[Corrected 9:05 a.m. 9/25/09, see below] In a performance reminiscent of the frothy days of the dot-com boom, stock in Watertown, MA-based lithium ion battery maker A123Systems (NASDAQ: AONE) soared more than 50 percent in its first day of trading yesterday. It’s been years since a New England technology firm burst out of the IPO gate so strongly, and Wall Street’s interest in the company—which hopes to supply batteries for many of the electric vehicles likely to come to market over the next several years—has significantly boosted the portfolios of the major venture investors, strategic investors, and executives who hold shares in the company, at least on paper.

The individual investor whose shares gained the most value yesterday is legendary Boston-area entrepreneur and philanthropist Gururaj “Desh” Deshpande, the founder of Sycamore Networks and the donor behind the Deshpande Center for Technological Innovation at MIT. Desphande owns 7.3 percent of A123Systems; at the IPO price of $13.50 per share yesterday, that stake was worth just over $95 million. By the end of the day, when the company’s stock price had climbed to $20.29, Deshpande’s shares were worth nearly $143 million. (See Table 1 below.)

A123Systems’ main venture backer, North Bridge Venture Partners of Waltham, MA, also fared well yesterday. With 9.3 percent of A123’s outstanding shares, the venture firm is the battery maker’s single largest shareholder. Its stake was worth just under $121 million at the offering price and had grown in value by $60 million by the end of the day. [Update: PE Hub has an interesting table today, using investment data from Thomson Reuters, estimating the share values for A123's six largest venture backers. The VC firms' (as yet unrealized) multiples, based on yesterday's closing price, vary from 3.03 to 7.23, according to Thomson's estimates; North Bridge's multiple comes in at 4.35.]

Overall, the company’s eight largest shareholders saw the value of their holdings increase by almost $270 million on Thursday [Updated and corrected: not $365 million as a previous version of this story reported due to a double-counting error in the math]. The company’s total market capitalization increased by $600 million over the course of the day, ending at $1.96 billion. Not bad for a company that has raised only about $352 million in private, dilutive investments. (A123Systems also benefited from $100 million in refundable tax credits from the state of Michigan, a $249 million Department of Energy grant this August, and about $250 million in other government grants and loans, leading PE Hub’s Deborah Gage to comment that “the biggest backers of A123Systems are taxpayers.”)

Here’s a list of A123Systems’ biggest shareholders, drawn from regulatory filings, and the amounts by which their stakes grew in value yesterday.

Table 1. A123Systems’ Eight Largest Shareholders and Their Stakes

* The “Shares Owned” figures refer to shares owned after the offering.

Source: A123 Systems Form S-1, page 124.

Of course, the gains reflected in the table above are on paper only—none of A123’s largest shareholders actually sold shares in the initial offering. But as part of the offering, several A123Systems principals did sell portions of their stakes in the company. Co-founder Yet-Ming Chiang, who developed the company’s battery technology in his laboratory at MIT, sold the most shares—a stake amounting to about $2.8 million at the IPO price of $13.50 per share. Here’s the list of selling shareholders identified in regulatory documents:

Table 2. Selling Shareholders in Yesterday’s IPO

Source: A123Systems Form S-1, page 125.

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A123Systems, the Watertown, MA-based advanced battery manufacturer that hopes to provide lithium ion batteries for the next generation of electric and hybrid vehicles, today revealed the expected stock price for its initial public offering. The company will seek to sell 25 million shares of its common stock at $8.00 to $9.50 per share, according to regulatory forms filed today. That would bring the company between $200 million and $237.5 million in new working capital.

Individual shareholders, including senior managers at A123, will sell an additional 680,500 shares, potentially netting them $5.4 million and $6.5 million. A date for the IPO has not been announced. Morgan Stanley and Goldman, Sachs are the lead underwriters, and A123 will trade on the NASDAQ exchange under the ticker symbol “AONE.”

There is likely some numerological significance to the timing of the announcement of A123’s IPO terms. As Bob reported last year, A123 deliberately chose to submit its original IPO filing at 8:08 a.m. on August 8, 2008 (8:08 on 08/08/08). A123’s co-founder, MIT material scientist Yet-Ming Chiang, was born in Taiwan, and in Chinese culture the number 8 is considered to be especially lucky, associated with sudden fortune and prosperity.

Today is 09/09/09, and in Chinese numerology, the number 9 is traditionally associated with power, since it is the highest number before 10. In Mandarin (though not Cantonese) the word for 9 is also a homonym for “long-lasting.” Traditionally, the robes of the emperor of China showed nine dragons, and in Chinese mythology, dragons have nine children.

As Chiang wrote in an e-mail after the initial IPO filing: “It was not a coincidence that the ’send’ button was pushed at 8:08am on 8/8/08, although I wasn’t the one who did it!” Today’s filing is probably no coincidence either.

