Posted on Fri, Jun. 10, 2005

Vow of lower solar costs attracts venture capital

Mercury News

Two Silicon Valley solar cell start-ups, both at the brink of delivering more cost-effective technologies to the red-hot solar market, have raised fresh war chests of venture capital.

Nanosolar of Palo Alto has raised $20 million from a group of investors led by the Menlo Park firm Mohr, Davidow Ventures. Miasolé of San Jose has raised $16 million in a round led by Menlo Park's Kleiner Perkins Caufield & Byers.

The fundings are significant because these companies promise to bring down the cost of solar cell technology, which remains relatively expensive compared with more traditional sources of electricity.

The timing is good, too. As oil prices have gone up and other energy sources remain limited, nations are increasingly searching for safe, reliable long-term sources of power. Solar energy is long-lasting, going years without cells needing replenishment. Moreover, existing solar cell manufacturers have been slow to ramp up supply. Demand, meanwhile, has soared -- fueled by government subsidies to support the non-polluting technology.

Both Nanosolar and Miasolé say they've made their technology breakthroughs, and the challenge now is to produce in bulk to minimize cost.

They were able to reduce costs by eschewing the traditional reliance on costly silicon.

Solar companies rely on the same photovoltaic process: Sunlight in the form of photons hits a light-absorbing semiconductor material in the solar cell, exciting electrons and creating an electric current.

But Nanosolar and Miasolé have shed silicon as their semiconductor material -- its crystal form is bulky and inflexible. Instead, they're using a copper alloy, copper-indium-gallium-diselenide, that can be deposited on more flexible material -- transforming bulky solar panels into thin foils.

Venture firms are enthusiastic, and Miasolé, in particular, has drawn attention -- already producing cheap, high-quality hard disks for disk drives, which Chief Executive David Pearce used at a previous optical components company.

Big-name firms Kleiner Perkins and Mohr Davidow both sought to invest in Miasolé, according to Pearce. Pearce took funding from Kleiner Perkins. Mohr Davidow, in turn, invested in Nanosolar, which is using a slightly different, unproven process.

Still, the two look neck-and-neck in delivering their product. Last year, Miasolé's Pearce predicted his would be available during the first quarter of this year. He has taken his first orders, but now plans to make his first delivery next month: ``Honestly speaking, it has taken a little longer to get the bugs out,'' he said.

Still, the market won't go away anytime soon. Large solar cell wholesalers are struggling to ensure supply of solar cell modules, with BP Solar saying it is 70 megawatts short -- the equivalent of about $250 million in revenue. ``That's the magnitude of the demand issue we're looking at,'' Pearce says.

He aims to sell his technology to large energy companies like General Electric, PB Solar and Mitsubishi, he says. Like Nanosolar, he's focusing on installing solar cells on the rooftops of large commercial buildings -- where companies are more likely to embrace cheaper power options more swiftly.

Nanosolar, meanwhile, says it will test its product at three customer sites in California this year, and will deliver more broadly next year.

Chief Executive Martin Roscheisen has focused his efforts on assembling a proven management team, including recent hires Chris Eberspacher, former head of R&D at ARCO Solar/Siemens Solar, the world's largest solar producer; and Werner Dumanski, who had experience manufacturing thin-film disks at Hitachi/IBM.

Roscheisen, who sold Internet company eGroups to Yahoo for $432 million in 2000, has also built up partners in Japan and Germany -- the two largest existing markets for solar cells.

Another Nanosolar investor is Japanese engineering conglomerate Mitsui, which Roschiesen says will help in accessing that market. Mitsui has sold Sanyo-produced solar cells to the U.S. market, but Roschiesen says they'll soon be doing the reverse. ``They'll be bringing solar cells from California to Japan,'' he says confidently.

Onpoint, the U.S. Army's venture fund, and previous investor, Benchmark, also participated in the Nanosolar investment.

Contact Matt Marshall via his blog at

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