Achates Power rides diesel wave with clean engines

San Diego based startup is one of 15 companies the Cleantech Group spotted in the past week looking to raise money. Find out more in the Pitch o’ the week.

The same fuel efficiency that drew Europeans to embrace diesel engines is taking hold of the U.S., and startup Achates Power is ready to pounce.

The San Diego, Calif-based company spent four years developing a diesel engine technology that  offers 50-percent improvement in fuel economy at a cost premium of 30 percent, said CEO David Johnson.

The company is seeking $25 million round to get validation of its multi-cylinder engine technology. The company previously raised $35 million from investors including Sequoia Capital, Rockport Capital Partners, Madrone Capital Partners and Gary Convis, vice chairman of Dana Corp. and former chairman of Toyota Motor North America.

Johnson said he has secured commitments from some existing investors but is searching for a a new lead for the round, expected to close by the third quarter.

The fuel efficiency gains are achieved, in part, because the two-stroke engine lacks a cylinder head, an engine component that loses 8 percent of energy as heat. Instead, there are two pistons, which offer twice the power density, in the engine, which is lighter and smaller than its competition, Johnson said.

The company is now launching testing of a four-cylinder engine with eight pistons using the same technology. The power-dense, lighter engine balances force and torque in its streamlined, symmetrical design. The technology is designed so that it can be used alongside batteries in hybrid engines.

Johnson said he expects increasingly stringent fuel economy standards to put the spotlight on diesel engines (see Hottest startups woo cleantech investors with wide-ranging tech). Problem is, he said, the U.S. doesn't have the necessary manufacturing facilities because domestic demand favors gasoline engines.

"There's not a single U.S.-based plant that makes diesel engines, except for commercial trucks, which is a field already driven by economics," he said. "[Manufacturers] are going to change, so the question is: Will it be to regular diesel engines or Achates Power diesel engines?"

Achates plans to license its technology to engine manufacturers and vehicle makers for $50 million, plus a 5-percent royalty per unit.

"We plan to turn companies that would otherwise be competitors into our customers," Johnson said.

The technology has applications in standard vehicle engines, as well as jet engines and unmanned military vehicles. Johnson estimated the global market at $235 billion, with about 90 percent addressable by Achates Power's technology. 

Achates Power is one of 15 potential new investment opportunities the Cleantech Group added to its dealflow database this week, available exclusively to members of the Cleantech Network. Members can click here to search the dealflow database.

Interested in investing in cleantech companies? Here are two other U.S.-based companies from the Cleantech Group's dealflow database also looking for funding:

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