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A lot of people modify their cars, but the alterations to the hybrid Toyota Prius I was test-driving last week were more than just a fancy paint job or cool rims. In addition to the standard regenerative braking battery, I was packing an A123 Systems Hymotion L5 lithium ion battery that charged by plugging into a wall socket. The Prius had been modified and lent to me for a few days by Bellevue, WA-based Green Car Company.

The mechanics at Green Car Company had installed the Hymotion battery in the trunk of the car, right behind the socket where the power cord to charge the car plugs in. The Green Car Company rents and sells a variety of environmentally friendly cars and bikes, including biodiesel vehicles. It also performs maintenance and modification for those cars, such as the plug-in module for the Hymotion battery.

Hybrid cars are growing more popular all the time, and many companies are competing to develop the best possible battery—long-lasting, easily recharged, and cheap. The L5 battery has a longer life than the standard Prius battery, though it requires a power grid to charge. It also makes the gas engine of the car more efficient, improving the overall energy efficiency of the car compared to standard hybrids. A 2009 modified Prius at Green Car Company costs $41,999, while a standard Prius costs $22,516, according to Kelley Blue Book. Toyota is developing a plug-in version of the Prius, but according to Green Car Company, that version will actually cost more than modifying the current, standard Prius.

The main idea of installing the plug-in battery is that drivers will be able to travel 100 miles or more on every gallon of gasoline, with a range of 30 to 40 miles on just the battery itself. One of the nicer points for me was that even if the battery did deplete all the way, the car would then become a standard Prius hybrid and use its factory-installed battery.

The plug-in battery maker, A123 Systems, based in Watertown, MA, acquired Toronto-based Hymotion and Hymotion’s plug-in hybrid modules in May 2007. A123 developed the nanophosphate lithium ion battery, which has a longer life and charging ability than standard lithium batteries. Hymotion used these A123 batteries in its conversion kits even before being acquired. Last Wednesday, A123 announced it had received $249 million in grant money from the U.S. Department of Energy, part of the $2.4 billion in federal grants given out for companies working on technology for electric vehicles. A123 plans on using the money to expand and improve its lithium ion battery manufacturing capabilities in the U.S.

To give people an opportunity to test-drive a car installed with a Hymotion battery, …Next Page »

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Seattle-based EnerG2, an advanced materials startup focused on energy storage, has scored a $21.3 million grant from the U.S. Department of Energy to build a new manufacturing plant in Albany, OR. The funds are part of a total of $2.4 billion in federal stimulus grants announced today to speed up the manufacturing and development of next-generation batteries, energy storage technologies, and electric vehicle components. (Check out the map of all 48 awardees here.)

EnerG2, a University of Washington spinout, is developing novel nano-scale materials to make better ultracapacitors. These are devices that can store and release large amounts of energy much faster than conventional batteries, and with longer lifetimes. Ultracapacitors are typically used in electric and hybrid vehicles, forklifts, and cranes. Their performance depends on the materials used to make their electrodes—and that is where EnerG2 comes in with its unique concoction of synthetic carbon nanomaterials.

The U.S. Department of Energy has great interest in companies like EnerG2 that seek to improve energy storage and efficiency more broadly. That’s partly because as more alternative energy sources come online, they will require technologies that can deal with the natural peaks and valleys of that kind of power generation.

“This is obviously an exciting turn of events for EnerG2,” says Chris Wheaton, the company’s co-founder and chief operating and financial officer. “It’s a great confirmation of the role ultracapacitors can play in the automotive industry, as well as the role that materials science can play in helping the country achieve our energy efficiency goals for the future.”

EnerG2 will work together with Oregon Freeze Dry, one of its manufacturing partners, to build the new plant, which Wheaton says will be the first in the world dedicated to commercial-scale production of high-performance synthetic carbon materials. Wheaton adds that construction is expected to take about 18 months, and the new plant should create 25 to 50 new jobs in Linn County, OR. As for why EnerG2 wants to build the plant in Oregon, he says, “[Oregon Freeze Dry] have both the skills and the land that make it an ideal place to situate this facility. They’re already our partner.”

Better ultracapacitors could potentially have a big impact on electric and hybrid vehicles. EnerG2 co-founder and CEO, Rick Luebbe, told me last fall that ultracapacitors could be used to get 150,000 miles out of a plug-in hybrid car battery. Wheaton says vehicles will use a combination of a battery and an ultracapacitor. The latter is used to accelerate the car and store braking energy, while the battery gives you longer driving range. “The ultracapacitor makes the whole system more efficient,” Wheaton says. “It makes the battery last longer and not need to be as big and expensive.”

EnerG2 is backed by OVP Venture Partners, Firelake Capital, Yaletown Venture Partners, WRF Capital, University of Washington, Washington Technology Center, the Sustainability Investment Fund, Northwest Energy Angels, and the Frontier Angel Fund. Back in October, the company raised $8.5 million led by OVP and Firelake. That funding round was augmented by an additional $2.5 million investment in June, which brought in Vancouver, BC-based Yaletown as a new investor.

