There seems to be a theme in Massachusetts venture investing right now. Things aren’t quite as hot as they were earlier this year, but are still trumping last year’s numbers for the same period. That’s what my colleague Greg noted about the MoneyTree report for Q3 2011 venture investing. And that’s what I’ve observed here with data from CBInsights FundingFlash—a daily roundup of companies receiving venture capital, angel investment, and growth equity funding—surrounding startup deals last month in Massachusetts.

On to the specifics. Twenty-nine Bay State startups raised a collective $253.8 million in equity-based deals in September. That’s an increase from the August ($156.5 million) and July ($250 million) funding totals. And September 2011′s funding is well above the total from September 2010, when startups pulled in $146.7 million in 25 transactions. But it’s still nowhere close to June’s massive $564.7 million pot, so talk of a bubble might have been premature.

The surge in September financing can largely be attributed to a $125 million Series F funding round for Westborough, MA-based Boston-Power, an advanced lithium-ion battery developer. (Note, this deal wasn’t included in the MoneyTree Report, likely because SEC documents for it had not yet been filed.) While the financing—which came largely from the Chinese government and a Beijing-based venture firm—helped plump up the deals total for the month, its overall effect on Massachusetts is mixed. As part of the deal, Boston-Power cut about 35 percent of its 80-person work force in the state as it shifts operations to China to pursue electric vehicle applications for its technology there.

The Boston-Power deal handily made energy the leading sector for the month, with $131.8 million raised across three deals. Healthcare followed with $71.2 million raised in eight deals, which included $23 million for Tokai Pharmaceuticals and $15 million for Tensha Therapeutics, both of Cambridge, MA. An SEC filing in September showed that Watertown, MA-based Arsenal Medical had raised $12 million, but just this week the company announced an $18 million financing round, which included $15 million for its new spinout, 480 Biomedical.

The Internet sector had the highest number of deals last month, with 10, and came in third for funding raised, at $39.2 million. The top deal in that sector and the fourth-largest deal of the month was a $13 million Series D financing for Boston-based Visible Measures, a maker of software that helps advertisers and publishers track the performance of online video. Massachusetts companies also raised another $10.5 million in 10 debt- or rights-based financings last month.

Check out the list below for details on the top 5 deals:

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This week’s deals news in New England was dominated by cleantech and life sciences firms.

—Quincy, MA-based Bluefin Robotics, a maker of  autonomous underwater vehicles, acquired the assets of Hawkes Remotes for an undisclosed sum. Hawkes Remotes is a spinoff of Hawkes Ocean Technologies, a Bay Area developer of deep-ocean explorer vehicles.

—Providence, MA-based NABsys, a developer of gene-sequencing technology, raised $10 million in a Series C financing led by its return investor Stata Venture Partners. That brings NABsys’ total funding pot to $21 million. The startup said it will put the money toward developing and commercializing its solid-state electronic systems for single-molecule DNA sequencing and analysis.

—Mascoma, a Lebanon, NH-based biofuels developer, filed for a potential $100 million initial public offering, which is being underwritten by Morgan Stanley, UBS Investment Bank, and Credit Suisse. As of fall 2009, the company had raised $100 million in private equity and about another $100 million in government grants and loans.

—Massachusetts startups collected $156.5 million in equity-based funding in August, continuing to dip from the dollars raised in earlier months of the summer, according to data from CB Insights Funding Flash.

—My hunch is that this month’s Bay State funding numbers will turn out better; Westborough, MA-based cleantech startup Boston-Power announced Tuesday that it had raised $125 million in funding, led by Beijing firm GSR Ventures. Return Boston-Power backers Oak Investment Partners and Foundation Asset Management also provided funding, along with the Chinese government. As a result, the developer of lithium-ion battery technology will shift its operations and manufacturing to China. Boston-Power has now raised more than $316 million.

—Cambridge, MA-based Tokai Pharmaceuticals took in a $23 million third tranche of its Series D round from existing investors Novartis Venture Fund, Apple Tree Partners, and angel investors. The money will go to Tokai’s prostate cancer drug galeterone (TOK-001), as it moves into the second of three clinical trial phases needed for FDA approval.

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Just after I wrote that no Massachusetts-based cleantech companies inked funding last month, Westborough-based Boston-Power bucks that trend for September.

The developer of advanced lithium-ion battery technology is announcing today that it has raised $125 million. The deal, which brings Boston-Power’s total funding pot to more than $316 million, has some serious implications for the company’s place in Massachusetts and its executive structure, though.

