Robert Lakin and Larry Paulson are back again.
The two longtime business partners, who made their fortunes in the mobile phone industry, are turning their attention to making high-density batteries for industrial use, a fast-growing industry as the country’s electricity demand rises.
Across the US, companies are exploring ways to store electricity, while dozens of factories are popping up to make batteries and related products.
Much of this is in response to the Inflation Control Act, which provides subsidies, tax credits and low-cost loans in exchange for investments in domestic energy production, with an emphasis on clean energy, including batteries.
Last month, Mr. Laikin and Mr. Paulson founded Megablock LLC, a Carmel-based company with the mission of building high-density batteries that can store renewable energy from solar and wind.
“We’re talking about industrial batteries, not batteries that you use in remote controls,” Raikin said. “It could be for a variety of solutions. It could be for a utility company that needs backup battery storage. It could be batteries for generators at Walmart or Home Depot.”
Paulson said another market could be microgrids — big boxes the size of freight trains packed with industrial batteries — that utilities are installing to meet peak demand for electricity.
“In addition to the power companies, you also have the big server companies like Google, Facebook and Apple,” he said, “and they need to power those server farms.”
The two companies are scouting sites across the country, including in Indiana, to build at least two large factories, up to 300,000 square feet each, to make batteries. Each factory could employ more than 400 people, they said. They aim to start production next year or early 2026. If successful, more factories could follow.
Laikin said Indiana is on the final list of potential locations along with other Midwestern states, South Carolina, Texas and Arizona.
It’s an ambitious goal, and setting up and equipping the factory would likely require tens of millions of dollars. But in separate interviews with IBJ, Laikin and Paulson each said they aren’t seeking investors. Instead, they plan to bootstrap the company initially and explore the generous incentives offered under the Anti-Inflation Act.
“We’ve made a lot of investments together,” Paulson said. “We’ve done a lot of different initiatives together.”
The company is still in its infancy. It has just five employees, including Laikin, who lives in Indianapolis, and Paulson, who lives outside San Diego. The other three employees are the chief technology officer, the vice president of real estate and the vice president of strategy. The company’s website launched on Wednesday.
But Lakin and Paulson have a vision and a business plan in the works, and they have also assembled an advisory board that includes real estate developers, investment bankers and software executives.
The two companies are looking to gain a foothold in an industry that’s experiencing double-digit growth: Megablocs will enter the $12.7 billion global lithium iron phosphate battery market, which is expected to grow at a compound annual growth rate of 15.7% from 2023 to 2032, according to Precedence Research.
Increased demand
Some analysts say rising demand for electricity in everyday life and the green transition to renewable energy sources such as solar and wind are putting pressure on the battery market.
“Electric vehicles caused a surge in electricity demand in the beginning,” said Roger Lee, senior research analyst at Columbus-based Kerr Marbo & Co. “Then in the last two years, AI became popular, and that’s what’s been driving demand.” [which required] “Data centers need to process all the artificial intelligence queries, so the demand for electricity is growing much faster than the supply.”
In recent years, China has dominated the global battery market, dominating many regional lithium markets and building factories. According to the Financial Times, batteries from China’s leading manufacturer CATL (short for Contemporary Amperex Technology Co. Ltd.) now power one in three electric cars worldwide, supplying a variety of brands from Tesla and BMW to Volkswagen and Ford. The company’s energy storage products are effectively used in large industrial, commercial and residential areas.
The U.S. government is currently trying to increase domestic production of battery storage systems and reduce reliance on foreign sources.
The Biden administration’s Inflation Control Act includes a clean energy tax incentive designed to help low-income communities and areas that have historically relied on the fossil fuel industry for jobs or have been harmed by pollution. The law provides tax credits of up to 30% for eligible investments in wind, solar, energy storage and other renewable energy projects, as well as other incentives.
According to a U.S. Treasury fact sheet, “The program’s goals are to increase clean energy capacity in low-income areas, encourage new market participants, and benefit individuals and communities who experience adverse health or environmental impacts or lack economic opportunity.”
The federal government is pursuing a two-pronged approach to boosting American industrial and automotive strength: First, it wants to use a variety of economic incentives to give companies that invest in the U.S. an advantage over those that import into the country.
Second, we are increasing tariffs on certain imported products, including electric vehicles, to keep American products competitive and keep American workers employed.
technology transfer
Raikin and Paulson want to apply their success in the mobile phone industry to other types of technology.