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Boston-Power CEO Christina Lampe-Onnerud says she was “incredibly disappointed” and “frankly a little surprised” when the U.S. Department of Energy today announced $1.5 billion in battery-related grants—and none of it went to her company. The Westborough, MA-based firm had requested $100 million to build a state-of-the-art “green” battery-manufacturing plant in Auburn, MA.

“I have this vision of being a good global citizen, and one of my visions is to bring great technology to the market. And we do that everyday,” Lampe-Onnerud, an Xconomist, told me in a phone call this afternoon. “I’m incredibly disappointed that DOE and the [Obama] Administration didn’t bet on us.” Her proposal, she says, was to build the facility in three years. “We would have been able to do that in two years. We would have brought 600 jobs to Boston-Power in Massachusetts, and we would have pulled along 2,000 in indirect jobs.”

Lampe-Onnerud says the decision stung all the worse because Boston-Power has shown its competiveness and its success through deals such as the one announced last December with Hewlett-Packard to make energy efficient, eco-friendly replacement batteries for laptops. “We have landed some of the top fish in a very competitive market. We would have loved to help bring green jobs back to the United States.”

But Lampe-Onnerud continued in her trademark energetic, upbeat fashion. For starters, she said the Department of Defense also opened up a grant program along with DOE’s, and “we did apply to both agencies. So their [the DOD] decision, I think, is happening in October, and I remain hopeful that Boston-Power will be invited into the table.” She adds, “We will continue to try to make this happen in Massachusetts.”

Lampe-Onnerud seemed to back away from a statement made during a keynote session on June 24 at XSITE, the Xconomy Summit on Innovation, Technology, and Entrepreneurship, in which she said if Boston-Power did not receive the $100 million in stimulus funds, “we will most likely not remain an American company.”

Instead, she says, “I think the fact is if we don’t get the Department of Energy funding and don’t get the Department of Defense funding, we will not be able to put together a manufacturing plant in the United States, which means the whole focus of the company will go to Asia. There is so much cash on the ground in Asia and it’s so tight here.”

Boston-Power currently has one big plant in Taiwan and is building an even bigger one in China’s Shanghai corridor, Lampe-Onnerud says.

Whatever the funding decisions, “I would say life goes on,” she says. “It’s going really, really well for Boston-Power…we’re expanding into many regions.” She says the company will have some “very cool news” this fall about some deals in the portable power and automotive spaces.

Lampe-Onnerud did point out that the bulk of the battery funding went to proposals designed to create jobs in Michigan and, to a much lesser extent, Indiana, around the automotive belt. Case in point was fellow Massachusetts battery maker A123Systems of Watertown, which today won a $249 million grant to build a plant in Livonia, MI.

“I suspect it’s really not about us, it’s really about Michigan and Indiana,” she says. “I don’t know if it was in the cards for Massachusetts.”

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The coming generation of electric and hybrid gas-electric vehicles will need safer, longer-lasting, faster-charging batteries. Boston-Power—the Westborough, MA-based known up to now mainly for its “green” lithium-ion laptop batteries—wants to supply them, and it’s pursuing federal stimulus money to fuel its bid.

At a planned media event today featuring Massachusetts Governor Deval Patrick, the company will introduce a new “green” lithium-ion battery for electric and hybrid cars called Swing. To build the new product, the company is unveiling plans for a 455,000-square-foot manufacturing facility to be located in Auburn, MA, a Worcester suburb about an hour’s drive from Boston.

Boston-Power says the proposed facility could create 600 new jobs, and both the company and state officials are describing it as a major step toward making Massachusetts into a vehicle battery mecca. “This is the state of innovation,” says Christina Lampe-Onnerud, Boston-Power’s founder and CEO. “It’s a state that is committed to clean technology and has been for a long time. We put Boston-Power’s headquarters here for the same reason. We believe manufacturing should be close to the innovation.” (Below is a complete interview with Lampe-Onnerud, who will also be a featured speaker at the June 24 Xconomy Summit on Innovation, Technology, and Entrepreneurship.)

Indeed, Boston-Power’s project, along with similar efforts at Watertown, MA-based A123Systems, could give the state a key foothold in the reborn auto industry if, as expected, federal bailout conditions force American automakers to retool for a new generation of greener vehicles. A123 landed a deal in April to supply Chrysler with lithium-ion batteries based on its MIT-bred nanophosphate technology. (Those batteries, however, will be built in Michigan rather than Massachusetts, thanks to a $100 million tax-credit lure extended by the Michigan Economic Development Corporation.)

