The idea of launching a startup with some venture capital and going public or getting acquired within a few short years — in other words, cashing out — has its appeal for investors and entrepreneurs. In the cleantech sector, it has become clear that most venture-backed technologies will require considerably more time and capital to mature than their Web 2.0 predecessors.

For the first generation of battery startups developing technology for the nascent electric vehicle market, and their investors, exits may be especially hard to come by. Over the next several years, the initial wave of winners emerging from today’s venture capital and stimulus-fueled hotbed of battery innovation will likely be those that manage to finance the clunky, capital-intensive and lengthy business of manufacturing. With more standardization in the sector, however, a second wave of battery developers will increasingly be able to take cues from the semiconductor, telecommunications and biotech industries on the path to outsourcing manufacturing or selling their R&D.

Challenge: All About Scale
“Energy storage is about scalability for manufacturing, not good ideas for energy storage,” said Scott Faris, CEO of battery startup Planar Energy Devices. Another entrepreneur, Michael Sinkula, co-founder and director of Envia Systems — a stealth-mode startup focused on cathode materials for batteries — agreed, adding that battery startups in today’s market need to have a solid plan for getting into manufacturing and ramping up quickly, rather than banking on acquisition.

Ford’s Greg Frenette, manager of electric vehicle programs, stresses the importance of scalability and manufacturing capacity for sealing a battery deal with the automaker. “Because this technology is new and rapidly changing, the commercial factor of a supplier’s production plans and access to funding could weigh heavily in our evaluations,” he says. Ford, which has tapped French-American battery giant Johnson Controls-Saft for the lithium-ion batteries in an upcoming plug-in vehicle, is “constantly evaluating and testing different chemistries from multiple suppliers,” according to Frenette, and working to improve them. But suppliers with proven tech and capacity for high-volume production are understandably “more attractive” for the automaker when it comes to actually awarding contracts.