I read the book and found it quite enjoyable.

And with all due respect to Eric Ries and all of the VCs out there chasing lean startups, I recognized one simple truth. I still like my startups Phat.

A phat startup aims to solve a very big, very difficult problem that will transform an industry. They typically take many millions, or even tens of millions and 1-3 years to get the first product out the door. They are big ambitious bets on deep technology and market transitions that are difficult to predict. They require invention and problem solving and risk, yes risk. They are a venture in the true sense of the word.

But my goal is not to dismiss the good ideas in the Lean Startup bible. There are many, but some simply don’t apply.

For example, in Phat startups, the challenge is not whether customers will want it (or whether you need to pivot or iterate or some other euphemism). The challenge is whether it can be built in the first place—will it work at all? Will it perform to spec? Will it scale? Will it be reliable? Can it be manufactured? Will it hit the price point?

Very frequently, the last question is whether customers will buy it. I know this sounds “unconventional” and decidedly old-school, but in many of these cases, if you CAN build it, they WILL come.

Why? Because phat startups often address problems that simply can’t be solved any other way, and customers are in dire need of solutions—from cancer treatments to robots for bomb disposal to switches capable of handing exponential growth in mobile data.

And that’s why, once the product is proven, phat startups have been many of our region’s, and our country’s fastest growing and biggest winners. All of these were $1B market cap companies:

*These are my estimates based on VentureSource.

And there’s a new generation of New England companies following in their footsteps:

Demandware (on-demand e-commerce), QD Vision (display color enhancement), 24M (grid storage), 1366 (direct solar wafer), Plexxi (10 GB networks), Affirmed (4G Mobile), Actifio (secondary storage), Qualtre (smartphone components), Xtalic (electronic components), Akiban (scale out databases).

But a key question comes to mind: Are phat startups riskier than lean startups? It depends how you measure risk.

One of the great virtues of lean startups is that they … Next Page »

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Waltham, MA-based A123 Systems (NASDAQ: AONE), the lithium-ion battery maker, has laid off about 125 employees at its manufacturing facilities in Livonia and Romulus, MI. The news originally broke the week of Thanksgiving and was reported by media outlets including the Observer & Eccentric and Crain’s Detroit Business.

The layoffs are apparently the result of lower demand from Fisker Automotive after its plug-in hybrid sports car ran into production delays. A123 invested in Irvine, CA-based Fisker early last year. Media reports quote Jason Forcier, the vice president and general manager of A123′s automotive group, and PR manager Dan Borgasano as saying the layoffs are temporary and the workers should be hired back within six months.

Forcier spoke with me last year around the opening of the Livonia plant. At the time, he noted that “the battery industry is really a rejuvenation for the whole area. This is extremely important for Michigan from an economic standpoint.”

A123 still employs about 600 people at its two Michigan plants and its research and development center in Ann Arbor, according to the Crain’s report.

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Michigan may have potential in medical devices and software but in the end, the state’s high tech future, for better for worse, is really tied to cleantech.

For one thing, it offers the most natural and logical extension of Michigan’s core expertise in automobiles/manufacturing, experts say. Think lithium batteries, electric cars, next generation engines equipped with software that smartly manages energy consumption.

“I think Michigan has a great chance at cleantech because it so tied with transportation,” says Chris Rizik, CEO and fund manager of Renaissance Venture Capital Fund in Ann Arbor, MI. Rizik is a featured panelist for Thursday’s Xconomy: Michigan 2031, a forum for the state’s best investors and entrepreneurs to envision the future of Michigan’s high tech economy and brainstorm ways to make that vision a reality.

But here’s what really pushes cleantech ahead of the pack: unlike medical devices and software, cleantech enjoys significant financial and institutional support from both Uncle Sam and Michigan’s top politicians.

Last fall, Watertown, M-based A123Systems opened a lithium battery plant in Livonia, MI, thanks a $249 million grant from the U.S. Department of Energy (DOE) and $125 million in refundable tax credits from Michigan’s 21st Century Jobs Fund. U.S. Energy Secretary Steven Chu, along with then Gov. Jennifer Granholm and Sens. Carl Levin and Debbie Stabenow, attended the plant’s opening ceremony.