Boston-Power’s plan to build in Massachusetts hinges on its ability to lasso a big chunk of federal stimulus cash. The American Recovery and Reinvestment Act of 2009, known colloquially as the stimulus bill, provides $2 billion for “facility funding awards” for “manufacturers of advanced battery systems and vehicle batteries that are produced in the United States, including advanced lithium ion batteries.” Boston-Power is applying for $100 million of that money. It also plans to hit up the Department of Defense for funds designated in the proposed 2010 federal budget for the construction of manufacturing facilities that contribute to national security.

The Commonwealth of Massachusetts has pledged up to $9 million for the Auburn facility—but that money is in the form of matching financing, meaning Boston-Power will have to secure the federal money first. The company says it’s “working closely” with state officials, including Governor Patrick, energy and environmental affairs secretary Ian Bowles, and Representative Jim McGovern (a Democrat who district includes Auburn), to pursue federal and state incentives.

Lampe-Onnerud says building the Auburn facility will cost far more than the $100 million the company is seeking from the U.S. government, but that “it’s enough to get private investors to believe that you can do battery manufacturing in the United States.” Without some pump-priming in the form of federal stimulus spending, she says, the financial markets might not back risky technologies in areas like energy and clean technology. “What I think the Obama Administration has realized, to its credit, is that if we want to be a player, the government has to help,” Lampe-Onnerud says. “It will not happen on its own.”

Boston-Power isn’t saying much yet about the Swing product itself, except that it will set new standards in the vehicle battery business for safety, lifetime, weight, cost, environmental sustainability, and energy density. (Lithium-ion batteries have a higher energy density, or energy output per weight, than most other battery technologies, and both A123 and Boston-Power have come up with engineering tricks that make it even higher.) But Lampe-Onnerud says the Swing builds on the same basic technology platform as the Sonata, which is marketed by Hewlett-Packard under the Enviro brand name. She adds that the manufacturing blueprints and procedures the company has already developed for its Sonata factories in Asia can be adapted relatively easily to make larger-format batteries for cars here in the United States.

And using an existing building—a warehouse off I-90 once used by the rapidly downsizing Filene’s Basement bargain clothing chain—will hasten the project, Lampe-Onnerud says. “This factory will be up and running full speed within three years, which is very fast in the battery industry,” she says. “We have experience with this type of manufacturing in Asia, so I think it’s a low-risk investment for the government.”

Boston-Power and other applicants for the battery-manufacturing grants have already submitted proposals to the government, and the Department of Energy plans to announce a list of grant recipients as early as July. Governor Patrick, Secretary Bowles, Rep. McGovern, Lampe-Onnerud, and other officials plan to promote the Boston-Power proposal at a noon ceremony today at the Auburn site.

Xconomy spoke with Lampe-Onnerud about the project Friday evening; a transcript follows.

Xconomy: How much of the actual cost of the proposed Auburn plant would be covered by the $100 million stimulus grant you’re seeking?

Christina Lampe-Onnerud: It’s not the whole amount, by far, but it’s enough to get private investors to believe that you can do battery manufacturing in the United States. For a company like ours, cash flow is everything. I believe that Boston-Power, 10 years out, will be a smashing success. But it’s tough in the early years because you’re growing the company at the same time you’re growing the top line. Revenue needs to grow and you need to establish market share at the same time as you’re innovating. This will allow us to …Next Page »

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Three local venture firms put on what amounted to a university startup fair at the Charles Hotel in Harvard Square yesterday. I went hoping for a peek at a few of the companies that could be pulling down Series A rounds a year or two from now.

Now in its second year, the invitation-only University Research & Entrepreneurship Symposium was organized by Atlas Venture, Flybridge Capital Partners, and General Catalyst and sponsored by Boston-based law firm Goodwin Procter. The firms formatted the event so that university research teams with hot, potentially commercializable technologies had a chance to give their best 12-minute pitches to a large collection of venture capitalists and corporate representatives from all over the region. Attendees had one track to hear about nine companies in the life sciences industry, and other track for nine more infotech- and energy-oriented companies. The research teams weren’t just from places like Harvard and MIT, but represented 15 different institutions from around the country.

Eight of the presenting teams were from New England. One, Boston-based Novophage, is a company that Ryan already covered; it’s working on “engineered bacteriophages” to combat antibiotic-resistant bacteria such as MRSA. I couldn’t be in two places at once, so I had to skip presentations by three of the remaining seven local teams. But the following is a quick rundown of the four local presentations I did hear. All of these groups are in the lab-bench or seed-funding stage, and are looking for venture capital to get to the next step in the commercialization process.

Making Ethanol from Soybean Hulls—Without Destroying the Protein

Jonathan Mielenz of Oak Ridge National Laboratory in Tennessee and Dartmouth College in Hanover, NH, talked about a project with Dartmouth engineers John Bardsley and Charles Wyman to study soybean hulls as a potential raw material in the fermentation of ethanol.

