Dow Jones Venture Wire
(also picked up in The Wall Street Journal online)
April 14, 2020
By Yuliya Chernova

Ioxus Receives $21M To Charge Century-Old Ultracapacitor Industry

The industry is old and the market still small, yet General Electric Co. and several others have invested $21 million in Ioxus Inc., a start-up that hopes to unlock the value of energy storage devices called ultracapacitors.

Though we might not often think of them, ultracapacitors are still found under many computer desks, providing the charge in uninterruptible power supply units, which keep electronic devices charged during temporary losses of outlet power. Ultracapacitors, unlike batteries, are rapid-charging and can release large bursts of power--useful in many applications. They also can charge and recharge millions of times without losing efficacy, which can't be said of the limited lives of batteries.

"We've begun to receive orders for more than 50,000 pieces for commercial production into products like wind turbines and portable LEDs (light emitting diodes). And beyond that we have a number pending in an even broader array of applications such as hybrid buses," said Mark McGough, president and chief executive of Ioxus.

Some of its investors may also become customers, he said. The company raised the round from Energy Technology Ventures--a joint venture of GE, NRG Energy and ConocoPhillips--Northwater Capital, Aster Capital--representing Alstom SA, Schneider Electric SA and Rhodia SA--and return investor Braemar Energy Ventures.

The company is valued at about $50 million after the round, McGough said. The Oneonta, N.Y.-based company previously raised $5 million in a Series A deal, shortly after spinning off from Custom Electronics Inc.

The total market for ultracapacitor applications that Ioxus targets is about $250 million a year right now, McGough said. One of the largest companies in the space, publicly traded MaxWell Technologies Inc. had about $65.5 million in revenue last year, with a gross margin of about 25%, according to estimates by investment bank Stifel.

"The market is so small," said Thomas Daniels, an analyst with Stifel. At the same time, he added, "Utracapacitors have been around for 100 years."

Yet, judging by MaxWell, the market is growing. That company, whose ultracapacitor business was nurtured and run for a while by McGough, has grown revenue and improved its margins significantly over the past couple of years.

McGough said he expects demand to improve, largely because the cost of the devices is lowering, and their energy density is improving. At the same time, applications for cars, buses and rail are growing. As for the automotive application, "Today it's nothing, but it's got the most potential," Stifel's Daniels said. Ultracapacitors can be used for start-stop systems in hybrid cars, power windows and doors, and acceleration in buses.

A few years down the line, "a $100 million business, with nice margins, that's a nice valuation," said McGough, of the exit potential for his investors.

The company will use the new funds to quadruple manufacturing in New York and start selling abroad, especially to China and Europe, and for research and development on the next generation of its devices.

Right now it makes lithium-hybrid ultracapacitors, which McGough said have higher energy density than comparably sized MaxWell utracapacitors. The units also have features that enable them to be configured. Their pricing is similar to the rest of the market, McGough said.

Ioxus is selling its ultracapacitors at a profit, the CEO said. "I guarantee you we pay less for our facility than MaxWell does in China," he said. He added that production doesn't require a lot of labor. "Our biggest disadvantage is volume," he said, adding that the company is increasing capacity.

Ultracapacitors, however, have to dislodge existing products to gain market share. Johnson Controls Inc., for example, supplies batteries used in hybrid cars and is pushing its own products to its automotive OEM customers.
"All the marketing money in the world won't change the fact that a battery won't charge in 10 seconds," McGough said.

Anticipating a growth market, GE and others provide the funding at a valuation of about $50 million.