Feb 23, 2011
Ric Fulop is a general partner at North Bridge Venture Partners and a serial entrepreneur who has started six companies during his career. He is most known for the creation of A123 – a developer and manufacturer of lithium-ion batteries. Read Part I of the interview.
How did A123’s vision of the application of its technology change over time?
It evolved over time. The interesting thing is how you get to the end goal. We always knew our technology was applicable to things like hybrid vehicles, but when you’re a five person MIT startup you can’t just go and sell to Toyota even though Toyota was one of the first companies we went to visit. We realized that we needed to prove our manufacturing systems, prove the chemistry, prove the durability, the quality systems, etc. So, we went into power tools and other products that were more commodity-like but at an entry level. From there we went into energy storage for the grid and automotive. Initially at the heavy-duty level, and then from there we went to the passenger level. You go step by step as you evolve through the chain.
How many years did it ultimately take A123 to get to the automotive sector and start producing the batteries for hybrid vehicles?
We started the company in 2001 and in 2007 we started in the heavy duty market, which includes vehicles like trucks and buses. In 2008 we started getting a lot of contract design wins once we were in buses. Today we have a number of car makers like Mercedes-Benz and BMW that are designing cars around our batteries.
So it took 7-8 years to get to that market you initially wanted?
Yes, but we built a nice business in between. We were already doing almost $50MM in revenue by the time we started getting design wins in automotive. Automotive is a tough market because you have to have a just-in-time supply chain and all these things that mattered to them but wouldn’t matter to another market. So, we evolved until we could get there.
A123 had the vision of where they ultimately wanted to be in this market, to commercialize technology on a mass scale. How did you first develop your market strategy?
It takes a long time and you absolutely have to understand the customer requirements. One of co-founders is a fellow named Bart Riley, who is our CTO & VP of Engineering and is a critical team member. If you’re trying to spin technology out of MIT the professors typically won’t leave MIT so you need somebody that’s going to run engineering, someone who’s going to run marketing and sales, and Bart was a key person of really understanding the requirements and making sure the first product was not only going to meet the needs of, let’s say, power tools but was also going to have the durability and other features that would enable you to enter the hybrid vehicle market later on. You want to capture data on that first generation product that can later be applied to the third generation product. Basically you want to build it with the end goal in mind.
Power tools was the first market A123 entered. How did you come to this decision?
It was an easy market entry. They had a problem that they needed more lightweight tools and we had a solution. The design and sales cycle was short. You do your market research and figure it out.
How did you conduct your market research?
We had already had our Series A funding of about $8MM so we were well funded to do our work. We don’t use consultants. In a start up market research is done by usually the founders, or the guys in charge of marketing who really need to know more about it than anyone else. Business development is key.
Market research requires not only picking up the phone, but it takes getting on a plane and going to visit the customer. Real entrepreneurs go out to talk and meet with the customers and not just trying to do it from your desk. For example, I went 12 times to China in 2009 and that type of travel went on for 10 years.
What else did you focus on when developing your initial market strategy?
You follow a classical process and you do it well. You figure out who are the early adopters and majority for your market, what are the features of your product that make it really unique, and try to find where the pain is and size up those opportunities to find the biggest one that can give you scale.
In our market, where our batteries were a component, you need a certain level of production to have a cost structure that makes sense. You can’t go after too large of an application because then you’re a critical path to that company and they won’t consider you because you’re a start up. You have to find the right balance between the two.
What advice do you have for future entrepreneurs?
I think entrepreneurship can be taught and it’s really about role models. If you find good role models in a market then you’re going to get entrepreneurs that see it and think, “I’m just as smart as that guy and I can do that.” I think not everyone can be entrepreneurs but certainly a lot of people can be successful entrepreneurs.
Any books you recommend for future entrepreneurs that made a difference in your career?
There are so many good books, but I like the Jeffrey Moore classics. Rob Reid has a good book about the beginning of the internet. Another good one is a book called Startup that is a history of the early tablet computing days that shows how things were in the eighties and nineties and how things have really changed that much when you’re looking at new markets today.
Those are good foundations but it’s nothing like doing it. So if you have a good idea just go do it. Worst case scenario is you fail at that one and you get another job or you try again.