Soybeans are used to make soy oil and other food products, and their hulls, which have a high protein content, are usually used as feedstock for cattle. That would seem to make them a bad choice as a source of biomass-derived ethanol; indeed, a lot of the effort in ethanol production these days is going into technologies, like ideas being developed at local firms like Mascoma and Verenium, that use non-food, high-cellulose sources such as wood chips or switchgrass.

But Mielenz said his group has come up with a simple way to ferment the sugars in soybean hulls without destroying the protein. The high-temperature pretreatment to which most other high-cellulose biomass is subjected before fermentation would break down the proteins in soybean hulls, Mielenz said. Simply by skipping this step, Mielenz says, his startup—which doesn’t have a name yet—found it was able to extract the sugars in the hulls without disrupting the amino acid sequences in their proteins, thus preserving their value as feed.

Selling the remains of the fermentation as feed could help bring down the net cost of ethanol production and make biofuels more competitive with fossil-based fuels, Mielenz argued.

Cheaper, More Powerful Methanol Fuel Cells

Nathan Ashcraft, a PhD candidate in the laboratory of Paula Hammond in the Chemical Engineering department at MIT, gave a talk about DyPol, a startup looking to commercialize a new, more efficient type of membrane for methanol-based fuel cells.

A methanol fuel cell works by exposing methanol on the anode side of the cell to a membrane where a catalyst such as platinum splits off protons and electrons. The electrons exit the cell to form an electric current while the protons travel through the membrane, meeting oxygen from air on the cathode side of the membrane to produce water as a waste product. DuPont makes the leading membrane material for methanol fuel cells, a polymer called Nafion. But Nafion has a few weaknesses, Ashcraft said; it’s costly to make; it depends a toxic fluorination process; and it’s easily permeated by raw methanol, reducing its efficiency.

Ashcraft and colleagues in the Hammond Lab, collaborating with a number of other labs around MIT, have devised a way to build polymer membranes layer by layer, allowing them to blend polymers that couldn’t otherwise be used together. The layers are less permeable to methanol, and can be created in a non-toxic, water-based solution. Prototype fuel cells built using the new membranes have 53 percent greater energy output than …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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SAIC Motor Corporation, a state-owned carmaker in Shanghai, China, plans to use iron-phosphate-based lithium ion batteries from Watertown, MA-based A123 Systems for a new gasoline-electric hybrid car that could be available in China by 2010, according to a report yesterday in the Wall Street Journal. The Journal said A123 executives would not confirm the report, but the company has published a headline about the agreement on its website.

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In the past couple of weeks, we’ve seen further bloodletting in terms of area tech-company layoffs and closures. It really is brutal out there. Here is a quick recap:

—Exide Technologies (NASDAQ: XIDE), a maker of batteries and energy storage devices in Alpharetta, GA, closed its facility in Sumner, WA, and laid off 43 workers earlier this week. The staff cuts were effective immediately.

—Bellevue, WA-based travel site Expedia (NASDAQ: EXPE) laid off an undisclosed number of workers about two weeks ago. The latest staff cuts came on the heels of another layoff (numbers also not disclosed) at the company in February.

—Seattle-based Impinj, the maker of novel radio frequency identification technologies, laid off 23 workers (or about 18 percent of its staff of 130) two weeks ago. Xconomy profiled the company’s strategy in February.

—Sun Microsystems (NASDAQ: JAVA), the software and networking giant, laid off 24 employees in Bellevue, WA, earlier this week. The staff cuts are effective May 30.

—Microsoft (NASDAQ: MSFT) is laying off two employees at its Seattle facility near the International District, effective June 30, according to the Washington State Employment Security Department.

—Microsoft is also shutting down MSN Encarta, its online encyclopedia site, as of October 31, 2009. The move is viewed as a response to the changing nature of reference materials and information access, thanks to competing sites like Wikipedia.

—Seattle-based Trusera, the online community healthcare startup founded by ex-Amazon exec Keith Schorsch, said it may close at the end of April unless it can raise more funding in a hurry. Trusera began in early 2007, raised $2 million in angel funding that summer, and rolled out its public site in June 2008.

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Wilmington, MA-based Lilliputian Systems, which is developing fuel cells small enough to power mobile phones and laptops, has raised an additional $25 million in venture funding from a group of new and existing investors, according to a report today in Mass High Tech. The new investors are Stata Venture Partners of Needham, MA, and Altira Group of Denver. The round also included existing backers Atlas Venture, Fairhaven Capital, Rockport Capital, and Kleiner Perkins Caufield and Byers, according to MHT. The eight-year-old company has raised some $90 million all told.

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Sun Microsystems (NASDAQ: JAVA) has laid off 24 workers in Bellevue, WA, effective May 30, 2009, according to a notice from the Washington State Employment Security Department. Meanwhile, Exide Technologies (NASDAQ: XIDE), a maker of batteries and other energy-storage devices, has closed its facility in Sumner, WA, and has laid off 43 workers, effective immediately.