In 2009, Michigan established the Centers for Energy Excellence program, which provides $45 million over three years to fund technology commercialization and research between companies and universities and national laboratories.

Later this month, the U.S. Department of Energy (DOE) and University of Michigan are hosting a conference exploring Michigan’s investments into manufacturing and clean energy.

“Though Michigan’s research infrastructure suffered during the deep recession that forced major cutbacks in the research funded by the auto industry, the state has leveraged local investment, American Recovery and Reinvestment Act [federal stimulus] funding, and the strengths of its universities to begin rapidly rebuilding manufacturing by investing in new industries,” the DOE said on the conference website. “Many of these new investments are in clean energy, and the DOE is interested in learning from this natural experiment in rapid rebuilding of R&D and manufacturing capability.”

Not surprisingly, local cleantech startups attracting investor cash are developing auto-related technologies. Khosla Ventures, for example, is backing lithium ion battery maker Sakti3 in Ann Arbor, MI, and EcoMotors in Allen Park, MI, which is developing a more energy efficient engine. (Sakti3 CEO Ann Marie Sastry will be joining ups at Michigan 2031 as well.) General Motors has invested $5 million in wireless charging startup Powermat in Commerce Township, MI.

But is there more to Michigan cleantech than just greener cars? … Next Page »

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The third quarter of 2010 is going out with a monsoon in New England. It seems like a good time to hole up indoors and look back at some of the top stories we’ve done at Xconomy Boston over the past three months.

These are our editors’ picks. They aren’t necessarily the ones that got the most traffic or the most attention. Rather, they are stories that highlight our unique style of on-the-scene reporting and in-depth analysis, and will stand the test of time. They range from startup profiles in health IT, security software, and drug development, to analysis pieces on leading companies’ acquisition and expansion strategies, to unique venture capital perspectives and quirky, strange-but-true facts about New England innovation leaders.

So, without further ado, here are our top 20 stories of the third quarter, in reverse chronological order (plus a bonus story, in honor of Unica founder Yuchun Lee, a former member of the MIT Blackjack Team, selling his company to IBM for $21 a share):

Genzyme Boss Henri Termeer Not Ready to Sell to Sanofi, Ride Into the Sunset, Sources Say

MeYou Health Enters Social Gaming Realm with Daily Challenge for Improving Well-Being

IBM’s Software Acquisition Strategy in Massachusetts (Plus Tips on Getting Acquired) From VP Mike Loria

Skyhook, Fighting for Its Life in Suit Against Google, Cries Foul: “Call in the Referees and Review the Tape”

Bluebird Bio, Third Rock & Genzyme’s Gene Therapy Bet, Shows Promise for Blood Disorder

Who Knew? Part 3: Xconomy Uncovers Even More Strange-But-True Facts About Boston’s Innovation Leaders

PerkinElmer Expects to Make Acquisitions After $500M Business Sale: CEO Talks Boston-Area Talent and Growth in Software, Imaging

A123 Opens Lithium Ion Battery Plant in Michigan, Wants to Create Global Hub for Electric Vehicles

Good Start Genetics Emerges from Stealth with $18M Series A Round

Reality Show Project Seeks to Capture MassChallenge Competitors in Their Entrepreneurial Element

Vertex Nails Third Big Trial With Hepatitis C Drug, In Toughest Patients to Treat … Next Page »

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Big companies put on dog-and-pony shows for government officials all the time, but this one actually means something. A123Systems (NASDAQ: AONE), based in the Boston area, is officially opening a 291,000-square-foot lithium ion battery manufacturing facility in Livonia, MI, today. The plant already employs more than 300 people, and is part of a Michigan expansion that the company says will create a few thousand jobs in the state over the coming years.

