This afternoon a friend asked if there was anywhere I could point him to a short history of A123. It dawned on me the company is now 15 years old and its been through three very different phases so it might be a good idea to create a short post recapping history with hyperlinks included.
Today (May 2016) A123 is roughly half a billion a year revenue business owned by Wanxiang, the largest car parts maker in china. They are profitable and make Li Ion cells for major car makers like BMW, Porsche, SAIC, Mercedes Benz, Volvo, etc.
In June 2015 it announced it was investing $300M to double capacity. In my opinion, Jason Forcier who we hired to run our automotive business back in 2009 and took over as CEO after Wanxiang bought the company has done a remarkable job running and growing the business.
In the beginning: In the summer of 2000 I wanted to start a battery company. After some time looking around for technology I met Prof. Yet Ming Chiang at MIT and we decided to start A123. It became aparent we needed someone to run engineering and we quickly brought onboard Bart Riley who had worked with him at his previous company American Superconductor. By January 2001 we had raised a series A and were off to the races. We got great terms from Sequoia and NBVP. It took us 2 years to get our technology working plus a little over a year to set up manufacturing capacity and line up our first customer.
First product: Our MVP was batteries for power tools. These products did well for DeWalt. I’m amazed to say the evolved 26650 cell is still in mass production today.
Automotive: We quickly became a supplier to many automakers and tier ones. I’m skipping how much work and tedious quality control process this actually was! I think this is how I developed an alergic reaction to APQP.
Building factories overseas: Being venture backed we wanted to do manufacturing fabless. We started with contract manufacturing partners in Taiwan and quickly moved to China. After a year of production we realized we could only compete long term if we built our own plants. After a few years we had 5 factories in china.
Grid batteries: In 2008 we met Chris Shelton, of AES and we convinced him Li Ion was ready to deliver in the grid business. AES made a strategic investment in A123 and 9 months later we delivered our first multi-megawatt battery pack for this market. Over the following four years the company shipped over 100 megawatts to a variety of utilities in almost every continent.
2008: This was a crazy year. We had to raise $100M that summer while the financial markets were collapsing. We filed for our IPO on 08–08–08. Leads were Morgan Stanley and Goldman Sachs but it took us a year to find the right window to get out. I was overseas in France selling batteries to Renault when I got a call to get back on a plane because my daughter Maggie was being born early. I think we did about $70M in revenue that year.
Fundraising and IPO: Over the years we learned how to fundraise. We raised over $300M before our IPO and another $380M in an IPO that to this day remains the largest Boston IPO in the past decade.
The government: The government was always an key ally to our business. USABC helped us develop our technology. The DOE had a sound investment strategy supporting R&D. The only area where we got in trouble was when we got offers to move our factories back to the US. This was mostly our fault and not the government since we wrote our own proposal are were too agressive with our own sales projections. The stimulus program and the indigestion that followed gave money not just to us but to all our competitors. We made the internal mistake of overbuilding our own capacity by several times what the market required in the short term.
2010: This was a tough year, I had done 10 tours of duty to Asia in the past 12 months plus an IPO roadshow. I could sense the industry was heading towards a huge capacity glut. We had a $1.5B market cap and I wanted to sell but my partners wanted to keep going so after 10 years I decided to do something new and go into VC.
2012: As all the excess capacity from the $2B in stimulus funding entered the market things got really ugly. Battery prices fell. Shares of A123 tumbled. The company entered restructuring and was acquired by Wanxiang.
2013–2015: Rebirth: Wanxiang was able to quickly cut losses and drive volume using their automotive relationships. They sold non core assets and two years later the plants were at full capacity and making money. In 2014 two major divisions were sold, first the grid business was sold to NEC and at that time it was the #1 marketshare supplier of Li ion batteries to the grid and then materials business was sold to Johnson Matthey. As mentioned earlier in the post, today they ship over half a billion a year and the business is projected to double.
Management: I’m most proud of the folks I got to work with. When I left we had over 1600 employees and everything I know about business since I was 26 when we got started I learned from the folks I worked with over those years. Early on we were lucky to bring Dave on board. He had grown APC from $50 to $1.5B in revenue. Many of our folks went on to places like Apple to work on amazing projects or starting VC backed companies or are partners at other VC firms.