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Back in December, Westborough, MA-based Boston-Power announced a major deal to manufacture new longer-lasting, eco-friendly laptop batteries for Hewlett-Packard. The new $150 battery, called the Enviro, is compatible with 17 notebook computers in the HP Pavilion, HP HDX, Compaq Presario and HP G lines, and goes on sale today at HP’s e-commerce site, hpshopping.com. Starting later this month, the Enviro battery will be available as an option on new HP laptops, Boston-Power said.

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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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After raising $70 million in venture funding and spending more than three years on the development of next-generation lithium-ion batteries, Westborough, MA-based Boston-Power has won its first big customer: It’s the supplier behind a new line of replacement laptop batteries from Hewlett-Packard. Branded as the “HP Enviro Series” but based entirely on Boston-Power’s Sonata technology, the batteries incorporate advances in design and chemistry that will allow them to be recharged much faster than conventional laptop batteries—and that will keep them from losing their capacity to store power over time, the way older lithium-ion cells do.

The Enviro batteries be available from HP early next year, and will have the same form factor as current HP laptop batteries, meaning they can be slipped directly into existing HP laptops. That will make Boston-Power the first U.S.-based company ever to enter the laptop battery market, a space wholly dominated up to now by Japanese and South Korean companies such as Sony, Sanyo, LG, Samsung, and Panasonic.

Boston-Power—which is funded by Oak Investment Partners, Venrock, GGV Capital, and Gabriel Venture Partners—has long been promoting its battery technology as a smarter alternative to conventional lithium-ion cells. Most lithium-ion batteries suffer from chemical buildups that cut their capacity in half after only one year of use, meaning that they usually have to be replaced several times over a typical laptop’s three-year lifespan. That’s not only an expensive proposition for consumers, since replacement packs usually cost $80 to $120, but also uses up precious resources during manufacturing and leads to greater shipping costs and carbon emissions.

A single Enviro replacement battery, by contrast, is designed to retain 80 percent of its charging capacity over three years—meaning, in theory, that the replacement will never have to be replaced. Christina Lampe-Onnerud, a research chemist and Swedish native who founded Boston-Power in 2005, calls the company’s deal with HP “a celebration of cleantech” and of innovation in general. “The number-one laptop and notebook computer maker has prioritized the environment and created a whole new brand to give consumers a choice,” says Lampe-Onnerud (who participated in an Xconomy panel discussion on energy innovation last week). “I’m very proud that Boston-Power is the enabling technology for their first offering, and I’m extremely happy that we can be part of the solution for climate change instead of the problem.”

But if the Enviro batteries are so great, why aren’t they being included in new HP laptops, rather than sold only as replacements? That will probably happen down the road, Lampe-Onnerud suggests. Offering the Enviro as a replacement battery first “was the quickest, best way, in HP’s mind, to deploy this battery to as many people as possible,” she says. “I think you should expect to see other opportunities for collaboration [between Boston-Power and HP] in 2009.”

In fact, the market for laptop batteries is so commoditized—with no particular product standing out from any other—that it’s hard to imagine that HP would not eventually put the new Enviro batteries directly into its Presario and Pavilion laptops and turn them into a sales point (or at least market them as an option, the same way it offers buyers of new laptops a choice of graphics cards or hard drives).

“We will see during a 2009 a very interesting opportunity for our early adopters to get rewarded for working with us, because …Next Page »

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Waltham, MA-based Polaris Venture Partners and D.E. Shaw Ventures of New York are the lead investors in a $13 million Series B investment round for Infinite Power Solutions of Littleton, CO, the startup announced today. Existing investors Core Capital Partners, Applied Ventures, and In-Q-Tel also joined the round, which brings the company’s total venture pot to some $49 million, and will help it commercialize its technology for rechargeable thin-film batteries.

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I pinged energy expert Jesse Berst, the managing director of Redmond, WA-based GlobalSmartEnergy, to get his take on EnerG2, the venture-backed energy-storage startup we profiled earlier today. EnerG2 has developed a nanotech approach to building better batteries and “ultracapacitors” for storing electricity. Berst, an Xconomist, replied with some insights into the startup’s prospects for becoming a major player in the electricity economy (you can read more about this here and here), and the main challenge it faces.

Berst first emphasized the importance of EnerG2’s core market. “Energy storage is the choke point of the electricity economy,” he writes. “Whether you want electric vehicles, a smarter, more reliable grid, or simply a laptop that lasts all day on a single charge, it is the lack of cost-efficient storage that stands in your way.”

He then gave a bit of context to the problem EnerG2 is solving. “Although we’re making progress, it is largely incremental—squeezing out more efficiency from approaches that have been known for decades. If EnerG2 has found a new way to store energy, and a way that can achieve industrial scale, the world will beat a path to its door.”

