16 April 2009

Hot Clean-Tech Ideas Hatch in Support Clusters

Incubating clean-energy businesses requires creativity, cash and patience

Robert Poor of a Boston company called Ember shows wireless devices developed for a smart power grid.

By Christopher Connell
Special Correspondent

Washington — When fledgling Texas company ActaCell Incorporated landed nearly $6 million in backing to work on a possible breakthrough in lithium-ion battery technology, it marked an early victory for an engineering professor and an entrepreneur who launched the startup 18 months earlier.

It was only a fraction of the hundreds of millions in capital that eventually may be needed for ActaCell to commercialize ideas hatched in a lab at the University of Texas at Austin. But the eye-catching roster of early investors includes Google.org’s RechargeIT initiative, which is betting on ActaCell as part of wider efforts to accelerate the adoption of plug-in electric vehicles.

Austin, the Texas city where ActaCell is located, has emerged as a hotbed of clean-energy technology, with 60 companies nurtured by partnerships among universities, government and entrepreneurs.  Their hopes have been stoked by President Obama’s federal investments in clean, renewable sources of energy.

Austin was ranked Number 1 in the United States for “clean tech” clusters by SustainLane, an Internet and media company, followed by San Jose, Berkeley and Pasadena, all in California, and Boston. These clusters, or incubators, draw on business and engineering schools for expertise and, in turn, bring entrepreneurs and investors together.

ActaCell used the services of the Clean Energy Incubator within the Austin Technology Incubator at the University of Texas, which has been providing guidance and infrastructure support to startups since 1989.

“It’s basically a support group. It was part of the team helping vet the opportunity … [and] put funding presentations together,” said Bill Ott, ActaCell’s president.

It was through the University of Texas’s licensing and commercialization office that Ott met engineering professor Arumugan Manthiram, whose lab was seeking a breakthrough on lithium-ion batteries — the batteries that power cameras and Blackberries and may power the electric cars of tomorrow. They started ActaCell together. For licensing rights and for the incubator services, the University of Texas gained a small piece of equity in their venture.

Ott, an electrical engineer with a business degree, had already experienced success as vice president of another Austin clean-tech company, Active Power, which makes a flywheel energy-storage system billed as the world’s most energy-efficient uninterruptible power supply. He left to become a venture capitalist and scout other opportunities. He found one with Manthiram.

ActaCell is entering a race with companies across the United States and around the globe to build lighter, longer-lasting batteries. Building a clean-energy company “requires more cash, more time and more patience” than starting a software company, Ott said.

ImaginEnergy designs solar systems for homes, using an innovative device for mapping the direction and location of sunlight.

Reed Benet, director of the Clean Energy Incubator, said the jury is out on whether the venture capital model will work for clean-energy companies as well as it did for high-tech and biotech firms.

“The history of energy is massive scale, high fixed cost … and big, immense players in this heavily regulated space,” Benet said.

Lawrence M. Murphy, manager of enterprise development programs for the National Renewable Energy Laboratory (NREL) in Golden, Colorado, said clean-energy entrepreneurs have a tougher road to travel

“With software, for a million bucks or a million and a half, you can probably go from idea to marketplace in 18 to 24 months,” Murphy said. With new hardware technologies that are usually integral parts of clean-energy startups, “maybe there’s been five years of [research and development] at a place like NREL or one of the universities, and then you’re still looking at three to four years to manufacture and get it into the marketplace.”

Nevertheless, clean energy “has the most potential to get funding in these [difficult] times because it is a hot sector,” said Melinda Richter, who manages the Environmental Business Cluster and San Jose BioCenter for the San Jose Redevelopment Agency and the San Jose State University Research Foundation. GreenVolts, a solar energy firm incubated there, made BusinessWeek magazine’s 2008 list of top U.S. startups.

In San Jose, the government’s hospitality to clean energy infuses City Hall.

“The city practices what it preaches,” Richter said. “It lets companies pilot new things like street lights here. That’s very exciting for an early-stage company.”

The Environmental Business Cluster holds sessions for entrepreneurs to practice their pitches and “makes sure they are ready for introductions to the venture capitalists,” she said.

The cluster partners with law firms and human resources firms that provide on-site services. “We try to be like a big company and give them the [same] advantages,” Richter said.

ActaCell recently teamed with a dozen other U.S. companies to form the National Alliance for Advanced Transportation Battery Cell Manufacture to build and share an ultra-modern plant. The alliance is looking to the federal government for most of the billion-dollar investment needed. The alliance says Washington’s support is necessary to compete against heavily subsidized manufacturers in China, Japan, South Korea and elsewhere.

More information about U.S. clean-tech business incubators is available on SustainLane’s Web site.