ENERGY
According to a new report from Business Communi-
cations Co., the global market for solid oxide fuel cells will
grow from its current size of $123 million to $335 million
by 2008. The North American market is now estimated to
be around $67 million or 55 percent of the market. With
the first precommercial SOFC systems expected to come
online by 2005, venture capitalists are making their invest-
ments now to stay ahead of the cur ve. One recent benefi-
ciar y of new VC money is 3E Systems, a stealth startup
featured below.
3E SYSTEMS
Solid-Oxide Fuel Cell
San Jose, California
www.3esystems.com
A
highly ef ficient, low-cost fuel cell for distributed
power systems is a longtime goal of both startups and
established energy players. The leading candidate the
solid-oxide fuel cell, or SOFC has not seen wider accep-
tance before now because it's expensive to manufacture
and not ver y ef ficient. The dif ficulty is building a scal-
able SOFC system with an energy density that makes it
economically feasible for residential and industrial power
applications in Japan and the U.S., a market estimated at
$2.2 billion.
3E Systems, launched in March 2003, says it has devel-
oped a solid-oxide fuel cell with a novel design capable of
generating from 10 kilowatts to 200 kilowatts of power.
The base technology, developed at Lawrence Livermore
Lab, delivers .5 watts per square centimeter, an energy
density nearly twice that of Westinghouse's current
SOFC, which checks in at .28 watts per square centimeter.
The 3E Systems SOFC employs a unique design that
seals and stabilizes the cell, thus minimizing breakdown
of its membrane. Inside the cell are 16 parallel tubes that
span the membrane and provide greater mixing of air with
the hydrocarbon. This allows the hydrogen molecules that
fuel the cell to be cleaved from a propane or natural-gas
power source more efficiently. Other SOFC systems use a
planar architecture that doesn't afford the efficient mixing
dynamics of 3E's parallel-pipe design.
There is no shor tage of players in the SOFC market.
Large competitors include Siemens-Westinghouse,
Acumentrics, Cummins Power, Delphi, FuelCell Energy
and GE Power Systems. 3E Systems says these companies
could potentially become customers, since 3E supplies
core components that can be incorporated into the
housing of other fuel cell systems.
The energy industr y grows at an anemic 2-3 percent
per year but venture capitalists know that technologies
like fuel cells have the power to jumpstar t the market.
Fuel cells already are one of the fastest-growing segments
of the power industr y and solid oxide fuel cells, in par-
ticular, are leading the charge. One VC comments that
companies like 3E Systems are exactly what he's looking
for these days. "When it comes to solid oxide fuel cells,
it's no longer a question of if but more a question of
when and even how much." 3E Systems has six
employees and $5.8 million in private investment. The
company does not yet have any customers.
q
NANOTECH
The nanotech market got another shot in the arm
this month when industr y bellwether Nanosys filed a pre-
liminar y prospectus with the Securities and Exchange
Commission outlining plans to raise about $115 million
in an initial public offering. If Nanosys enjoys a successful
initial offering, analysts believe even more venture money
could flow into the sector. A solid IPO would also
encourage other nanotech startups to tr y their luck in the
public market and lend more legitimacy to an industr y
that is still widely considered science fiction by the gen-
eral public. Despite its status as industr y star, Nanosys
has much to prove. It lost $9.2 million on revenue of $3
million in 2003 and doesn't expect to have products out
for several years.
PLEXTRONICS
Conductive Polymer
Pittsburgh, Pennsylvania
www.plextronics.com
E
ven a third-grader knows plastic doesn't conduct elec-
tricity, right?
"Ever ything you learned in third grade is wrong," says
Andrew Hannah, president and CEO of star tup
Plextronics, which is now attempting to commercialize
the field of conductive polymers. "We make plastics that
conduct electricity."
The company's flagship product, Plexcore, is made of
a polymer called polythiophine, which has been modified
to achieve a highly linear molecular alignment. The design
enables the plastic to carr y current and completely con-
tradict elementar y-school science fundamentals.
Hannah says Plextronics is looking at several initial
applications for Plexcore. The automotive industr y could
likely use a conductive plastic in body parts, which would
10
IC RATING (scale 110)
INNOVATION
6
CAPITALIZATION
5
TARGET MARKET
6
One VC says startups like
3E Systems are what he's looking
for: "When it comes to solid oxide
fuel cells, it's no longer a question
of if but more a question of
when and how much.
IC RATING (scale 110)
INNOVATION
6
CAPITALIZATION
5
TARGET MARKET
6
