Lilliputian Systems, MIT spin-out that raised $150 million, runs out of fuel

Former Lilliputian employees Mouli Ramani and Souren Lefian in the company's lab in 2011. Photo by Scott Kirsner for BetaBoston.
Former Lilliputian employees Mouli Ramani and Souren Lefian in the company's lab in 2011. Photo by Scott Kirsner for BetaBoston.

One of Boston’s best-capitalized — and oldest — startups has run out of fuel thirteen years after it was founded.

Lilliputian Systems, which had been developing a $300 system called Nectar that used butane to charge up portable electronics, has been selling off equipment and intellectual property, and plans to vacate its Wilmington office by September, CEO Sohail Khan tells me. That is after about $150 million of investment from venture capital firms that included Kleiner Perkins, Atlas Venture, Fairhaven Capital Partners, Stata Venture Partners, RockPort Capital, and Intel Capital. Intel had hoped to produce components of the Lilliputian system at its microchip factory in Hudson, which is being shuttered this year.

It’s a sad end for a company that had long touted its product as a revolutionary alternative to batteries. The Nectar system had its roots at MIT’s Microsystems Technology Lab — and may have simply left the lab a few years too early. It used butane fuel cartridges to produce electricity for USB 2.0 devices like smartphones or digital cameras. But while Lilliputian inked a deal with Brookstone to distribute the product, and demoed it at the Consumer Electronics Show, Nectar never made it to market. Lilliputian’s co-founder and former chief technology officer, Sam Schaevitz, left the company in April, and a diaspora of other employees began back in the fall of 2013. Company employment was at about 140 last year, and now it’s down to the single digits.

nectarpics-smWhen I last wrote about Lilliputian in March, the company was trying to raise more money. That didn’t pan out, Khan says. “The equity markets are very tough, difficult, and challenging for hardware businesses,” he told me. And he said he had sold off most of the company’s assets, including a portfolio of about 80 issued and pending patents, to one major acquirer. But he said he was not permitted to mention the name of the buyer. “It’s a very large corporation with offices everywhere,” he said. Some employees will go work for the acquirer, though not Khan. (At right is the Nectar charging system; the cylindrical object is the disposable fuel container, which would have sold for $10.)

All of the Lilliputian investors I spoke with refused to comment on the buyer or price; many simply didn’t return repeated phone calls. Former CEO Ken Lazarus also didn’t return calls, and several former employees with whom I communicated weren’t aware of who the buyer was. One who was said he couldn’t divulge it, but suggested that several fairly well-known companies had bought different pieces of the company’s intellectual property. But it’s not likely that investors will see a return on that $150 million. “Given the situation,” Khan said, “it’s a reasonable outcome.”

My best hunches: One buyer could be Intel, which is maintaining an R&D team in Massachusetts, and which already owned a piece of the company. Even more intriguing would be Amazon, which has a growing tech team in Cambridge; Apple; Google; or Samsung, which has a small and rather quiet presence in Cambridge.

Khan said he’s hopeful that the acquirer will eventually bring a product to market: “We’ve gotten the technology to a point where it will continue and prosper in real products,” he said. Lilliputian had announced launch dates for Nectar in 2012 and 2013, and missed both. Customers who pre-ordered the charger on Brookstone’s website dubbed it “vaporware.” In 2011, I got a demo of a working prototype of the Nectar system, using it to charge my iPhone for a few minutes. In 2010, when Intel invested, Lilliputian talked about selling the system for $100, a price point that tripled over the next few years. Also that year, Lazarus told me Lilliputian hoped to develop technology capable of delivering sufficient wattage to charge laptops; it never quite got there. In 2001, I bought Schaevitz, the co-founder, a pizza at Emma’s in Kendall Square to talk about the concept behind the company.

Two videos are below. The first is Schaevitz demonstrating the Nectar system in January 2013 at the Consumer Electronics Show. The second is from the same event, featuring Lazarus, who was Lilliputian’s longest-serving CEO.

For more on why fuel cell systems for personal electronics haven’t taken off, see this Michael Kannellos piece from 2013.

Scott Kirsner writes the Innovation Economy column every Sunday in the Boston Globe, in which he tracks entrepreneurship, investment, and big company activities around New England.
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