Silicon Valley Start-ups

Business Week has an interesting article on two start-ups that seek to produce the next generation, fuel-efficient cars. I still think that there is a lot money to be made in renewables and energy efficiency. The U.S. and the Valley are well-suited to be key players in launching the next-generation "energy" companies:

... Silicon Valley engineers have always been closet gearheads. When they're not writing code or designing semiconductors, many tinker with exotic cars, airplanes, even rocket ships. Couple that with a Californian environmental bent -- it's hard to drive the stretch of Highway 101 between San Francisco and San Jose without passing several Toyota Priuses or Honda Insights -- and techies seem like ideal candidates for building nonpolluting vehicles.

Yet the region's startup machine has never produced a notable auto company. Wright and Eberhard are out to change that. After four years of research and development, San Carlos-based Tesla plans to release a battery-powered sports car later this year. It will do so without Wright, who left Tesla last year and formed his own electric car startup, Wrightspeed Inc., in Woodside. "I had a different vision, to build cars with different technology," he says. The parting was amicable. Wright doesn't have a delivery date for his vehicle.

Both companies are charting new territory by applying info tech engineering, consumer-electronics design, and venture-capital financing to auto startups. For talent, they are dipping into the Valley's deep well of electrical engineers, software programmers, and industrial designers. For financing, they are appealing to venture capital's newfound interest in clean technology. So far, both have been funded by their founders and other individuals. Tesla has raised at least $25 million, some from PayPal (EBAY ) Inc. founder Elon Musk. The company is close to completing a private placement led by a prominent VC firm, according to a source familiar with the deal. (Tesla declined to comment, preferring to stay quiet until its car is ready.) Wright has yet to close on a first round of funding.

LESSONS FROM LAPTOPS
So what makes these techies think they can do better than Detroit, Tokyo, or Stuttgart? After all, past attempts to market electric cars in the U.S. have disappointed. Buyers balked at high prices, odd looks, and limited range. When General Motors Corp. (GM ) introduced its first-generation EV1 in 1996, most owners could only drive 60 miles before charging.

But Tesla and Wrightspeed have a different approach. For one thing, their vehicles use lithium-ion polymer batteries, a more powerful version of those found in portable electronic devices. Packing twice as much energy per pound as the nickel metal hydride batteries used in the electric cars of the 1990s and today's gas-electric hybrids, lithium ion increases the driving distance on one charge. Surging demand from portable device makers has spurred development of more powerful lithium batteries. "It's an intensely competitive business in the laptop and portable market, which is good for us because it means the technology is improving, and the price is coming down," says Tom Gage, president at AC Propulsion Inc., an electric-car components manufacturer in San Dimas, Calif., that is providing key elements of Wrightspeed's and Tesla's drive trains.

Another distinction: Tesla and Wrightspeed are designing zippy sports cars for wealthy drivers who might otherwise buy a Ferrari or Porsche. Although economy cars sell in greater numbers, performance cars sell at higher prices and a greater profit. Tesla hasn't announced pricing, but Wright estimates his cars will cost about $100,000. Other electric-car makers have discovered the performance market. French carmaker Venturi last year began selling the Fetish, a sports car powered by lithium-ion batteries. But Venturi is making only 25 Fetishes, for $600,000 each.

Engineers have long known that electric power can best gas power on a racetrack. Light weight, high horsepower, and no shifting make for rapid acceleration. "The interesting thing about electric cars is you don't have to give up efficiency to get performance," says Wright. He claims the X1 will go from 0 to 60 miles per hour in under 4 seconds and drive for up to 160 miles at 70 mph on one charge. Charging will take about two hours.