A Battery-Material Startup Applies Lessons From the Venture Capital Bust

Samir Mayekar was fine-tuning his idea for a battery startup in 2012 when A123 went belly-up.

A123 never achieved profitable electric vehicle battery sales, even after it raised $1 billion from private capital, government stimulus funds, and an IPO. Witnessing the demise of A123 — and a host of other startups with valuable storage IP — left a mark on Mayekar, and altered his approach to founding the silicon anode startup SiNode.

SiNode spawned out of a class at Northwestern University that paired MBA students like Mayekar with science Ph.D. students to study the commercialization of energy technology. He decided to build a business around a piece of anode technology developed at the university, but not before conducting a listening tour with nearly a dozen battery company founders.

“We had the benefit of not being part of the cleantech boom,” Mayekar said. “I talked to a lot of people who founded these businesses and went under or scraped by…I got a healthy dose of reality. I didn't come out of it discouraged, I came out of it energized to solve a very complex puzzle.” 

In the five years since, SiNode has grown to 15 employees, signed joint development deals with several blue-chip customers and is approaching commercial deployment, all with a single funding round of about $1 million. It hasn't hit the big time yet, but this little venture has implemented a lean, tightly scoped business model that Mayekar says will deliver actionable battery improvements.

A humble target

The strategy starts with a narrow goal: to produce a silicon graphene composite anode for use in other companies' lithium-ion batteries.

Silicon anodes benefit from higher energy capacity than typical graphite anodes, because silicon can store more lithium ions. Such an improvement would be valuable for electric car batteries, where energy density is key.

The challenge is that Silicon also tends to expand and contract during charge and discharge, which can put it into contact with the electrolyte and short out the battery, and lead to the silicon particles breaking apart.

SiNode addresses this by wrapping the silicon in graphene, the highly flexible and conductive layer of carbon atoms. Mayekar describes the product as “a graphene blanket wrapped over silicon balloons.” This structure allows the silicon to expand and contract, while keeping it safely away from the electrolyte. 

That involves some complicated materials science, but it's notable for what it does not entail.

This technology does not challenge mainstream battery technology, but rather seeks to advance it. 

“We are bullish on lithium-ion,” Mayekar said. “The materials that have the greatest chance of getting to market soonest and making a difference are in the lithium-ion ecosystem.” 

That means the company needn't pitch clients on a whole new way of storing electricity, like flow batteries or zinc-cathode. It can pitch an incremental but significant improvement on the client's existing product.

The team also picked an area that has seen relatively less competition than say, the cathode. “Instead of going to battle with 17 Dow Chemical-sized companies, you’re going to battle with like four,” Mayekar said.

Perhaps most crucially, SiNode has rejected the desire, witnessed in VC-backed battery and solar startups alike, to do everything — not just invent a new technology, but build a factory, manufacture it, market it to customers and distribute it. SiNode chose to focus on the technology part, and leave the rest of the supply chain to companies that operate factories and distribution channels.

Unconventional funding streams

That specialization lends itself to joint development partnerships, where a startup works with an established company to integrate its technology into existing products, with payments along the way at key milestones. 

“We are almost entirely funded by our customers and our partners today,” Mayekar said. “They're big companies that have been around for 50, 100, 200 years, and they see the macro trends.”

This model is common in the biotech industry, where scientists who have a promising new materials partner with pharmaceutical heavyweights. Battery science is similarly difficult, Mayekar said. It takes a long time to actually turn a profit on it, even if you start with ample funding, as evidenced by the Envias and A123s of the world.

In SiNode's case, the development partners are large companies that specialize in materials, batteries, or end devices like smart phones. Few of these deals are public, but in June the company announced a $4 million deal to develop electric vehicle battery anodes for the United States Advanced Battery Consortium, a joint research program of Fiat-Chrysler, Ford and General Motors.

“It makes their technology development less capital intensive, because it's focusing on a single aspect, and relatively speaking less risky, because they're not necessarily trying to take it to market themselves,” said Ravi Manghani, energy storage director at GTM Research. “SiNode won’t have to invest efforts in going to the market because GM and Ford are going to the market on their behalf.”

When I asked Mayekar why he was so averse to venture capital dollars, he turned the question around: How many successful VC-backed battery startups are there? It's not a crowded field.

With partnerships, SiNode can focus on the science, rather than on how fast investors want a go-to-market product. And by working closely with the large battery makers who will ultimately mass-produce the anodes in their products, SiNode can streamline the product integration from the get-go.

“Their focus has always been on the customer: Who is the customer, what are their pain points, what’s the minimum viable product we can get in their hands,” said Sara Chamberlain, managing director of the Chicago-based Energy Foundry, an early investor in SiNode. “You have to involve the customers in the very early stages. A black box approach doesn't work.”

Since high-profile cleantech companies are still going bankrupt, SiNode offers a useful test case for how battery startups (at least a certain kind of materials startup) should work.

from GTM Solar https://www.greentechmedia.com/articles/read/a-battery-materials-startup-applies-lessons-from-the-VC-cleantech-bust

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