Beijing-based GSR Ventures led the round, which also included Oak Investment Partners, Foundation Asset Management, and grants, tax incentives, and other funding from the Chinese government, Boston-Power founder and now international chairman Christina Lampe-Onnerud says (she was executive chairman prior to the transaction announced today). GSR managing director Sonny Wu will now chair Boston-Power’s board of directors.

“We are embracing the electric vehicle opportunity in China,” Lampe-Onnerud, an Xconomist, told me over lunch Monday. While the vast majority of Boston-Powers operations will be moving to China (read on for more on this), she herself has elected to stay in Massachusetts.

The funding announcement follows last week’s news that Boston-Power CEO Keith Schmid, chief financial officer Steve Byram and vice president of marketing Sally Bament were leaving the company. Lampe-Onnerud says those moves were part of Boston-Power’s overall plan to shift its operations and most of its product marketing to China, where the company is building a new factory. Boston-Power will be searching over the next few months to fill the CEO, CFO, and marketing positions in China; meanwhile, “between the board and management team, we’re hosting those functions,” Lampe-Onnerud says.

What’s staying in Massachusetts, in addition to Lampe-Onnerud, are the R&D, designing, and fine-tuning of the company’s battery cells. All of these operations will take place in the Westborough office, while China-based teams will focus on developing the battery technology for customer applications. Boston-Power will be reducing its roughly 80-person workforce in the Bay State by about 35 percent, as those functions shift abroad, says Lampe-Onnerud. The global sales staff will also remain in Westborough, though Boston-Power expects most of its customers to come from China. The company plans to … Next Page »

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Fremont, CA-based Leyden Energy, which is developing longer-lasting lithium ion batteries for consumer mobile devices, electric vehicles, and energy storage, said today that it has raised $20 million in Series B financing. New investor New Enterprise Associates led the round, which was joined by existing investors Lightspeed Ventures, Sigma Partners, and Walden International. Leyden says it expects to use the funds to expand its global sales efforts and add manufacturing capacity.

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Envia Systems, a Newark, CA-based startup developing cathodes for high-capacity lithium ion batteries for electric and hybrid vehicles, said today (PDF) that it has raised $17 million in Series C financing. General Motors’ venture investment wing, GM Ventures, put $7 million into the deal; the rest came from new investors Asahi Kasei and Asahi Glass and existing investors Bay Partners, Redpoint Ventures, and Pangaea Ventures. In a separate announcement, Envia said that it has started shipping sample quantities of its manganese-rich cathode material for testing by potential customers. As part of its investment, GM has secured rights to use the material.

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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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Jason Hartlove has a name and a rakish mug worthy of a soap-opera star, a resume that any Silicon Valley engineer would envy, and a bit of swagger as a turnaround CEO. He co-invented the optical mouse at Hewlett-Packard, ran a 3,000-employee manufacturing operation for HP spinoff Agilent in Malaysia, and set South Korea’s struggling MagnaChip Semiconductor on its current path to an IPO. “One of my investors said this—so I won’t claim it for myself—but I am a technology MacGyver,” Hartlove says. “If you give me some piece of technology, I can really figure out what to do with it.”

But at Palo Alto, CA-based Nanosys, where he took over as CEO in October 2008, Hartlove may be facing his biggest challenge yet. With an impressive portfolio of patents based on work at MIT, Harvard, UC Berkeley, and other institutions, the nine-year-old company has repeatedly been described as one of the most promising in a batch of nanotechnology startups that emerged around the turn of the millennium. In its early years, it investigated areas like solar cells and display electronics where it was thought that nano-engineered materials could lead to higher power output or greater efficiencies. But real commercial applications for nanotechnology insights have been slow to emerge, and Nanosys has yet to bring a single product all the way to the market (the first is set to appear in the fourth quarter of this year, if all goes according to plan).

“The clock is ticking for Nanosys…since its financial backers are counting on a return on investment in another three to five years,” wrote Technology Review magazine. That was in 2004—just a few months before Nanosys called off a planned IPO that still hasn’t happened.

Nanosys CEO Jason Hartlove

After the pulling the plug on the IPO, “the company sort of struggled a little between 2005 and 2007 about what exactly its mission was,” Hartlove told me earlier this week. “It continued to do some directed research but didn’t really have an eye toward commercialization.” The shakeup year was 2008: CEO Calvin Chow was let go, former Symyx Technologies CEO and Venrock partner Steve Goldby became the company’s interim leader (he’s still chairman today), and the board recruited Hartlove to find Nanosys some real products.

