Startup company

Startup company

In June 2007, Sujit Kumar and Mike Sinkura began working with the public library in downtown Palo Alto, California. Kumar is an India-born battery scientist, and Sinkura is from San Francisco. The two made phone calls, printed papers, faxed, and organized meetings in a common meeting room in the library. Over a four-month period, they raised $3.2 million to license and validate the Argonne NMC version 2.0 — an advanced cathode created by shocking the NMC at just over 4.5 volts — which doubles the battery’s capacity and halves the cost of a car battery. They plan to use the funds to form a scientific research team of about ten people to develop super power batteries. After successful development, they can raise more funds, and then put the scientific research results into production.

In the automotive industry at the time, it seemed that only Kumar and Sinkura noticed Agung’s NMC formula, and only they seemed to be convinced of one thing: if you are looking for a profitable application technology, NMC version 2.0 is the most promising battery material on the market today. Kumar learned about the material’s properties at a Silicon Valley start-up he and Sinkura had previously worked with. The company, NanoeXa, is developing batteries for power tools. Kumar, who served as the company’s chief engineer, spent months searching for a competitive advantage over his peers when he stumbled upon Argonne’s NMC patent. He has reviewed hundreds of patents and academic papers on lithium ions. Argonne’s NMC patent and its second-generation upgrade are more advanced than any other inventions he’s learned of. In 2006, he surprisingly called Thackeray about the invention. Before that, Thackeray found that the industry had no interest in NMC’s patents, but NanoeXa’s CEO still paid $150,000 to license it.

After a few months, both Kumar and Sinkura left NanoeXa, citing their desire to “change their environment.” In order to give the surprised CEO a “reassurance”, they said that the next company has nothing to do with the NMC market. A few weeks later, though, Agung got another call from Kumar — who had started his own company with Sinkura. Their main business is promoting NMC to automakers. Over the next few years, the startup’s every move was the focus of a heated debate between the pair and NanoeXa CEO Michael Pak. Energy was a hot topic in Silicon Valley, as Jeff Chamberlain discovered in his own startup phase. Venture capital firms are voraciously chasing the most promising ideas. They believe that renewable energy will be the next big boom. However, their cravings seem to be different from the previous madness. They are after more than just profit. The craze is in the same vein as Silicon Valley’s disdain for oil, which does not exclude technological rivals and is concerned about climate change. This approach is a good strategy for venture capital investors who want to balance revenue and public welfare.

At the same time, in the United States and around the world, people are paying more and more attention to the issue of global warming. At the time, Barack Obama was a U.S. senator, and when he ran for president, he pledged to promote non-fossil fuel technologies and reduce greenhouse gas emissions. However, the general public believes that regardless of whether a Democrat or a Republican is elected, the new president will pass relevant legislation and federal funding to support the development of solar, wind, biofuel and battery companies. Silicon Valley’s venture capital circle is ready for new policy and business trends.

In this context, Kumar sat in front of the venture capital investors and played PPT slides, while introducing that although Argonne’s NMC is the most advanced technology on the market, no one has cared about it so far. Kumar said the city of Boston had a Harvard Business School graduate who worked at RockPort Capital Partners “very excited.” He wanted to meet Thackeray or Oman himself. If Kumar and Sinkura are right, he’s willing to throw $3.2 million on them.

Two weeks later, Kumar, Sinkura, and two RockPort employees flew to the city of Chicago. After Oman’s presentation, the two investors returned to Boston and sent Kumar and Sinkura a “term sheet for an investment agreement,” formally pledging to exchange funds for half of their as-yet-unnamed company.

Kumar felt that this came too soon. Despite his entrepreneurial experience, he’s only now realizing that he doesn’t really understand how financing works. Returning to his home in Fremont, California, he called one of his wife’s college classmates, Artur Kapadia, who heads Bay Partners, one of Silicon Valley’s oldest venture capital firms.

Kumar said, “RockPort wants to invest in me, but I can’t read the ‘investment agreement term sheet.’ Can you help me?”

Born in Mumbai, India, Kapadia holds an MBA from Stanford University and a BA in Biomedical Engineering from the University of Mumbai. After graduating, he joined Sun Microsystems and joined the design team that would become the fastest Spitfire chip in the world.

Kapadia first asked Kumar why the largest U.S. venture capital firms are in Silicon Valley, why would they want to seek funding on the east coast of the United States? He suggested that Kumar and Sinkura bring their PowerPoint presentations to his Palo Alto office for a chat.

After listening to the two’s statements, Kapadia called Kumar’s mobile phone two hours later and said, “I am willing to invest in you.”

Kapadia offered essentially the same terms as the Boston firm: $3.2 million for half the startup, a standard term in Silicon Valley venture capital circles. But, as a sign of good faith, he was willing to write Kumar a check for $500,000 right away so they could get to work as quickly as possible. Until the details of the equity investment are hammered out, Kumar can treat the check as a short-term loan.

When looking back on this experience later, Kumar felt that he might have raised more money for this part of the equity — $5 million, or even $6 million. There was a market for his idea—with just a few phone calls, he and Sinkura got two funding opportunities. But this is all hindsight. Now he has to start a company. He accepted Kapadia’s investment terms.

Kumar and Sinkura named their company “Envia Systems” and set up a lab in a new small industrial park in Newark, which is home to many start-up technology companies. Newark is a suburb on the Eastern Bay of the United States. The company’s name came from the idea of Sinkura. “Envia” is a combination of the English word “energy” (“energy”) and the Spanish “via” (that is, the English “way”, “road”), which means “the road to energy”.

Kumar called Chamberlain and said, “I’m ready to license the patent again.”

Chamberlain was very surprised by Kumar’s high efficiency. Kumar didn’t have a prototype on hand and struck the deal on an idea alone. In terms of intellectual property, he only got a written agreement for a non-exclusive patent from Chamberlain. Chamberlain thought to himself, “How did these VCs be so ruthless and ruthless?” The key was timing – Kumar and Sinkura saw the opportunity when the market needed people like them and took the initiative. However, the success factor is not only this one. While venture capital investors don’t say that technology is important, it’s not a priority for them. They pay close attention to the management of a business. Their key question is: “Has management ever done this?” In other words, has the entrepreneur executed a venture capital project and made a high return on it? If so, investors can be very generous, and money is available on demand. Chamberlain gave a apt example:

Suppose you’ve made hundreds of millions of dollars in my fund. Then, you want to raise money from me? OK, no problem. How much capital do you need?

Kumar hasn’t made hundreds of millions of dollars to anyone, but he’s “done it” — he’s led three start-ups, and that’s his core aptitude. This is his “highlight”. He could go to VCs and say, “Look, I’ve found a new opportunity. I haven’t got a licensing deal yet, but you have to move fast. That’s the terms we negotiated with Argonne.” “Then, it hit it off,” Chamberlain said. “Three million dollars. He got it done in a little while.”

By contrast, a few years ago, Chamberlain also visited venture capital firms along Sand Hill Road in Silicon Valley. When asked about his experience, Chamberlain replied that he had “really” built a business out of nothing: Capote. However, VCs have different views on what can be accomplished in a large company environment. They feel that this is not the same as the success they can achieve with a small team, a tight budget, and at their own risk. Their reply was “No, you haven’t done this.”

Chamberlain is a standout at Argonne National Laboratory, thanks to his extensive industry experience and lucrative deals. From Kumar’s successful experience, we can learn how entrepreneurial stars play the venture capital game.