It’s a big deal—for Michigan’s ecosystem, for U.S. competitiveness in manufacturing, and for A123’s business. The new plant in Livonia is the largest lithium ion automotive battery plant in North America, according to the company. It will produce lithium ion battery cells and packs, to be used in electric and hybrid-electric vehicles. The Watertown, MA-based company hopes to help transform Michigan into a global hub for the expanding market of batteries and electric vehicles.

The Livonia plant has been in the works for years, but is now a reality thanks to a $249 million grant from the U.S. Department of Energy (DOE) last year, and $125 million in refundable tax credits from Michigan’s 21st Century Jobs Fund. A123 also has a DOE loan application pending for $233 million.

For the opening ceremony, U.S. Secretary of Energy Steven Chu will be on hand, as will Michigan Governor Jennifer Granholm, Senator Carl Levin, Senator Debbie Stabenow, and other politicians. A123’s CEO, David Vieau, will be joined by most of the company’s top brass, including co-founders Yet-Ming Chiang and Bart Riley, and chairman Desh Deshpande. Big customers like China’s SAIC Motor Corp., BAE Systems, Navistar, and GM will be present too. The emcee and host will be Jason Forcier, vice president of A123’s automotive group, who is based in Michigan and is overseeing the new facility. (Forcier is known within the company as the “wheels guy.”)

Attendees will see a working factory, and see how a lithium ion battery is made, Forcier says. Unlike some of A123’s competitors in the state (like LG Chem), he adds, “This is not a groundbreaking, this is a grand opening…We’ll show the world we’re making batteries right here in the state.”

That has special significance to Forcier. While many people around the country may have learned of the economic woes of Flint, MI, through Michael Moore’s 1989 documentary, “Roger & Me,” Forcier and his family—some of them GM employees—lived through it. Forcier himself has built … Next Page »

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Acquisition news from big IT, Web, and biotech names, plus funding announcements for newer tech and life sciences companies, kept us buzzing with deals news in New England this week.

—Watertown, MA-based Dicerna Pharmaceuticals, a startup developing gene-silencing drugs, raised $25 million in Series B funding. New investor Domain Associates led the round, which also included Abingworth, Oxford Bioscience Partners, and Skyline Ventures.

—Mercator Therapeutics, a Wellesley, MA-based stealthy biotech startup, raised $2 million in seed funding to put toward licensing its technology and conducting early research in cancer.

—Framingham, MA-based Boston Heart Lab raised $10 million in an offering of equity- and rights-based securities. The startup makes lab tests for measuring patient cholesterol and programs for tracking cardiovascular health.

—Boston TechStars alum Marginize brought in $650,000 in its first round of venture funding. The startup is working on technology that displays the social media buzz surrounding the website you’re viewing. The investors in the financing were Atlas Venture, Longworth Venture Partners, eonBusiness, and SOS Ventures on the venture capital side. Marginize also attracted backing from angel investors David Cohen, Dharmesh Shah, Joe Caruso, Jean Hammond, Bill Warner, Will Herman, and Michael Mark.

—Healthcare payment software maker TransEngen, of Norwalk, CT, pulled in $2.5 million in an equity financing. The company’s website lists Dallas, TX-based Carlson Capital as a board member.

—Waltham, MA-based marketing analytics firm Unica will be acquired by IBM for $480 million in cash, in a deal set to close in the fourth quarter of this year. Big Blue is rolling Unica’s (NASDAQ: UNCA) 500 employees into its Software Solutions Group and will move them into its IBM Mass Lab. The computer giant has scooped up other companies in the marketing, e-commerce, and fulfillment spaces, like AT&T’s Sterling Commerce and Coremetrics.

—Stealthy social games startup Ayeah Games raised an undisclosed amount of seed funding, from angel investors and micro VC firms like John Landry of Lead Dog Ventures and Janpieter Scheerder of Eureeka Ventures. Ayeah was started by … Next Page »

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If struggling automaker Chrysler survives its current financial crisis, it will likely come out the other end with a different owner (the Obama Administration wants it to link up with Italy’s Fiat) and a different lineup of vehicles. In fact, it’s already working on a line of electric-only automobiles, including five Dodge, Jeep, and Chrysler models displayed at the 2009 North American International Auto Show in Detroit in January. And today the Auburn Hills, MI-based carmaker announced that A123Systems of Watertown, MA, will supply advanced lithium ion batteries for the vehicles, the first of which is expected to hit the market next year.