“That said, it should be prepared for skepticism,” Berst writes. “Every few years a new startup appears claiming radical improvements in storage. So far none of them have been able to move to real-world applications in quantity.”

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Two weeks ago, Xconomy broke the news of the Seattle startup EnerG2’s $8.5 million first-round venture deal with Kirkland, WA-based OVP Venture Partners and Palo Alto, CA-based Firelake Capital Management. Today, the energy storage and advanced materials company is officially announcing its approach and giving the story behind its financing. I had a chance to speak in-depth with EnerG2 chief executive Rick Luebbe and OVP venture partner Rick LeFaivre about the company, its strategy, and what it could mean for the future of cleantech ventures, particularly in the Northwest.

As we reported before, EnerG2’s technology originally comes from the University of Washington. It revolves around synthetic carbon powder and “nanocomposite” materials that have novel properties on the molecular scale, such that they are extremely efficient at storing various kinds of energy—electricity, natural gas, and hydrogen, to name a few. I wanted to find out more about how the technology works and how it will be commercialized (think better batteries for tools, vehicles, and mobile devices), but I also wanted to hear the deeper story about the ideas and motivations of the key players and how the deal came about.

The story goes back to 2003, when Luebbe and his business partner Chris Wheaton first got into the energy game. Luebbe had been the co-founder and CEO of the Seattle software firm Hubspan, while Wheaton had been vice president of North American operations at Silicon Valley-based Loudcloud (now part of Hewlett-Packard). “We got interested in energy storage because we recognized no matter which direction the energy economy went, storage would be a critical, critical component,” says Luebbe. And whether it was electrical storage or gas storage, local or mobile applications, the future was in energy. “I really enjoyed my previous career from a business perspective, but I didn’t have same passion I have for clean energy,” Luebbe adds.

Luebbe and Wheaton began looking for renewable energy technologies at the University of Washington that were practical and could be readily commercialized. “We weren’t interested in science projects,” says Luebbe. At the same time, they thought “the most practical way to enter the space was to find a technology that was a market changer,” he says. In other words, they had to swing for the fences. So they met with various department heads at the UW, and were introduced to Guozhong Cao, a professor in the materials science and engineering department, and his graduate student, Aaron Feaver. Cao and Feaver were focused on developing novel materials to generate and store energy. It was a good match.

The status quo in energy-storage technology, roughly speaking, is that you try different natural materials and see if they work. What Cao and Feaver did was use advanced nanotechnology and …Next Page »

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Xconomy has learned that EnerG2, an advanced materials company in Seattle, has closed an $8.5 million round of Series A financing, led by Kirkland, WA-based OVP Venture Partners and Palo Alto, CA-based Firelake Capital Management, according to multiple sources familiar with the deal. The news suggests that energy venture deals could be hot, even in the midst of a cold recession.

EnerG2 was founded in 2003, with technology from the University of Washington. The company is developing novel materials—synthetic carbon powder, carbon monoliths, nanocomposites, and others. It intends to use the stuff for applications like natural gas storage, hydrogen storage, more efficient solar cells, and “ultracapacitors” to replace traditional batteries, according to its website. EnerG2 is targeting customers in industrial, consumer electronics, and automotive sectors who need more efficient energy storage.

The startup is led by CEO Rick Luebbe, chief operating and financial officer Chris Wheaton, and vice president of research and development Aaron Feaver. Feaver did his undergraduate studies at the University of Illinois at Urbana-Champaign (always nice to acknowledge a fellow Illini alum), and came to the Seattle area in the late 1990s to work at Boeing. He co-founded EnerG2 while pursuing his Ph.D. at the UW, working with Guozhong Cao, a professor in the materials science and engineering department.

Feaver and Cao’s work included research on material-processing techniques to create new electrochemical properties at the nano scale (billionths of a meter). In 2004, EnerG2 formed a partnership with Cao to study carbon-based nanomaterials for storing energy and other applications. The work was initially funded by a $240,000 grant from the Washington Technology Center, a state-supported economic development agency that finances applications of university research. EnerG2 has also been funded by the U.S. Department of Energy, National Science Foundation, Pacific Northwest National Laboratory, and the UW Center for Nanotechnology.

The EnerG2 venture deal speaks volumes about the commercial promise of energy storage technologies, and the vibrancy of the local energy startup scene—particularly for technologies coming out of the UW. It also strikes me as a very smart deal for OVP, which has at least four cleantech companies in its portfolio—Carbonflow, Coda Genomics, M2E Power, and Tigo Energy—but none in the Seattle area until now. The 25-year-old venture firm has a couple of nanotech investments as well, but they are more on the biology side. OVP couldn’t talk about their latest deal just yet, but I hope to follow up with them in-depth soon.

