Phononic, which aims to be the Intel of refrigerators, has wrapped up a cool financing round of $44.5 million. The firm has been raising money since last year. Who are the investors?
A local hospital, for one.
Phononic announced the closing of its $44.5 million Series D round with Rex Health Ventures among the investors.
Eastwood Capital Corp. and Wellcome trust led the round.
Other backers include WLR China Energy Infrastructure Fund, Tsing Capital, Venrock and Oak Investment Partners and Rex Health Ventures.
Funding will be used to expand its manufacturing as well as stepped-up sales efforts.
Phononic focused on the use of semiconductors in cooling, and it continues to role out new capabilities as well as products with a focus on laboratories, research centers and medical facilities, complementing its residential commercialization efforts. Phononic’s technology is now also being applied to fiber optics, telecommunications and data server infrastructure cooling, with thermal solutions necessary to continue Moore’s Law.
“The last year has seen tremendous and exciting growth for Phononic as more people have become aware of the game-changing nature of our solid state thermal management technology,” said Tony Atti, CEO of Phononic, in announcing the funding. “This latest round of financing will enable us to deliver and expand comprehensive product solutions to our customers and partners.”
Here’s what WRAL TechWire reported a year ago about Phonoic’s genesis and growth:
The Phononic Back Story
The conventional refrigerator compressor – technology that’s noisy, uses lots of electricity and is nearly 100 years old – is being pushed aside by startup Phononic’s new heat pump, which harnesses cooling capabilities from semiconductors for use in a modern-day appliance.
Phononic aims to bring its energy-saving technology to refrigerators worldwide in what it estimates is a market opportunity in the billions of dollars. That refrigerator revolution will start in China. Durham-based Phononic on Thursday announced it closed on a $21 million investment led by Beijing-based Tsing Capital, funding that will allow the company to scale up manufacturing of its components that would be installed in new refrigerators rolling out in 2014.
“The approach would be to displace the compressor, which is the anchor of your refrigerator, with our solid state component,” Atti said. ““You eliminate the freon, you elimininate the the noise.”
Atti describes the market opportunity in Asia alone as “staggering.” Asian countries have a growing middle class, including some families who have never had refrigeration or cooling products. Phononic does not make refrigerators. The company has devoloped a solid-state heat pump, which displaces the motors and moving parts of the refrigerator compressor. Phononic makes these heat pumps and sells them to refrigerator makers.
As a comparison, Atti evokes the slogan of Silicon Valley semiconductor stalwart Intel. Just as PC-makers use Intel’s chips in the computers they manufacture and sell with the label “Intel Inside,” refrigerator companies will incorporate the Phononic component in the refrigerators they manufacture and sell. And like Intel, Phononic’s technology is based on semiconductors.
Atti has spent most of his career in energy technology as well and venture capital. In 2008 venture capitalists asked him to research applications for solid-state semiconductors. The technology has been used in electronics and LEDs with success. But semiconductors had not been used in energy applications, such as cooling.
Phononic launched in 2009 as a virtual company backed by $2 million from Venture Capital firms Venrock and Oak Investment Partners. Those firms later led a 2010 series B round of $10 million. Phononic was also awarded a $3 million U.S. Department of Energy Advanced Research Projects-Energy grant in 2009.
The Phononic heat pump technology is based on thermoelectric generators. These devices can convert heat into electricity. The technology can also be applied in reverse, resulting in a thermoelectric coolers. That capability showed potential in a wide range of cooling applications for use in electronics and data centers. But Atti said that a global search, including trips to Asia, revealed that the biggest and earliest demand for this cooling capability was for residential refrigerators.
Phononic showed refrigerator companies how the technology could be incorporated into refrigrator manufacturing without disrupting the entire manufacturing process. Phononic’s heat pump won’t require refrigerator companies to make massive redesigns of their units. It’s a matter of swapping out the compressor for the Phononic component.
“It’s a fundamentally new approach,” Atti said. “The challenge for any small company that wants to be disruptive is you want to be disruptive but you don’t want to be painful, because that makes adoption hard to do.”
Phononic’s technology is based on research from several universities that have expertise in semiconductors and thermoelectrics including the University of Oklahoma, the University of California Santa Cruz and the California Institute of Technology. The technology is protected by a number of patents in the United States and overseas. But when it came time to pick a place to base the company in 2009, Atti chose North Carolina after a national search.
Why the Triangle?
For companies working with conventional semiconductor materials, it makes sense to be in Silicon Valley, Atti said. But companies working with non-conventional semiconductor materials don’t need to be there. Materials science expertise is concentrated in Phoenix, Austin and Raleigh. Beyond that expertise, Phononic also needed manufacturing and packaging capabilities. North Carolina, home to semiconductor companies Cree (NASDAQ:CREE) and RF Micro Devices (NASDAQ: RFMD) offered everything Phononic was looking for. The company chose to locate at N.C. State University’s Centennial Campus.
While there is no N.C. State intellectual property associated with the technology, Atti said Centennial Campus provided resources that were important in accelerating development of the technology. But needing more space for manufacturing, Phononic moved to Durham 18 months ago,
Phononic now employs close to 50 workers in its 15,000 square-foot semiconductor fabrication facility just west of Research Triangle Park. Atti said he expects the company will double that headcount in the next 18 to 24 months.
Phononic is looking for semiconductor device engineers and thermal engineer experts. In January, the company is opening up another 5,000 square feet of space adjacent to the existing facility as the company ramps up from pilot production to full-scale manufacturing.
“The ability to get somewhat sophisticated clean room manufacturing space is a feather in the cap for RTP,” Atti said.
New refrigerators incorporating Phononic’s heat pumps are expected to reach the market sometime in 2014, though product launches are dependent on Phononic’s as yet unnamed refrigerator manufacturer partner. Atti declined to discuss pricing, nor would he get into specifics on energy savings. The price of refrigerators incorporating the new technology will ultimately be determined by refrigerator companies. But Atti said that the technology should not add to the cost of a refrigerator. As for energy savings, specific savings will depend on the size and type of unit.
While Atti touts the Asian opportunity for deploying quieter, more energy efficient and freon-free refrigerators, Phononic technology should also find its way into U.S. homes. Phononic’s Asian partner also sells refrigerators in the United States.