Latest Battery Startup Shutdown: Firefly Energy

Here’s the latest sign that the next-generation battery business is just really tough for startups: On Friday and over the weekend local Illinois media reported that Peoria, Illinois-based battery startup Firefly Energy has stopped operating. Specifically The Peoria Journal Star reported on Friday that Firefly Energy had filed for Chapter 7 bankruptcy, and that the city of Peoria and Peoria County plan to follow legal action to recover $6 million in government loans that they gave the startup in 2007 (the Associated Press also reported the story). On Saturday the Peoria Journal Star also reported that while Firefly Energy is clearly not operating anymore, there is some confusion about whether the company has officially filed for bankruptcy yet.

Regardless of the details of the bankruptcy, Firefly Energy, which was developing cutting-edge lead-acid battery technology based on carbon graphite foam for commercial and military electric vehicles, just couldn’t make the economics work. Imara, a startup that had been working on small-format batteries for power tools and outdoor equipment with the goal of eventually producing vehicle batteries, also shut down in December after it did not get the funding necessary to move forward. We’ve reached out to Firefly to get the details of the company’s operations and will update this when we know more.
Like Imara — which had raised $20 million in venture capital from Battery Ventures and Nth Power — Firefly Energy seemed like it had secured a solid amount of early stage funding from high profile investors. In mid-2008 Firefly Energy raised $15 million as part of a Series C round that brought on Khosla Ventures, Infield Capital and Quercus Trust, as well as a $10 million round in November 2006 from Caterpillar, Stark Capital, KB Partners, the Illinois Finance Authority and Tri-County Venture Capital Fund.
The Peoria Journal Star says that Peoria city and county had guaranteed a $6 million loan to Firefly in May 2007 and the Peoria County Administrator and the City Manager said last week in a statement that the city and county might lose their loan in “the worst case.” In addition Firefly Energy also had a $7 million development contract from the U.S. government and a $2 million grant from the U.S. military.
Firefly was spun out of construction and mining equipment maker Caterpillar in 2003 to develop lead-acid battery technology for commercial and military use that the company says are lighter, cheaper, more rugged and more powerful than traditional lead acid batteries. Firefly representative David Reiners told us in 2008 that Firefly was focusing solely on the commercial and military vehicle markets and that Firefly’s battery could one day contribute to potentially “huge diesel fuel savings and cleaner air that next-generation batteries will produce as more states adopt strict anti-truck-engine-idling regulations.”
Firefly Energy said in a release last February that it was pursuing funding from the stimulus package through the U.S. government’s Advanced Technology Vehicles Manufacturing Incentive program, but clearly wasn’t able to tap into those funds in time. The ATVM program has proven to be one of the biggest sources of government funds for auto startups since Secretary Steven Chu took office and made it a priority to disburse the long-delayed program (electric car maker Tesla Motors scored $465 million in loans under the program, and plug-in hybrid car developer Fisker Automotive snagged nearly $528.7 million in loans), but no battery companies have yet received funding under the program.
Firefly also applied for the DOE’s stimulus-funded battery grant program, which would seem to be a better fit for battery developers. But larger, more established firms have won the bulk of awards under that initiative (reflecting the program’s goal of getting technology into large-scale production within two to three years). Firefly responded to its failed application to that program in a letter to the DOE in September, which it then posted on its website, saying there were “serious miscalculations and therefore misinterpretations,” from the DOE reviewer.
Like an exec from Imara said at the time that it was shut down, not being awarded stimulus funding seems to have proved fatal for some of the smaller battery companies.
At the end of the day manufacturing battery technology requires a lot of capital. And in particular significant capital to move a startup through the so-called valley of death — the gap between proving the technology and scaling. Firefly Energy, like many others, just couldn’t make it through that expensive phase. (See How EV Battery Startups Can Cross the Valley of Death, GigaOM Pro, subscription required).