Under the agreement announced today, A123 will build a plant in Michigan to manufacture its nanophosphate lithium ion battery cells, which can be combined into battery packs large or small enough to suit the size of each vehicle. Using the same battery cells in all of its upcoming electric-drive vehicles, Chrysler says, will reduce development time and system costs and help increase production volumes. The cells will end up inside the company’s so-called “ENVI” line, which includes the Dodge Circuit EV, the Jeep Wrangler EV, the Jeep Patriot EV, the Chrysler Town & Country EV, and the Chrysler 200C EV concept car (see photo; click for a larger version).

“We’re very proud to have been selected to supply advanced battery systems for Chrysler’s family of ENVI electric-drive vehicles,” David Vieau, A123′s president and CEO, said in a statement issued by Chrysler. “This bold move by Chrysler changes the game and greatly improves our country’s ability to modernize our transportation fleet. We’re confident that our collaboration with Chrysler will serve as proof that American innovation is alive and well and ready to lead the new global market for fuel-efficient electric vehicles.”

Chrysler says the deal with A123 will help it respond to calls from government and the public for a new generation of cars that create fewer greenhouse gas emissions and that reduce the nation’s dependence on petroleum. Michigan Governor Jennifer Granholm welcomed the news, saying the Chrysler-A123 alliance “will create new jobs in the state, deliver benefits to consumers and contribute significantly to bringing more environmentally friendly vehicles to market.”

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Battery manufacturer A123 Systems of Watertown, MA, said yesterday that it has applied to the Department of Energy for $1.84 billion in federal loans under the department’s “green car” program. A123 says it wants to use the money to build a factory in southeastern Michigan that will manufacture lithium ion batteries for up to 5 million hybrid vehicles per year, or 500,000 plug-in electric vehicles per year, by 2013. Executives at Chrysler and GM, Michigan Governor Jennifer Granholm, Senators Carl Levin and Debbie Stabenow, and Representative John Dingell, as well as Massachusetts Senator John Kerry all voiced their support for A123′s application under the DoE’s Advanced Technology Vehicles Manufacturing Incentive Program.

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GE announced today it invested an additional $30 million in A123Systems, the Watertown, MA-based battery maker. That brings GE’s total investment in A123 to $55 million, or a 9 percent ownership stake. According to the announcement, the $30 million was part of a $102 million Series E round raised by A123 in May, but the particulars of the financing had not been confirmed by A123.

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When General Motors unveiled its lavish 330-acre, Eero Saarinen-designed technical center in 1956, company president Harlow Curtice cruised to the podium in a shark-finned, bubble-domed Firebird II gas turbine experimental car. “We must put more emphasis on basic research, pure research,” Curtice declared, later adding, “I hope you will come to regard the General Motors technical center in the same way I do—as one of the nation’s great resources—more important even than the natural resources with which we have been endowed.”

More than a half-century later, no one gushes about “pure” research at GM or virtually any other industry lab—competition is too fierce, the pressure to conduct R&D directly relevant to the core business too intense. But that doesn’t mean the nation’s biggest carmaker doesn’t nurture big dreams about the future of vehicles, which run from hydrogen-powered cars to environmentally friendly vehicles that never crash. And it turns out that those dreams have some strong New England connections. So when president of GM North America Troy Clarke came to town yesterday, I asked him about the company’s vision for the future, and how two deals with local roots—its big investments in Watertown, MA’s A123Systems and in Coskata, an Illinois biofuels company backed by Waltham, MA-based Advanced Technology Ventures—fit in. That’s when he started waxing on about new types of batteries and cars that run on your trash.

“In some regards in the auto industry, and I don’t mean to be melodramatic, we’re at the beginning of time again,” Clarke told me. “There’s more technology opportunities than I think there have been since the industry started a hundred years ago.”

