Startup Phononic raises $44M for solid state heating and cooling

Semiconductors have transformed many modern industries (computers! LEDs!) and if startup Phononic has its way it will change heating and cooling, too. On Wednesday, Phononic announced that it’s secured a series D round of $44.5 million in financing to help get more of its next-gen heating and cooling products out there in the market.

Phononic's heat pump compared to a traditional compressor.

Phononic’s heat pump compared to a traditional compressor.

The company is using thermoelectric materials — which are semiconductors that can turn heat into electricity — to create products that can make use of wasted heat (like in a car engine or power plant flue) or use electricity to remove heat (like in a refrigerator). Phononic has been pretty solely focused on next-gen cooling products up to this point, and the team has made things like solid-state heat pumps that can be used in compressor-free refrigeration units (a super quiet, efficient fridge) and fan-free cooling products for electronics like servers and computer graphics cards (a computer that doesn’t turn on a noisy fan when hot).

Phononic is currently shipping products for those electronics customers, and it will also start shipping a quiet efficient refrigerator for labs, research centers and medical facilities next year. The company has also been working on residential products — a quiet home wine chiller and replacements for window-mounted air conditioners — with a partner in China and plans to introduce those residential products in early 2015.

Clearly North Carolina-based Phononic’s thermoelectric materials have a lot of applications, but figuring out the killer products that could take off commercially will be the next step for the company. This latest round is intended for growth and scale. Here’s an interview I did with Phononic CEO Anthony Atti in 2011 when they were first developing the technology behind these products.

https://www.youtube.com/watch?v=9cZ-91xXdUg

Phononic received a $3 million grant from the Department of Energy’s ARPA-E program to work on the technology and later raised funding from Valley investors Venrock and Oak Investment Partners. To scale the residential-focused tech Phononic is focused on Asia, and in its Series C round brought in Beijing-based Tsing Capital.

Phononic's heat pump at the company's facility

Phononic’s heat pump at the company’s facility

The Series D round was led by Eastwood Capital Corp, the Wellcome Trust and a syndicate made up by WLR China Energy Infrastructure Fund, Tsing Capital, Venrock, Oak and Rex Health Ventures. Phononic has raised about $78 million to date.

First Solar’s former President-turned-investor Bruce Sohn and “Anthony Fadell” (I’m thinking this is Nest Labs CEO and investor Tony Fadell) are listed on the latest SEC filing, indicating they could also be investors. I’ll update this when I hear back from Phononic on whether or not Fadell and Sohn are investors. Nest was also backed by Venrock.

Other startups are working on using thermoelectric materials to capture waste heat at oil drilling, mining and power plant sites. Alphabet Energy recently launched the world’s first industrial scale thermoelectric generator, which captures waste heat from the exhaust stack of a diesel generator, and converts that heat into usable electricity. When installed in an offgrid remote location, the product can significantly reduce the amount of diesel fuel needed.

While Alphabet Energy scales up thermoelectrics on a large scale, other startups are using thermoelectrics to go small. Stealthy Silicium Energy is looking to develop thermoelectrics for wearable computing that can increase battery life.

VIDEO: Making Money Off Of Capturing Waste Heat

Capturing waste heat from systems and turning it into usable power could be a good way to collect money. Watch my interview with Phononic Devices founder, CEO and President, Anthony Atti, from the sidelines of GreenNet last week.

Analyzing Apple’s Boilerplate

A boilerplate is a flexible term used to describe many different things, but Apple’s boilerplate is those lines of text that you see at the bottom of each of all its press releases, and it has remained largely unchanged for the past few years.

Daily Sprout

New Data Center to Help Heat Helsinki Homes: Finland’s Helsngen Energia plans to build a “relatively efficient” data center underneath a cathedral and channel the waste heat into water pipes that snake through homes around Helsinki. — Greentech Media

Nissan Aims to Double Battery Capacity by 2015: Nissan plans to equip electric vehicles by 2015 with a new lithium-ion battery that uses nickel and cobalt, as well as manganese as its main materials, and has twice the capacity of current batteries with no additional cost, according to the Nikkei newspaper. — Edmunds Green Car Advisor

Controversy Over Renault EV Name: “Fearing their daughters will have to endure lifetimes of comparisons to an electric minicar, some French parents are outraged that Renault christened their latest concept Zoé.” — Wired’s Autopia

Greener City to Sprout Up Outside DC: American Community Properties Trust, a developer, plans to double the size of St. Charles, Maryland, “while reducing its carbon footprint through green design and, officials hope, technology that could create thousands of green jobs.” — Washington Post

Link Between Global Temp and Armed Conflict: According to a new report published by Proceedings of the National Academy of Sciences, “the likelihood of armed conflict increased in unusually warm years when food was scarce, suggesting that a rise in global temperatures could result in a greater number of wars.” — NYT’s Green Inc.

