The A123 Story: How a Battery Company Jumpstarted its Business

1/24/08Follow @bbuderi

If there’s one Boston-area energy company atop everybody’s list to become the next great New England success story, it’s got to be A123 Systems. The six-year-old Watertown, MA, maker of high-power lithium-ion batteries for applications like GM’s planned Volt electric vehicles and Black & Decker power tools has quickly established itself as a real powerhouse. After accumulating some $132 million in venture funding, it now counts six manufacturing plants in China, 852 employees (at last tally), 120 patents and filing, and the largest lithium-ion R&D team in North America. More to the point, everybody representative of the company whom I’ve met, from the chairman—legendary New England entrepreneur Desh Deshpande—to investors and key execs repeats a mantra you don’t hear all too often in these days of entrepreneurial early exits: “We’re in it for the long haul, and we’re out to change the world.”

Which is why I decided to stop by MIT’s Stata Center last Thursday to hear what Bart Riley, one of A123′s three founders, had to say. His talk, part of MIT Energy Futures Week, was called “A123 Systems: from nanotech to reality.” Which implies, perhaps, that things didn’t start out in reality. And, as you’ll see, that kind of turns out to be the case. Riley is a die-hard engineer, with some 40 patents to his credit. But, reining in his obvious desire to talk technical turkey, he proceeded to unfold a fascinating drama that kept the audience, roughly 60 people who filled the small Stata classroom to capacity, riveted in their chairs. His account amounted to a firsthand case study of entrepreneurship—telling how a little startup that was smart about picking employees, investors, and partners got going around one idea that didn’t really work out, and how it responded to that challenge to become a potentially industry-changing success story.

Before diving into Riley’s talk, a bit more context on A123. As we described the firm back in October, it’s “like some sort of entrepreneurial Energizer bunny: it just keeps on marching through investment rounds and deals.” At the time, the firm had just announced it had closed a new $30 million financing round. That was on the heels of a $40 million round the company closed last January—the largest New England venture deal in the first half of 2007—and brought the total raised since its 2001 inception past the $130 million mark. A123 can also point to a Who’s Who of investors that include General Electric, MIT, North Bridge Venture Partners, Procter and Gamble, Motorola, Qualcomm, and Sequoia Capital, among others.

A123 is planning to use its new funds to scale up production capacity to meet the growing demand for its products and services; a chief goal is fulfilling a big contract with General Motors, announced in August, to co-develop the battery cell for the Chevrolet Volt line of electric cars and other vehicles. The company also plans to, among other things, grow its cordless power tool battery business and rev up its aerospace ambitions.

How it intends to do all that, and its other plans for the future (Riley hinted in the Stata’s pub after his talk that another big announcement is on the way), will have to wait for another time, though. Riley’s account was about how the company got going and persevered—and he says it’s the fullest picture the company has ever revealed of those early days.

The story starts not too far from Stata, in the lab of Yet-Ming Chiang, a professor in MIT’s Department of Materials Science and Engineering. Sometime in 2000 or early 2001, Chiang (who had long been researching lithium battery materials) hit on a potentially revolutionary way to fabricate batteries. More specifically, he discovered that as a result of what are called colloidal surface forces, he could coax a mixture of cathode and anode particles to self-assemble into a battery.

“It’s a big idea,” Riley told the Stata crowd, some of whom (unlike me) probably understood what he was talking about. If it could be pulled off, he explained, the revolutionary new battery architecture would double the energy density of batteries and cut the cost of making them in half. That part, I got.

Fast-forward to the spring of 2001. Riley, who has a PhD from Cornell, was working at Danvers, MA-based American Superconductor, where he was employee No. 27. And despite not having an MIT degree (for which the audience at Stata gave him some good-natured grief), he had known Chiang for quite a while. One night, Chiang came over for one of their periodic dinners and told him about the self-organizing battery idea. The two talked about forming a company around the concept, but didn’t really know how to proceed.

Enter Ric Fulop, who drew applause when he made a guest appearance in the back of the room … Next Page »

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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  • Chris Sheehan

    Fascinating article Bob! Thanks for shedding light on one of Boston’s very intriguing up and coming companies

  • kate stohlman

    Great to see materials science and manufacturing methods as key innovations. These breakthroughs are remarkable and uncommon. Not surprising that it taps on talent from superconductor “industry”.

  • Jason M. Hendler

    Understanding that aerospace / automotive companies only deal with established players, A123 was smart to start with the power tool industry, which had battery requirements that were similar to their eventual target industries. This new / parallel market approach is detailed in both the Innovator’s Dilemma and Innovator’s Solution.

  • http://gimps.de Hillary Short

    Great new technology.
    I like to see this kind of development.
    The only thing that could beat this new kind of battery, are the newly developed super capacitors which became very capacious in recent time.

  • G. J.

    I still want to know what the peak operating temperature is before thermal meltdown, compared to Altairnano’s NanoSafe Technology; which, by the way, is much lighter for the same energy density as A123 batteries. Moreover, the materials required for NanoSafe Batteries are far more plentiful, cheaper, easier to come by, and safer in production.

    One more question, can A123 beat the price point of China’s ThunderSky Lithium/Iron/Phosphate batteries? I seriously doubt it.

    Looking forward, what is A123 doing to come up with a standardized battery platform for electric cars that can be swapped out in minutes at local battery charging stations?

    Answer this question and I’ll be more impressed….

  • David Gee

    Has A123 published the energy density and life span of their lithium-phosphate batteries?? If not, when will this info be available?

  • http://www.xconomy.com/author/bbuderi/ Robert Buderi

    Hi David

    We pinged the company on this, and they referred us to their website, under the technology and products tabs—saying your question should be answered there. I took a quick look and it seems they have general answers. Let me know if that isn’t what you were looking for…Bob

  • thyagi

    Have couple of questions

    1. Shelf life of their Lithium phosphate when compared to other chemistries based on Co & Mn.
    2. Number of deep discharge cycles (1005 DOD & 80% DOD)
    3. Overheating – and prevention of thermal runaway. – how efficiently you remove heat

    Answers to these will build additional confidence in putting them into EVs

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  • http://www.wearluckyart.com paul liddle

    please send inf on stock or how to invest in your company thanks

  • Jaime Becker

    Interesting that the technology that ultimately worked, and that will make this company and its stockholders lots of money, was backed by PUBLIC (DOE) funding and not venture capital. I wonder why that wasn’t the focus of the article?

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  • Repo

    And now it was sold in bankruptcy to China for penny’s on the dollar , all that investment for a Chinese Co. To reep the rewards . No sustainable plan to keep the company going through hard times….. maybe that was the plan all along build it up and bail out.