He was speaking primarily about the forces at work around climate change, the cost of petroleum-based fuels, and energy security. And he posed the problem, “How much can we afford to invest in infrastructure for personal transportation, and what are the costs of that?”

An unexpectedly introspective question, perhaps, from the man in charge of GM’s North American operations. But it’s probably good news that despite the pressures of the day, GM is spending some time looking ahead 50 years or more. And the automaker has plenty of projects on all these fronts, work I couldn’t sum up in a short article. But its hydrogen-powered fuel cell activity, to take just one example, is evidenced in Project Driveway, an effort announced last fall to put a test fleet of 100 cars with hydrogen fuel cells on the roads (85 of these have already been deployed, Clarke says). And Clarke spoke pretty passionately about the company’s farther-out visions, which include lightweight and fuel-efficient cars that are also safe (you can make lightweight cars now out of exotic and costly materials, Clarke says, but not only are they expensive, they don’t pass crash tests).

The solution, says Clarke: “I just have to make sure the vehicle doesn’t crash.” He sketched out a future of networked roadways and cars that talk to each other, with vehicle override systems taking control when needed. For those who might not like the idea of a car taking control of its owner, he points out that vehicles like the Chevrolet Corvette already have override systems that help owners drive much better in tough conditions. “Could you [make] a vehicle that couldn’t run into something? Yeah, I think you could,” Clarke says.

To that end, GM has been sponsoring work at places like Carnegie Mellon University, where it teamed up with the school’s engineers and computer scientists to enter an autonomous vehicle in DARPA’s Urban Challenge last fall.

But a road system without crashes is probably many decades away—and I wanted to know about some local investments poised to lead to commercial products much sooner. The first was GM’s contract with A123Systems, … Next Page »

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Local battery powerhouse A123Systems is delving further into the automotive market, thanks to a three-way deal involving itself, Norwegian electric car company Think, and General Electric. A123 has signed a deal to put its lithium-ion rechargeable batteries into Think’s vehicles.

Think is making an electric car, the City, that has a top speed of 60 mph and can go about 120 miles between recharges. It’s already on sale in Norway, and should be available internationally later this year. The company is also developing the Ox, a five-seater it says is close in size to an SUV, but lighter and more aerodynamic. That’s due out in 2009. (I didn’t speak to anyone at Think, but I’m guessing the name “Ox” is supposed to suggest oxygen, rather than a lumbering beast of burden. Maybe they’ll rename it if they move into the American market.)

Both vehicles are designed to rely on either a sodium or a lithium battery. In addition to A123, which makes the “Nanophosphate” lithium-ion battery, Think is working with Enerdel of Indianpolis, which makes a lithium-manganese system.

A123 batteries contain nanomaterials that let them hold more energy, run longer, and recharge faster than traditional lithium-ion systems. To build batteries for electric cars, the company has to take its individual battery cells and design them to operate in connected stacks that work with the car’s electrical system. The two vehicles, which will have different operating ranges, will require two different battery-pack designs, says David Vieau, CEO of A123. That’s why A123 is teaming up with battery-pack design experts at GE’s Global Research Center. The collaboration will “accelerate the timeline,” according to Vieu.

Meanwhile, another branch of General Electric, GE Energy Financial Services, is putting money into both companies to help advance the development of the electric cars. GE invested $4 million in Think, and increased its investment in A123Systems to more than $20 million. Vieau wouldn’t say exactly how much GE put in as part of this latest deal, but overall it’s the largest cash investor in A123, which has raised $148 million in financing to date.

He said both GE and A123 had been in talks with Think about battery systems, and the multi-party deal just made sense. “All of it kind of came together at the same time,” he says.

A123 has also been working with General Motors to provide the battery for GM’s electric vehicle, the Volt, and with BAE Systems to help power hybrid buses. Vieau says the deal with Think is yet another step into the transportation market.

But that doesn’t mean it will be solely a car parts company. A123 is also continuing its relationship with Black & Decker—among its first commercial products were batteries for high-power, longer lasting power tools. Still, Vieau says, “The transportation market is going to be our largest overall.”