Question of the Day: Tortoise or Hare?

With the roaring IPO this week of virtualization software company “VMWare”:http://www.vmware.com/, there can be no question that the company’s “cofounder and CEO, Diane Greene”:http://www.vmware.com/company/leadership.html, has earned what so many founders aspire to: strategic and financial success. VMWare’s marketcap is already north of $20 billion, valuing Greene’s hard-earned stake at $63 million. (The company’s shares trade under the ticker, “VMW”:http://finance.yahoo.com/q?s=VMW.)

But, as most of you know by now, Greene isn’t the only founder who made good off VMWare’s IPO on Monday. On Tuesday, a three-year-old venture backed competitor, “XenSource”:http://www.xensource.com/Pages/default.aspx was “acquired by Florida-based Citirx Systems for $500 million”:http://www.mercurynews.com/ci_6630304?source=rss. According to some analysts, this acquisition price equates to a valuation as high as *500x on Xen Source’s revenues,* estimated at just $1 million, “according to a Wall Street Journal Online report”:http://online.wsj.com/article/SB118718362916698432.html?mod=yahoo_hs&ru=yahoo today (behind paywall).

*So, you say, $20 billion vs. $500 million. No debate?*

Now conisder that Greene, 52, has been slogging it out in the virtualization space — which VMWare has been credited with forging — since 1998. And the long path to being publicly-traded included VMWare being acquired by EMC, and then spun out again. Read: headache for founders — so much change in control might also explain Greene’s comparatively modest remaining stake in her company of 1.13 million shares, per the S-1. (Not that $60 million is anything to shake a stick at; Greene grossed another $2.5 million on shares she put up for the offering Monday.). The Journal also reports that EMC paid $625 million for VMWare in 2004, a valuation at that time of just 7x on VMWare’s revenues — which makes Citrix Systems’ valuation of XenSource look richer still.

XenSource, as we said, was founded in 2004. I don’t think one needs to think too hard about the possiblity that XenSource’s founders, “Ian Pratt and Simon Crosby”:http://www.xensource.com/about/Pages/management.aspx are the clever hares here. According the startup’s site, XenSource has “5 venture backers”:http://www.xensource.com/about/Pages/investors.aspx through whom the startup raised $45 mililon. They’re all top tier (as in, aggressive, including KPCB and NEA and Accel), but according to reports by our friends at “VentureBeat”:http://venturebeat.com/2006/10/30/xensource-raises-15m-for-open-source-virtualization/, the company raised only three rounds of capital, which leads us to believe Ian and Simon still own a nice chunk of their shop.

Even if Ian and Simon only own 20% of the company today, they’re still ahead of Greene in terms of IRR. Moreover, now people are starting to say that VMWare is overvalued, and there is “criticism of the way the company handled its IPO in the firstplace”:http://techdirt.com/articles/20070814/124357.shtml (Found|READers, if you don’t already read “TechDirt”:http://techdirt.com/index.php, you should.) I know only a little about VMWare from friends who work there, but it’s enough to make me guess that those on the XenSource speed train might have had a bit more fun, too. But none of this is the point.

*All three founders have made good. But who fared better here? Put another way, which founder would you rather be?:*

*The trailblazing tortoise,* who sees a new opportunity, and is credited to history with helping to create a new industry?
*Or the clever hare,* who follows the lead of the trailblazer, capitalizing on the opportunity with more speed and apparent ease?

Tell us what you think.

Some notes:
VMware at a Glance (source: VMWare’s company website)
Founded: 1998; acquired by EMC in 2004; IPO in August 2007 (NYSE:VMW)
Revenues: $703.9 million (FY06)
Customers: 20,000+, including 100% of Fortune 100
Employees: 3,000+
Headquarters: Palo Alto, CA, USA
Locations: 40+ offices worldwide
Partnerships: 200+ hardware, software, network and storage companies; 5000+ resellers, distributors, and systems integrators