The two have worked together in different roles at different companies — Raikin has focused on sales, marketing and deal-making, while Paulson is the technology guy — and they’re not shy about talking about it.
“We have incredibly complementary skill sets,” says Laikin, “and we’ve both been in a few businesses in our careers and been very successful.”
“Bob and I both come from the mobile phone industry,” Paulson says. “The mobile phone industry was one of the industries that changed the way society behaves and works.”
Laken started his most successful company in 1989, just a few years after graduating from college, when cell phones were still bricks. He built Indianapolis-based wireless communications and logistics company BrightPoint into a company with $5.2 billion in annual sales, 4,000 employees and operations in 24 countries before agreeing to sell it to Santa Ana, Calif.-based Ingram Micro for $840 million in 2012.
The transaction netted Laikin approximately $14 million. After the sale, he remained with the company for seven years, serving in a variety of support and advisory roles.
Poulsson began his career at Finnish telecommunications company Nokia, where he spent more than 20 years, rising to the position of senior vice president of the mobile phone division.
Laikin then joined Brightpoint, where he served as Executive Vice President and Chief Marketing Officer for about two years until the company was sold, before moving to the US-based semiconductor company Qualcomm, where he was responsible for device design for Qualcomm’s smartphones, tablets and laptops worldwide.
A few years ago, Mr. Laikin and Mr. Paulson worked together at the height of the SPAC (special purpose acquisition company, also known as a blank check company) craze.
They co-founded two SPACs, raised a combined nearly $400 million, and took them public with the goal of merging each with a fast-growing startup that would revolutionize an industry and create even more wealth for themselves and their investors.
But the companies selected by SPACs have struggled and lost hundreds of millions of dollars in market value.
The first company, a greenhouse business called AppHarvest that was founded three years ago with the aim of revolutionizing agriculture, filed for bankruptcy last summer after a series of losses. The company liquidated its assets and used the proceeds to pay off some of its creditors.
The bankruptcy also wiped out all of AppHarvest’s outstanding shares of common stock, leaving long-time investors with an empty bag.
The second company is Energy Vault, a California startup that builds giant towers that store and release wind and solar energy for long-term storage of renewable energy. But the business posted a big operating loss of $106.7 million last year, up from $63.1 million the year before. The company’s shares were trading at $1.20 this week, well below its initial public offering price of $10.
Despite these setbacks, Laikin said the two SPAC deals were “huge successes” for many investors who bought and sold at the right time.
“Some investors decided they wanted to be in it for the long term,” he said, “and those who were in it for the long term in either of these transactions lost a lot of money.”
He said other investors sold AppHarvest near its 2021 high of $42 and Energy Vault near its 2022 high of $22. “I know people who made millions by getting out,” Laikin said.
He added: “There’s no evidence. Sometimes people speculate. Different people have different pain tolerances.”
But Carr Mabo’s Lee said claims of getting people rich through SPACs, which will fail and stumble, are disingenuous.
“Philosophically, I don’t like people justifying it by saying, ‘Some investor timed it well and sold to other investors and got rich,'” Lee said. “It’s just that some investor was able to sell his stock to somebody else. That’s not creating value, it’s destroying value.”
Jay Ritter, a finance professor at the University of Florida and an expert on SPACs, said horror stories about startups that have merged with SPACs during the recent cooling off period are common.
“In many cases, companies have not lived up to the optimistic expectations that were built into their prices,” he said. “A significant number of companies have seen their prices fall substantially, some by more than 90 percent, and some have gone bankrupt. It’s a tough situation.”
Try to move quickly
As Messrs. Laikin and Paulson talk about their plans for the battery factory, it becomes clear they are in a hurry: Other companies have entered the U.S. market in the past two years and made big deals, and they don’t want to be left behind.
Currently, the United States has just eight large industrial facilities known as “gigafactories” that make batteries, electronic components and electric vehicles.
But more than 20 factories are planned or under construction, including three in Indiana: two in Kokomo, a joint venture between automaker Stellantis and South Korean battery maker Samsung SDI, and one in New Carlisle, a joint venture between General Motors and Samsung SDI.
Laikin and Paulson say they have no intention of entering the electric vehicle market, but the companies are watching the brisk activity in industrial and electric vehicle batteries and are clear they want to enter other industrial markets.
“When we put it all together, we should be in construction mode with shovels in the ground in a year,” Paulson said. “And then we should be able to start production in late 2025 or early 2026.”