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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 »

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The Boston Area Solar Energy Association presents a talk by Joseph Adiletta, senior product manager at Watertown’s A123 Systems, a major supplier of advanced lithium ion batteries. More information at http://www.basea.org/.

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As many of our readers know, the X in Xconomy stands for “exponential,” referring to the rapid rate at which technologies such as semiconductors and genomics evolve and in turn transform our economy and our daily lives. Unfortunately, the batteries in the information devices we carry everywhere these days aren’t one of those exponential technologies. Portable power is an area where we have to settle for incremental advances—but where there’s such great demand that even small improvements can justify big investments.

Westborough, MA, startup Boston-Power, which says it’s come up with safer, longer-lasting lithium-ion battery cells for notebook computers, is the latest to attract some of that investment. The company announced today that it’s gathered third-round venture funding totaling $45 million, which it will use in to scale up manufacturing operations with partners in Taiwan and mainland China.

“By the end of 2008 we will have the capability of making a million cells a month,” says Christina Lampe-Onnerud, the company’s founder and CEO. “That makes Boston-Power a real player in the space. We are still very small, but [a million cells per month] is enough for our customers to place a bet on us.” The company’s batteries are larger than most existing lithium-ion cells–which is part of what makes them more efficient—but the firm is working with laptop manufacturers such as Hewlett-Packard to incorporate the cells into battery packs that can be dropped into existing laptop designs.

Oak Investment Partners of Westport, CT, led Boston-Power’s funding round, with Venrock Associates, Granite Global Ventures, and Gabriel Venture Partners also participating. The infusion brings Boston-Power’s total venture investment to $68 million.

Rechargeable ithium-ion batteries were first developed in the 1970s and have been the main power source for laptops, cell phones, and other gadgets practically since the birth of portable electronics. But they’ve attracted some unwanted attention of late as the result of fires and explosions caused by manufacturing defects. Conventional lithium-ion cells are made using cobalt oxides that can become unstable if the batteries are overheated, overcharged, punctured, or short-circuited; they then release oxygen that oxidizes other materials, releasing more heat, with potentially frightening results. (In fact, the FAA classifies lithium-ion batteries as “hazardous materials.” To minimize fire danger aboard airplanes, the agency just enacted new rules prohibiting airline passengers from packing lithium-ion batteries in checked luggage, and limiting them to two spare laptop batteries in carry-on luggage.)

Lampe-Onnerud, former director of battery research at Kenan Sahin‘s Cambridge-based technology-development firm Tiax, helped to devise lithium-ion batteries that use stabler substances such as manganese in place of cobalt. She founded Boston-Power in 2005 with a mission to commercialize the new chemistry—along with larger mechanical designs that simplify the path of current through a battery and add new interrupt devices resettable fuses, and other monitoring electronics. “We have put a lot of time and effort into safety,” says Lampe-Onnerud. “We’ve not only changed the alloys, but we’ve made batteries smarter. They can say ‘I don’t like what I’m feeling right now, so I’m going to shut down,’ either temporarily or permanently.”

At the same time, Boston-Power’s battery packs, branded “Sonata,” recharge faster than average lithium-ion cells, reaching an 80 percent charge in 30 minutes. They can also be recharged over and over for up to three years without losing significant capacity, according to Lampe-Onnerud, whereas the average laptop battery has faded to about 60 percent of its original capacity by that time. And they’re made using smaller amounts of heavy metals than traditional lithium-on batteries, earning the company the prestigious Nordic Ecolabel, awarded by the Nordic Council of Ministers to products that have mimimal environmental impact in both their initial manufacturing stage and their and waste or recyling stage. “We were the first in the world to get the Nordic Ecolabel for lithium-ion chemistry,” Lampe-Onnerud says. “Why the big guys didn’t do it first, I have no idea.”