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Boston-Power, which makes advanced lithium-ion battery packs for notebook computers, is planning a ribbon-cutting ceremony today for its newly expanded research and development facilities in Westborough, MA. I caught up with CEO Christina Lampe-Onnerud by phone this morning as she prepared for the event, where a number of local business leaders and state officials plan to join the company as it unveils a state-of-the-art facility focused on improving the quality of the company’s existing notebook batteries and exploring new applications for lithium ion technology.

Already, Boston-Power’s Sonata notebook batteries are known for lasting longer and recharging faster than battery packs from competing manufacturers. Lampe-Onnerud—who will be one of the expert panelists at an upcoming Xconomy Forum on energy innovation, planned for December 2—says the company hopes to extend that advantage into other types of consumer electronics and, eventually, into hybrid and electric vehicles.

A few outtakes from our conversation:

Xconomy: We last talked when you collected a $45 million Series C investment round back in January. Can you say a little about what Boston-Power has been up to since then, and why you needed additional research and development space?

Christina Lampe-Onnerud: The company is three and a half years old now, and it feels quite wonderful—it seems that we have arrived in the market at a time when consumer awareness is pretty high around what next-generation electronics technology should look like, and it’s all about having a battery you can depend on. Our batteries are green, they’re the fastest to charge on the market, and it’s really fun for us today to be opening our new development facility, where we’re expanding both our chemistry laboratories and our electronics laboratory, as well as our testing capabilities and our quality-control production support. We’re also officially opening a whole new division around transportation batteries.

It’s particularly inspiring for me and my colleagues, at a time when we’re reading a lot about the horrific evens in the financial markets all over the world, to be able to promise a glimmer of hope. We are stepping to markets that will not only create new opportunities for us but will actually solve major problems in the clean tech space.

X: What kind of work will go on in these new facilities?

CL-O: We now have close to 100 employees here in Massachusetts, and through our consultants, part-time people, and factory workers we have 500 people engaged in the company. The old facility was in the same building as the new one, but it was only part of a floor. We now have a whole floor, which means we’re able to house the whole team in one place, which is great. We have a dedicated customer support team for every OEM [original equipment manufacturer] that we work with, and now they, as well as the core expert groups in mechanical engineering and chemical engineering and material science, are all in the same space. That helps them make progress really quickly.

We are also fortunate to have many people who want to collaborate with us, so [the new facilities are] an opportunity to take in and partner with other organizations and truly come up with the best solutions.

X: Can you say more about the transportation applications for lithium ion batteries? That’s not something you’ve talked about a lot in the past.

CL-O: I think we have two really big opportunities for Boston-Power. We have all embraced mobile electronics in the last 10 years, and consumers are still hungry for better technology, and batteries have a big part in that. Now our company has the opportunity to leverage our experience with the [lithium ion] chemistry and apply it to the emerging market of transportation. That is a market that is still coming, no question. But it will probably be the biggest market in my lifetime. We really need people to come together to think this through from many different disciplines.

There are a number of new opportunities that will present themselves. Today we are showcasing battery modules for power-assisted bikes and scooters. And later we will be showcasing systems for larger systems like trucks and hybrid cars. In my opinion, it will be quite a few years before that becomes a real market, but I’m absolutely convinced that it will happen.

X: Right now the batteries in most hybrid cars, like the Toyota Prius, are nickel-metal-hydride batteries. Are you saying that you think you can displace that technology, or are you thinking about experimenting with other chemistries?

CL-O: I believe that we have only scratched the surface of lithium ion technology. If you look at the history of battery technologies, they typically stay around for 30, 50, or even 150 years. Lithium ion was only commercialized starting in 1991. You can think of a battery as a chemical factory where everything has to run exactly on time—and it takes a long time to refine a technology to that point. Lithium ion has had remarkable success in mobile electronics, where it is deployed in basically 100 percent of devices. The energy density is so much higher than for nickel metal hydride that there is basically no question that lithium ion will be the dominant technology.

But I have to be somewhat humble, because it takes a long time to commercialize these opportunities—longer than people sometimes might think. It just takes a very long time to scale up and trouble-shoot new batteries. It’s lovely to have an early demonstration in the lab, but it’s a whole new game to take it into mass adoption.

I think it’s quite likely that lithium ion is the only battery technology I will work on for my entire life. It’s going to stay around for another 50 years, at least.

X: Lastly—you’re talking today about Boston-Power’s lithium ion batteries as a “clean” technology. How so?

CL-O: Lithium ion is intrinsically environmentally friendly because it doesn’t have any heavy metals in it. Boston-Power is the only company in the world that carries “green” government accreditation from both the EU and China. It also has to do with the longevity of the battery packs. You are only going to need one Sonata battery for the lifetime of your notebook. The debate about whether batteries are recyclable misses the point. If you have a battery that can power-cycle 1,000 times as opposed to 400 times, you don’t have to recycle nearly as many batteries, which costs a lot of money, effort, and energy.

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