Friday, August 8, 2008

EEStor's Funding Stage Challengers

The history of the energy storage market is peppered with tales of stolen intellectual property. Such is the opinion of a person I spoke with recently who is familiar with the industry and knowledgeable about many of the companies within it. Given this historical blemish, market participants have had to adopt increased caution in bringing innovations into being. Typically, a company with something new goes through 3 main steps:

1) Develop the product so it actually works
2) Figure out how to build it cost effectively including beta and/or small runs
3) Figure out how to scale a manufacture ability so that you're able to do it consistently and reliably

Investments in startups in the space are often pegged against crossing these 3 milestones. But for any reasonable person embarking on this en devour, the challenge is establishing proof of accomplishment at each stage without revealing too much that could be leaked to other players. And when funding originates from a VC firm, even getting something off the ground can be a delicate dance of sharing information and hiding it. Add to this the regular gamesmanship that occurs in any market, where one competitor snipes at their rivals, perhaps occasionally in part to draw the other out to reveal some important piece of information and you've created sufficient conditions for a reliance on sleeping pills. In EEStor's case, it has had to battle an additional element in it's march to the marketplace: notoriety fueled by major claims surrounded by stealthy activities. This has ensured that there will be steady stream of doubt up until and if they make it all the way to the marketplace.

So, if you're an outsider looking in, how are you to make sense of all of this, especially since all of the scientific elements sparks such deep disagreement? What alot of people have done is relied upon Tyler Hamilton's work thus far as he's done a good job of balancing wild claims with insights from skeptics. If you go back and read Tyler Hamilton's well researched piece in MIT's Technology Review from Jan 07 you will see that he's brought reputable subject matter experts into the storyline. In this particular article, he spoke with Dr. Andrew Burke , a Research Engineer with a strong understanding of transportation energy systems. I had learned of Hamilton's mention of Burke only after googling a bit after my own conversation with Burke today.

Dr. Burke was willing to spend a considerable amount of time with me discussing his opinion of the EEStor efforts. I learned that Burke was hired to visit with Dick Weir onsite at EEStor and evaluate his claims for a company ready to invest millions of dollars in EEStor. I will be posting that interview in its entirety but essentially, Burke recommended against investment in EEStor to his clients because Weir "refused to give us any technical information that would confirm the dielectric properties of his materials." But Burke did mention that he was able to "replicate the calculations in the patent disclosure" saying that they were "pretty straight forward." Keep in mind what is generically true: many VC firms will not sign NDAs prior to a meeting. This many times causes a group seeking funding to severely reduce what they are willing to share in discussions and/or presentations.

If Burke was willing to lay out what it would take for him to believe Weir, another gentleman I spoke to would have nothing of it. John Miller, who runs JME Inc., a supercapacitor materials evaluation company in Ohio, also spoke with me at length and went much farther than Burke in condemning the whole EEStor project as "violating nature." Like Burke, Miller was hired to assist with evaluating Weir's claims on behalf of potential investors. Miller added that he has actually been hired 3 times to evaluate Weir's claims and each time advised strongly against it. In addition to speaking with me for a considerable amount of time, Mr. Miller has also published his thoughts on EEStor in an up coming article in the Winter 2008 BEST Magazine (Batteries & Energy Storage Technology). In that article, Miller says of the patent description that "capacitors cannot reliably operate near the breakdown voltage as claimed." He goes on to say that the technology "is not scalable, " has heat management problems and could not be constructed reliably.

Together, Burke and Miller represent respected subject matter experts in their respective fields who were hired to evaluate the claims of EEStor for purposes of ascertaining whether or not it was a reasonable risk to invest. After reading the interviews, you could possibly glean an understanding of what Kleiner's John Doer meant when he referenced a storage company that was Kleiner's "highest risk, highest reward" investment. So although Burke and Miller would not have invested in EEStor, Kleiner and Zenn did. Of course, this is not earth shattering since not every startup lands successfully every pitch to every VC.

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