It wouldn’t be a stretch to call Hartlove’s tactics since 2008 MacGyveresque, and so far, he hasn’t even used a Swiss Army knife. He has focused the company on the two research programs that seemed most likely to produce marketable products in the near future. And he has pushed forward one of them, a “QuantumRail” component that increases the brightness and efficiency of LED backlights for mobile device displays, to the point that the company is earning “real revenue from real paying customers,” in Hartlove’s words. The first customer is LG Innotek, which plans to use the QuantumRail in 5 million phone-sized displays by the end of 2010; its purchases recently contributed to Nanosys’s first break-even month.

Demand for the nanocrystals that go into the QuantumRail, as well as the high-capacity anode material that Nanosys is developing for the lithium-ion battery industry, is growing fast enough that the company will soon need to find larger quarters outside Palo Alto, Hartlove says. And within 18 months, he says, the company hopes to be in a position to restart the IPO process. “We’ll have display products on the market, battery products on the market, a track record of revenue and profitability,” he says. “Those are the milestones.”

At least one Nanosys investor, Lux Capital, seems to buy into Hartlove’s optimism. “Things have really accelerated and they’re on a rapid path to success,” says Josh Wolfe, a managing partner at the New York-based firm, which contributed to a … Next Page »

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When I last met Ann Marie Sastry, she was shivering in the cold, leaky basement of Detroit’s Cobo Hall at January’s auto show, talking about how her company, Ann Arbor, MI-based automotive lithium-ion battery developer Sakti3, was eventually going to power the cars upstairs on the main show’s “Electric Avenue.” Now her company is closer to ascending that escalator with a new $7 million Series B round of financing.

The money comes from new investor Beringea, based in Farmington Hills, MI, and previous investor Khosla Ventures. The Beringea investment was made through the $175 million InvestMichigan Growth Capital fund, which provides expansion capital to promising Michigan businesses.

Previously, the company received $3 million from the Michigan Economic Development Corporation in 2009 following an initial $2 million in financing from Khosla Ventures in 2008.

Sastry, the company’s CEO and a University of Michigan engineering professor, told me recently that although she likes to stay low-key about her company, this investment is exciting because it allows Sakti3 to work toward its goal of hiring 112 more people in the next few years and getting prototypes to customers by the end of this year.

Sakti3 has been a kind of poster child for state incentives. In 2008, the company received tax credits from the Michigan Economic Growth Authority worth $2.3 million over 10 years, helping to convince the company to stay in Michigan rather than move to a competing site in California.

“They’ve been amazing to us,” Sastry says, referring to the state government’s efforts to support Michigan’s nascent battery industry. “The state’s made a really substantial commitment to us. We take that really seriously. We want to scale in Michigan and the state has really stepped up.”

But, Sastry says, mostly she and her colleagues at Sakti3 keep their heads down, work on their technology and learn more about the nuts and bolts of the business, like automotive supply chain issues. Lithium-ion battery cells for the automotive space is a hot, highly competitive field now and Sastry prefers to keep the press releases at a minimum, as you can see by the company’s very minimalist Web site.

Of investors Beringea and Khosla, she says that she is thrilled that they share her philosophy about the future of vehicle electrification.

“We really believe that the way to solve a lot of these sticky societal problems is with good technology,” Sastry says.

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Around the time Steve Jobs unveiled the Apple iPad, a funny Photoshopped picture began making the rounds on the Web, showing Jobs with four iPhones crudely lashed together with duct tape. The picture’s unspoken message, of course, was that the iPad is just a big iPhone.

Well, something like that is actually coming true in the automotive battery field. It turns out that you can make a pretty good battery for a hybrid electric vehicle by assembling lots of small lithium-ion laptop battery cells—up to 2,000 of them, in fact—into one big pack.

This is the approach being pursued by Boston-Power, the Westborough, MA, startup best known for making the environmentally friendly Sonata batteries used in many Hewlett-Packard notebook computers. And in a sign that Boston-Power is getting serious about marketing its so-called Swing cells to electric-vehicle makers, the company is expected to announce today the appointment of retired General Motors executive Robert Purcell to its board of directors.

As the leader of GM’s Advanced Technology Vehicles Group from 1994 to 2002, Purcell helped to launch the EV-1, GM’s first modern electric vehicle, as well as an electric pickup truck and early hybrid cars. He went on to lead global sales, planning, and strategic alliances for GM’s Powertrain Group, managing $2 billion a year in direct engine and transmission sales and $1 billion in licensing activity.

