Raising capital for rays of energy
Venture firms fuel varied designs of solar cell start-ups
Earlier this year, Bob Metcalfe called Frank van Mierlo, the chief executive of the solar start-up 1366 Technologies Inc., to see whether it was OK for Metcalfe's venture capital firm to put a few million dollars into a similar business.
"We don't go forward with a new investment that might be competitive with one of our existing companies, unless both CEOs are comfortable with it," explains Metcalfe, an investor at Waltham's Polaris Venture Partners.
In this case, 1366's management was completely fine with Polaris backing Wakonda Technologies Inc., which was also developing a new approach to making solar cells. "They were both confident that they are gonna kill each other," Metcalfe says with a laugh. "The attitude on both sides was: 'You can make that stupid investment if you want to, but their approach won't work.' "
To date, 1366, which traces its roots to MIT research, has raised $12 million from Polaris and North Bridge Venture Partners, another Waltham venture capital firm. Wakonda, which spun out from the Rochester Institute of Technology, has raised $9.5 million, much of it from Massachusetts-based venture firms Polaris, General Catalyst, and Advanced Technology Ventures. The two companies are located a few miles from one another, off Route 128 in Boston's northern suburbs.
Polaris's involvement with two start-ups working on new approaches to wringing electricity from the sun is a little out of the ordinary but not unique; General Catalyst has funded two solar companies, and Advanced Technology Ventures has funded three. Over the past four years a roaring torrent of cash has been funneled into companies developing photovoltaic materials. According to Cambridge-based Greentech Media, a research firm, roughly $4.5 billion has been invested in about 150 solar start-ups in that time frame.
Does that sound like a bubble?
Metcalfe isn't afraid to call it that. "We saw that there was a solar bubble," he says, referring to the investments that were pouring into solar start-ups (which have since slowed to a trickle). "Our remedy to that was to invest at the very earliest stage," put in smaller amounts of money, and invest in technologies that would represent a "big shift" from the way solar cells are made today.
At Advanced Technology Ventures, partner Bill Wiberg says the firm looked at dozens of solar start-ups and chose three that are "high risk and high reward."
"The common theme is that all three are disruptive technologies, which have higher levels of risk at the outset," he says. "So we try to be careful about how money is spent at the beginning, and once there's proof that things are working, we put our foot on the accelerator."
1366 is trying to improve the efficiency of silicon-based solar cells, which are made with the same material and many of the same processes as computer chips. They're relying on design and manufacturing breakthroughs from Emanuel Sachs, a Massachusetts Institute of Technology professor who has taken a leave to help 1366 get off the ground.
One idea: a grooved surface to the solar cell that helps it capture more photons, which it can turn into more electricity. Another is a process for making the wires that carry the current much thinner and more conductive, so that they don't block as much of the light from hitting the surface of the cell and they also don't lose as much of the electrical current they transport.
"Our wires are about 50 microns wide, instead of 120, and our plan is to get that down to 20 microns," says Sachs, who earlier in his career spent several years developing manufacturing processes for Marlborough-based Evergreen Solar Inc.
The overarching goal of 1366, explains the start-up's cofounder van Mierlo, is generating solar power at a price equal to what it costs to generate power from coal, by 2012. That's about $1 per watt.
"And we think there are manufacturing innovations to get the cost of solar well below that of coal," he says.
But van Mierlo and Sachs both believe that the future is in silicon-based solar cells, which were developed at Bell Labs in the 1950s.
"Silicon is safe and abundant, and it's today's cost leader," says van Mierlo. "We believe there's an enormous future there. We're standing on the shoulders of a lot of work that has been done before us."
Turning new materials, such as gallium arsenide, into functional, high-efficiency solar cells, is risky, van Mierlo says.
That's exactly what Wakonda is working on. The eight-person company - still setting up its lab facilities in Woburn - thinks that gallium arsenide is the key to lightweight, low-cost solar cells. Like silicon, gallium arsenide is a semiconductor material; it is a compound of the elements gallium and arsenic.
Silicon, observes chief executive Les Fritzemeier, "is fragile, and a lot of the raw materials that go into silicon cells don't produce electricity," which is wasteful. He says that gallium arsenide solar cells have the potential to be up to 30 percent efficient - about 10 percentage points better than a silicon-based cell. (Efficiency is a measure of how much of the sunlight the cells convert to energy.) Fritzemeier also believes his manufacturing process - a "roll-to-roll" approach, much the same way this newspaper was printed - will be cheaper than the way silicon cells are made.
An early customer for Wakonda's technology, Fritzemeier says, will be the military. "It costs them $300 a gallon to get diesel fuel to a combat brigade," he says. Using solar arrays - perhaps even flexible cells built into tents - would reduce the need for oil.
Solar start-ups that aren't currently trying to sell their product, such as 1366 and Wakonda, might be in the best shape of all, given the economic climate. But 1366 is hoping to begin making product next year, and van Mierlo acknowledges that "you need a functioning financial market to build a production facility."
And the ultimate challenge for all new solar start-ups is being able to generate electricity more efficiently, or with lower installation costs, than the companies that have come before them.
Venture capitalists Metcalfe and Wiberg both say they believe that more than one of their solar investments can succeed. And Wakonda's Fritzemeier, looking to close his company's first round of funding, wasn't eager to disabuse them of that notion. "What I remember saying was, 'This industry is growing so fast, there's gonna be room for both of us.' "
But even now that both companies are in the Polaris portfolio, 1366's van Mierlo is confident that his technology is the right horse to bet on. "Ultimately, there will be one winner," he says. "In history, different technologies seldom exist next to each other. Can you buy a black-and-white television today?"
Scott Kirsner can be reached at email@example.com.