Though the company hasn’t said which manufacturers will be the first to include Sonata batteries in their laptops, it is already busy making them in partnership with a contract manufacturer in Shenzhen, China. And it announced today that it has selected a second company, GP Batteries of Hsinchu, Taiwan, to expand its manufacturing capacity. Lampe-Onnerud and GP’s own CEO, Andrew Ng, say the two companies connected at just the time when GP was looking for the right technology to manufacture. “GP Batteries has in the past been a conservative player in the laptop computer market, because of the safety concerns surrounding the lithium-ion system,” Ng said in a statement announcing the partnership. “With the design innovation and safeguards that are incorporated in Boston-Power’s Sonata batteries, we are now ready to apply our manufacturing expertise to re-enter the laptop computer market.”

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A123 Systems is like some sort of entrepreneurial Energizer bunny: it just keeps on marching through investment rounds and deals. In the latest news, the Watertown, MA, supplier of high-power lithium ion batteries announced today that it had received $30 million in new venture financing. The money will be used to scale up production capacity to meet growing demand for A123′s products, including fulfilling a big contract announced in August to co-develop the battery cell for General Motors’ Chevrolet Volt line of electric cars and other vehicles. The company will also grow its cordless power tool battery business, under a deal with Black & Decker.

The new funds come on top of $40 million the company raised in January; that was the biggest New England venture deal in the first half of this year. Since its 2001 founding, A123 has received more than $130 million in investment from the likes of General Electric, MIT, North Bridge Venture Partners, Procter and Gamble, Motorola, Qualcomm, Sequoia Capital, and YankeeTek, among others. A spokesman said that all of A123′s existing investors contributed to the new round, as well as two new ones: CMEA Ventures (which led the round) and Carruth Management.

The new funds should keep A123 energized for at least a little while longer.

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A123 Systems just landed a promising deal with General Motors to co-develop the battery cell for the automaker’s Chevrolet Volt line of electric cars and other vehicles. GM Vice Chairman Bob Lutz made the announcement yesterday during a speech in Michigan.

Under the deal, Watertown, MA-based A123 will co-develop the lithium-ion battery for GM’s E-Flex electric vehicle architecture (on which the Volt is based). The companies are not disclosing the exact terms of the arrangement. But, says Ric Fulop, an A123 founder and vice president of business development, “It’s a significant deal…We are working together with GM to develop a very special product for the Volt.”

The stakes are growing in the market for alternatively fueled cars. So far, GM and most other automakers have been left in the dust by Toyota, maker of the popular Prius gas-electric hybrid. In an attempt to catch up, GM is racing to offer cars that rely mainly on electricity for power (a conventional engine serves as backup when battery power is not being tapped) and whose batteries can be charged by plugging them into a standard outlet. GM first demonstrated its E-Flex electric vehicle architecture in the Chevy Volt concept car (pictured above) unveiled earlier this year, and Lutz said in his speech that GM hopes to offer a car based on the Volt technology by late 2010.

An affordable, safe, high-powered, long-lasting lithium-ion battery is key to GM’s plans. Developing such batteries is the forte of A123, whose technology is based on a nanoscale material developed at MIT. “It’s much safer chemistry, and it has much better life than first-generation lithium ion,” says Fulop. “These batteries last better than 10 years, over 7000 cycles of use.” The company already makes batteries for products such as power tools and jet-engine starters, he notes. “We’re now focused on batteries to help drive the electrification of transportation.”

A123 is one of the most talked-about energy companies in the Boston area. Founded in 2001, it has more than 500 employees—half of whom have been added this year—and reports raising more than $100 million in private financing. Its investor list includes General Electric, MIT, North Bridge Venture Partners, Procter and Gamble, Motorola, Qualcomm, Sequoia Capital, and YankeeTek, among others. Chair of the board is Sycamore Networks founder Desh Deshpande. Board observers include noted venture capitalist Michael Moritz of Sequoia, an early backer of Google and Yahoo.

Some other good news for GM and presumably A123: Lutz’s announcement came on the same day that the Wall Street Journal reported that Toyota was being forced to delay the launch of a new line of hybrids that tap lithium-ion battery technology.

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