In other words, he’s been around the block a few times in the automotive industry. And while he says he’s “seen a lot of things” in his work with GM and its partners, he’s never seen a car powered by the equivalent of 2,000 laptop batteries.

“Of course, this isn’t just as simple as strapping together a bunch of laptop cells,” Purcell told Xconomy last week. “It’s about integrating from cell to module and then from module to pack. Boston-Power has some very clever ideas about how to do that in a cost-effective way. And this isn’t a science fair project—they are doing the hands-on work to move from cell to module to pack in a way that will work in a typical light-duty passenger vehicle.”

Boston-Power has been eyeing the transportation market since 2008, when it expanded the R&D facilities at its Westborough headquarters and began to build prototype battery packs for power-assisted bikes and scooters. So far, the company has tested Swing-based battery packs in just a few hundred cars—but Christina Lampe-Onnerud, the company’s founder and CEO, predicts that eventually the Swing and other lithium-ion batteries will completely … Next Page »

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A123Systems, a Watertown, MA-based battery maker, announced today it will invest up to $23 million in Irvine, CA startup Fisker Automotive, in addition to supplying the batteries for the company’s luxury hybrid car, due to launch in late 2010. Fisker’s Karma Plug-in Hybrid Electric Vehicle (PHEV) has a range of 50 full-electric miles on a single charge of A123‘s lithium-ion battery, and a total range of 300 miles with an on-board generator powered by a fuel-efficient gasoline engine, according to A123′s announcement. A123′s investment in Fisker includes $13 million in cash and $10 million in A123 common stock, as part of a strategic partnership under which A123 will also supply batteries for another Fisker hybrid, Project Nina, set to launch in 2012.

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Quite a few clean energy companies around Boston have a stake in the outcome of the international climate change talks that start this week in Copenhagen, Denmark. If nations set more aggressive goals for greenhouse-gas emissions cuts, after all, they’ll have a greater need for technologies to reduce their carbon emissions.

But only one local cleantech executive, as far as Xconomy can determine, is actually going to Scandinavia to participate in the discussions. It’s Christina Lampe-Onnerud, founder and CEO of Boston-Power, which makes green, longer-lasting batteries for HP laptops and other devices.

As a member of a non-governmental initiative called The Road to Copenhagen, Lampe-Onnerud attended climate change discussions in Brussels, Belgium in two years ago and Oslo, Norway, last year. She’s now heading to her native Sweden to take part in the group’s final conference in Malmö, just across the Oresund Strait from Copenhagen, on December 8 and 9.

Boston-Power is one of 13 corporate sponsors of the Road to Copenhagen meeting, alongside much larger companies such as Cargill, Procter & Gamble, and Whirlpool. Lampe-Onnerud, who trained as a chemist, says her most important job at the Malmö meeting will be to “bring some honesty to the scientific debate” around different options for dealing with climate change. “I have made it one of my personal and professional commitments to be a citizen of the Earth, and this is something I know something about, so I think I should volunteer some time,” she says.

The Road to Copenhagen group—an initiative of the Club de Madrid, a group of former presidents and prime ministers—consists largely of politicians, business leaders, and scientists who are not part of the formal negotiations at the United Nations Climate Change Conference. (That meeting starts today in Copenhagen and continues through December 18.) The group plans to develop a communiqué that will be delivered to representatives at the UN meeting. Its last communiqué, issued just before the 2008 UN climate change meeting in Poznań, Poland, called for a halt to further increases in greenhouse gas emissions globally by 2020 and a 50 percent reduction below 1990 levels by 2050—goals that are far more ambitious than the emissions caps set out by the Kyoto Protocol in 1997.

Developing a more aggressive, legally binding treaty to take the place of the Kyoto accord—which expires in 2012—was the original goal for the Copenhagen conference. But the U.S. Congress’s failure to pass energy legislation this fall committing the United States to emissions reductions means that President Obama is going to Copenhagen largely empty-handed. Many other nations have also been dragging their feet on climate legislation. In recent days, both the U.S. and China, the world’s leading emitters of greenhouse gases, have set informal reductions targets, but it’s too late for Copenhagen: UN negotiators have already scaled back their goals for the meeting to achieving an interim pact, with more negotiations over a binding agreement to follow in 2010.

Still, Lampe-Onnerud is upbeat (as always—she is perhaps Boston’s most cheerful technology CEO). “I know that there is disappointment in the setup [for Copenhagen], but I am going because I still think the time is now,” she says. “We have to take action, because the climate change threat is more severe than many want to depict. I will go in with a sense of urgency, and with the discipline of a measurable, milestone-driven agenda.”

