After $150M Raised, What Went Wrong at Fuel Cell Startup Lilliputian

8/14/14Follow @mlamonica

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so many things. For example, the charger needed a pump to suck fuel into the fuel cell to generate power. But there were no off-the-shelf products that had the reliability, low price, and small size needed for a consumer electronics product. So Lilliputian had to make its own.

“The beauty of a consumer product is that it looks very easy, but it takes a lot of innovation and technology to have it look like that to the end user,” Khan says.

Cracking the consumer electronics market isn’t easy, either. Anyone who has ever searched for a wall charger while away from home can appreciate the utility of having an auxiliary power source in a purse or backpack, particularly one that could provide dozens of charges. But owning a fuel cell charger still required a change in consumer behavior. A person would have to go buy or order cartridges, which would have been priced at about $10, and remember to have enough on hand with the mobile charger.

Lilliputian boasted of how well its fuel cell worked compared to batteries. But at $300, that’s still a relatively large purchase, especially when you consider that a tablet computer can cost less than half of that. Some people would consider buying a portable charger for camping or during power outages. Indeed, there are a handful of portable fuel cell chargers available now. But that’s a very small market, made even smaller by Nectar’s projected price tag.

Making a hardware product, rather than a Web service or mobile app, also gave Lilliputian higher capital requirements. Given recent advances in prototyping, hardware startups can design products more quickly than when Lilliputian first started.

But the company’s primary challenge has more to do with it being an energy startup, says Bill Aulet, who teaches entrepreneurship at MIT’s Sloan School of Management. Innovating in energy and materials, in general, often includes both technical and business risks, and many venture investors have exited cleantech. At least one other portable fuel cell maker, Mechanical Technology Inc., failed to deliver a commercial product.

“There will be successful hardware companies, especially if they are what we call hybrid innovations that combine software innovation and data analytics, but energy is just really hard,” Aulet says. “Too many people jumped in this pool naively and it is a credit to the Lilliputian team that they treaded water for this long.”

For his part, Khan is confident that Lilliputian’s technology will appear in some other form, even if the business itself is now fading away. That’s not much of a consolation for its investors—or the more than 100 employees the company once had. In the end, Lilliputian, despite its name, suffered not from poor engineering but outsized ambitions.

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  • Just_Chris

    This is a real shame, IMO the technology (i.e. a hydrocarbon fueled fuel cell small enough to fit into a package like proposed) was a real game changer hopefully the sale of the assets will result in this technology emerging somewhere else for a different application or who knows maybe even the same application just in a different box.

  • EnergyMan

    By those of us in the business that know this market, this is no surprise, this was expected. The market potential for this technology never, ever, warranted this type of investment for such a limited market. Back four years ago, I could buy an additional battery back for my long flights for $200, so really, where is the large market need here? This is a prime example of the venture capital community pouring money into another dog and simply not understanding the realities of this niche market. You see this pattern again and again. Instead of cutting their losses, VCs seem more intent on doubling down when the signposts say STOP. Meanwhile they are missing so many other opportunities where they could have productively invested $150M. This is a key reason why the venture capital model is broken as it is currently configured. Perhaps, if they totally eliminated VC fees and worked totally on success outcomes only the truly fit VC’s would survive in that business, just like real entrepreneurs do today.

  • tw2014

    I am really impressed with the $150M spent on just one product….this reminds me of another company, who went through about $450M on something similar quite some time ago and then also died (in 2008)… I know of several companies that tried, including the big Japanese electronics firms. I’d say at least over $1 Billion has been spent globally at attempting to bring fuel cell chargers into the market. Amazing. My company (a fuel cell company) produces of a fuel cell portable charger – similar to what Lilliputian attempted, but much lower cost and, although innovative enough – less ambitious in terms of performance… however we also make many (many) other fuel cell products – at least 40 different items for various markets and customer types. In total we spent less than $200,000 and 6 months to develop our handheld fuel cell charger which so far sold and shipped over 20,000 units (and counting to this day). We are probably the only ones that broke through in this area successfully. But let’s be very clear – this is not a be all / end all product nor market…just a small step on our path towards broad-scale commercialisation.

    • green.future

      Horizon Fuel Cell?

      • tw2014

        yup.

    • Martin Langley

      I’d like very much to hear from your company if you can offer a fuel cell which uses LPG or Butane as fuel. No matter that its not as powerful as the Lilliputian product. I was never convinced that the Nectar package for laptops etc was a viable proposition. If anything it undersells the technology by restricting it to consumer electronics. For myself I always thought the prime target should be automotive applications. The very best electric vehicles are those powered by fuel cells (See James May’s video on the Honda Clarity!) The only problem is there’s nowhere to buy the hydrogen (yet). By contrast, there is already a well
      supplied LPG infrastructure around petrol filling stations. Something like one in three has a pump selling LPG here in Europe and I’m sure the States is the same. Result is electric vehicles requiring no recharging which you fill up just like gasoline.

    • A Touch of Sin

      A bit late to the discussion, but what company is this? Do you guys produce SOFCs as this MIT startup did? My startup is developing a (currently medical waste) gasification process which outputs H2/CO gas at about 850c, a small fuel cell would come in handy downstream. We’re in mainland China.