Education, Business Management, Blockchain, Entrepreneurship, Intellectual Property, Game Design, AI, SEO, Digital Marketing, cyber security and zero code automations. Her extensive educational journey includes a Master of Arts in Linguistics and Education, an Advanced Master in Linguistics from Belgium (2006-2007), an MBA from Blekinge Institute of Technology in Sweden (2006-2008), and an Erasmus Mundus joint program European Master of Higher Education from universities in Norway, Finland, and Portugal (2009).

She is the founder of Fe/male Switch, a startup game that encourages women to enter STEM fields, and also leads CADChain, and multiple other projects like the Directory of 1,000 Startup Cities with a proprietary MeanCEO Index that ranks cities for female entrepreneurs. Violetta created the "gamepreneurship" methodology, which forms the scientific basis of her startup game. She also builds a lot of SEO tools for startups. Her achievements include being named one of the top 100 women in Europe by EU Startups in 2022 and being nominated for Impact Person of the year at the Dutch Blockchain Week. She is an author with Sifted and a speaker at different Universities. Recently she published a book on Startup Idea Validation the right way: from zero to first customers and beyond, launched a Directory of 1,500+ websites for startups to list themselves in order to gain traction and build backlinks and is building MELA AI to help local restaurants in Malta get more visibility online.

For the past several years Violetta has been living between the Netherlands and Malta, while also regularly traveling to different destinations around the globe, usually due to her entrepreneurial activities. This has led her to start writing about different locations and amenities from the POV of an entrepreneur. Here’s her recent article about the best hotels in Italy to work from.

About the Publication

Fe/male Switch is an innovative startup platform designed to empower women entrepreneurs through an immersive, game-like experience. Founded in 2020 during the pandemic "without any funding and without any code," this non-profit initiative has evolved into a comprehensive educational tool for aspiring female entrepreneurs.The platform was co-founded by Violetta Shishkina-Bonenkamp, who serves as CEO and one of the lead authors of the Startup News branch.

Mission and Purpose

Fe/male Switch Foundation was created to address the gender gap in the tech and entrepreneurship space. The platform aims to skill-up future female tech leaders and empower them to create resilient and innovative tech startups through what they call "gamepreneurship". By putting players in a virtual startup village where they must survive and thrive, the startup game allows women to test their entrepreneurial abilities without financial risk.

Key Features

The platform offers a unique blend of news, resources,learning, networking, and practical application within a supportive, female-focused environment:

Skill Lab: Micro-modules covering essential startup skills
Virtual Startup Building: Create or join startups and tackle real-world challenges
AI Co-founder (PlayPal): Guides users through the startup process
SANDBOX: A testing environment for idea validation before launch
Wellness Integration: Virtual activities to balance work and self-care
Marketplace: Buy or sell expert sessions and tutorials

Impact and Growth

Since its inception, Fe/male Switch has shown impressive growth:

5,000+ female entrepreneurs in the community
100+ startup tools built
5,000+ pieces of articles and news written
1,000 unique business ideas for women created

Partnerships

Fe/male Switch has formed strategic partnerships to enhance its offerings. In January 2022, it teamed up with global website builder Tilda to provide free access to website building tools and mentorship services for Fe/male Switch participants.

Recognition

Fe/male Switch has received media attention for its innovative approach to closing the gender gap in tech entrepreneurship. The platform has been featured in various publications highlighting its unique "play to learn and earn" model.

Startup News: Key Lessons and Strategic Steps for Entrepreneurs Inspired by Redwood Materials’ 2025 Pivot