One item on Lampe-Onnerud’s agenda will be to try to quash schemes for large-scale climate modification to dampen or … Next Page »

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The automotive segment of the battery market is expected to skyrocket in the coming years, as eco-friendly vehicles that rely heavily on battery power hit the road in greater numbers than ever before. And Massachusetts advanced battery developers A123Systems and Boston-Power are among many firms eying this lucrative market. But the two companies are at very different stages in their efforts to enter it, analysts tell Xconomy.

Watertown, MA-based A123 is already making millions of dollars from its lithium iron phosphate (or what the company calls nanophosphate) battery systems in automotive applications, and it has secured agreements with Auburn Hills, MI-based Chrysler and others to supply batteries for more than a dozen vehicle models at various stages of commercial readiness, according to the company and industry sources.

Though arriving to the auto segment later than A123, Westborough, MA-based Boston-Power expects to provide its lithium cobalt-manganese batteries for an unspecified number of vehicles in China and Taiwan in the near future, CEO Christina Lampe-Onnerud tells Xconomy. Yet the company has not yet announced a deal with a major automaker like A123 has.

Lithium ion batteries—the kind that both A123 and Boston-Power produce—are attractive for use in hybrid and plug-in electric vehicles in part because they have greater power density than traditional lead-acid auto batteries, meaning they can produce more kilowatt-hours of electricity per kilogram. They do cost more than lead-acid batteries, but A123 says its batteries are worth it since they deliver higher voltage than standard lithium-ions. Boston-Power’s lithium vehicle battery, called the Swing, is priced competitively with other lithium-ion batteries, Lampe-Onnerud says. Its Swing battery is also manufactured using the same environmentally friendly techniques that have earned the company Nordic Ecolabel accreditation for its laptop batteries.

But one of the Bay State companies appears to be taking the lead over the other. A123 earlier this month scored … Next Page »

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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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A123Systems, the Watertown, MA-based developer of advanced lithium-ion battery systems, appears to be figuring hugely into President Obama’s plans to nurture U.S. development and manufacturing of electric-powered vehicles and cutting edge batteries. The company announced today that it has won a $249 million grant from the U.S. Department of Energy and plans to use the federal dollars to fund construction of manufacturing operations on U.S. soil.

The company’s manufacturing plan, which begins with construction at a site in Livonia, MI, was one of 48 projects that garnered a total of $2.4 billion from the DOE’s initiative to fund development of next-generation electric vehicles and batteries, according to a press release from the White House. A123 said it will have to match the DOE grant funding with its own money over an unspecified period. The firm received the second-largest grant among the 48 recipients, second only to a $299.2 million grant awarded to Milwaukee, WI-based automotive and industrial products firm Johnson Controls (NYSE:JCI), according to this list of grant winners. A123 said it is also applying for grants under the DOE’s advanced technology vehicles manufacturing program.

A123, a spinout from the lab of engineering professor Yet-Ming Chiang at MIT, said it plans to build U.S. plants to produce its patented nanophosphate cathode power and to assemble various components and the actual battery packs that can be integrated into automobiles. The company declined to be interviewed for this story because of its ongoing registration to complete an initial public offering. The firm has already raised more than $350 million in private equity from a bevy of investors including General Electric (NYSE:GE), its largest shareholder, and North Bridge Venture Partners of Waltham, MA.

“This grant is another exciting step towards creating an American battery infrastructure, which may reduce our dependence on foreign oil and increase our nation’s energy security,” said David Vieau, A123′s president and CEO, in a statement. “The capital provided by the DOE’s investment will help us speed our growth and better compete in global markets.”

The firm, founded in 2001, revealed in April that it had raised $69 million in private equity dollars from various investors to fund its manufacturing projects. At the time, the firm had signed deals to provide batteries for 19 different vehicle models, including electric-powered cars in development at Auburn Hills, MI-based Chrysler. The firm’s batteries are designed to provide higher voltage and last longer than traditional systems.

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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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Boston-Power, a Westborough, MA-based maker of long-lasting lithium-ion batteries, says that it has struck a deal with battery maker GP Batteries to dedicate GP’s entire plant in Taiwan to the production of Boston-Power’s Sonata batteries. The deal is expected to double production this year of Sonata batteries, which Boston-Power is supplying to HP as lithium-ion replacement batteries for laptops. (Here’s a story that I wrote about Boston-Power’s recent $55 million financing and expansion.)

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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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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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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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