Good science, market savvy make for successful battery start-up - Business, Government Legal News from throughout WV

Good science, market savvy make for successful battery start-up

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MORGANTOWN, WV -

Some scientist-entrepreneurs get into business through a certain amount of luck, pursuing academic interests that turn out to have commercial application.

Here's a more intentional method: Intend to make a game changer, identify the need and how much the market will pay, then improve the most promising emerging technology over and over until it meets those standards.

That's what Jay Whitacre did.

Whitacre is associate professor of materials science and engineering at Carnegie Mellon University in Pittsburgh. In his earlier career, he helped designed the battery system for the latest Mars rover.

Now, in addition to his academic appointment, he is chief technology officer of Aquion Energy, a grid-scale battery company he founded in 2008. Among other honors, Aquion was recognized in February as one of MIT Technology Review's disruptive companies of 2013.

He spoke May 3 at West Virginia University in a talk sponsored by the university's Center for Electrochemical Energy Storage.

Making a game changer

When Whitacre set out in the middle of the last decade to design a marketable grid-scale battery, he was logical about his path.

Market research led him to conclude that a grid-scale battery technology would need to be able to cycle an ambitious 5,000 times or more. It also would have to cost less than $300 per usable kilowatt-hour installed — meaning cheap materials and a simple manufacturing approach.

His review of published battery materials research found that everything fell far short of his parameters. But he narrowed in on one idea that stood out and decided to find a comparable technology that used cheaper materials, then work to increase the number of cycles it would deliver.

Several years of research later, he found himself presenting his idea to respected venture capitalists Kleiner Perkins Caufield & Byers. He asked for $150,000. They gave him $1.6 million.

Aquion Energy has since drawn more than $60 million in funding and has 130 employees. It had its commercial launch in the first quarter this year and expects soon to be in full factory production outside Pittsburgh.

Battery entrepreneurship

Whitacre's talk at WVU was enthusiastically technical. He spoke in detail of the various materials his team has tested and the chemistry behind their performance. He went into detail, too, about the logistics of assembling batteries: what Aquion has been able to automate, which steps still are done by hand, how individual cells are tied together in larger banks to be useful at the scale of the power grid.

But his talk was just as enthusiastically about his experience as an entrepreneur — for example, about the support CMU has provided him.

"Every new professor at a research university typically gets what's called a start-up package," he said. He spent that on equipment and graduate students, and results from that work got him to the venture capital stage.

Since he started the business in 2010, CMU also has allowed Whitacre to take unpaid leave every other semester, even promoting him to associate professor during that time.

CMU takes a more liberal approach to conflict of interest for faculty entrepreneurs than, for example, MIT or Stanford, he said.

"If there are any issues about involving students in a company, or where the professor is placed in some conflict between an outside interest in his own company and what's going on the lab, there's a resolution process," he said. "But it turns out that everybody wants this to work — so as long as we keep things lined up properly, protect the IP (intellectual property) properly, assign the IP to the right people in an honest fashion, there's no contention."

Support from the academic community makes a venture like his possible, he said.

"This is not a get-rich-quick scheme. Making a battery company is from scratch is a decade-long problem and it's a low-margin business, and it's not at all guaranteed to work. It's appropriate for universities to engage in this kind of work."

Ambitions

Although his "holy grail" market is the North American power grid, Whitacre said a year or so of conversations with those players led him to realize that starting there was too ambitious.

"We didn't want to overpromise to that big of a customer," he said.

A more appropriate market for his business at its early stage, he said, is early adopters that have small niche markets and are really tolerant of risk — companies that do residential, off-grid solar installations. He's working closely with Real Goods Solar, which has offices in the eastern and western U.S., and with Optimal Power Solutions of Australia; he's getting feedback from them and using that in the design process.

Because of his connections, Whitacre skipped over a local seed funding stage of the type cities and states might offer, which he said doesn't get a manufacturer very far anyway. Among his recent funders is Bill Gates.

But times have changed since his first meeting with Kleiner Perkins, he said.

"Venture capital is no longer interested in energy technologies because they've lost their shirts," referencing hundreds of millions of dollars in losses with Solyndra and other start-ups. "I'm lucky to have gotten through at the right time."

Five years from now, Whitacre hopes to be selling more than 300 megawatt-hours of batteries a year at a profit and to be under consideration for an initial public offering or a strategic takeover.

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