Google Ventures Leads $20M Round for Transphorm to Battle “Hidden Tax” in Power Conversion

2/23/11Follow @wroush

There’s a hidden tax when you pay your electricity bill, says Umesh Mishra, a professor in the college of engineering at the University of California, Santa Barbara. It’s the energy lost when power is converted from the alternating current coming out of a wall socket to the direct current needed by computers, TVs, and other appliances, or from one voltage or frequency to another. By some measures, 11 to 12 percent of all electricity generated in the U.S. dissipates into the air as heat thanks to inefficient power conversion.

If we could get that power back, it would contribute more to the economy than solar, wind, and every other form alternative energy put together. It would make electric vehicles more economical, improve the output of rooftop solar modules, cap energy waste in buildings, and reduce the huge energy bills paid by Internet companies like Google that run vast data centers. (These companies are, in a sense, taxed doubly: they’re forced to buy even more electricity to run the cooling systems that carry away the heat leaked by their thousands of servers.)

The silicon-based transistors inside most power converter modules hit a physical limit years ago—there’s simply no way to make them any more efficient. But there’s a company in Goleta, CA, outside Santa Barbara, that’s spent the last three and a half years perfecting a next-generation power conversion technology based on gallium nitride, a semiconductor commonly used in light-emitted diodes (LEDs). Called Transphorm, the company was co-founded by Mishra and his former student Primit Parikh, and it has been working behind a thick, almost NSA-worthy wall of stealth—if you’d Googled it before today, you’d have found speculation that it’s working on “hydrogen generating technology,” among other misinformation.

But the company decloaked in a big way at a press conference today in Mountain View, CA, where Google Ventures, the search giant’s venture investing wing, revealed that it was the lead investor in a $20.2 million Series C financing round completed last year for Transphorm. Foundation Capital also participated in the Series C round, joining previous investors Kleiner Perkins Caufield & Byers and Lux Capital. The company has raised about $38 million in total.

Transphorm’s financing round was actually disclosed in an SEC filing in May 2010, but the documents escaped the notice of journalists; they show that Google Ventures partner Wesley Chan, Kleiner partner Randy Komisar, and Foundation partner Richard Redelfs are all board directors at the company.

It’s the first publicly disclosed energy investment for Google Ventures—but it’s not hard to understand why the fund would be interested, despite the green energy industry’s reputation for being capital-intensive and slow to yield returns. ”One thing that attracted us to Transphorm is that we have an intimate undersanding of this problem, with a global network of data centers,” Bill Maris, managing partner at Google Ventures, said today. “Having an understanding of the problem made it a natural fit.”

“Google Ventures is highly tuned to the need for improved energy efficiency, especially when it applies to servers,” Mishra said in an advance interview with Xconomy on Tuesday. “When we made our presentation to Google Ventures, there was an appreciation of the scope and importance of the problem.”

Transphorm will sell its custom-designed power modules directly to power equipment manfucturers, who are expected to embed them in everything from consumer electronics devices to industrial motor drives. If the products win widespread adoption, it wouldn’t just benefit data center operators, says Mishra. “Imagine taking the whole West Coast off the grid—the impact would be huge. Transphorm’s impact could be that big, and saving this kind of energy is a huge business opportunity,” he said at the press conference. “It’s good for the planet and good for business.”

“It’s a real pleasure to finally share what this venture has been able to accomplish,” Komisar said at the event. Transphorm “has met or exceeded expectations at every juncture, which is really unusual.” Kleiner Perkins invested in the company, Komisar said, in part because of the scale of the problem—he said the energy savings from better power converters could be three times greater than that from other much-heralded technologies such as digital lighting. “The opportunity is to take 300 coal-fired plants off-grid, effectively, with more efficient power conversion modules,” said Komisar.

In power converter modules based on gallium nitride rather than silicon, waste heat is reduced by up to 90 percent, according to Peter Hébert, a board observer at Transphorm and a managing partner at Lux Capital, which invested in Transphorm’s Series A round. “This is absolutely transformative,” Hébert says. “One of the biggest and most important applications would be HVAC, building systems, elevators—buildings consume something like 40 percent of all electricity produced. Also, … Next Page »

Wade Roush is Xconomy's chief correspondent and editor of Xconomy San Francisco. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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