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Fallbrook's IPO: The Bicycle Tech Maker Looks to Electric Vehicles

Emerging from its haunts as a bicycle tech developer, Fallbrook Technologies this week has joined Tesla Motors and Codexis as the latest in a spate of greentech ventures filing initial public offerings. Like Tesla, it’s also the latest company to attempt to go public with no profits. The company — which has raised some $55 million in financing since it formed in 2000 — aims to raise $50 million through the planned IPO.

Based in San Diego, Calif., Fallbrook has charted an ambitious course for itself, aiming to parlay its business providing continuously variable transmission tech for bicycles into an entry point for the nascent electric vehicle and small wind turbine market. Here’s the company’s game plan for how to make that happen, and other tidbits drawn from the S-1.

The innovation: Fallbrook is using tilting, rotating spheres positioned between two rings to transfer torque in what Fallbrook claims is a simpler, more durable and scalable version of what’s called a continuously variable transmission, or CVT. This type of transmission, Fallbrook explains, “effectively has an infinite number of gear ratios within its range.” The company claims its design can “improve the overall efficiency and performance of mechanical systems that require variation between the speed of a primary drive and the speed required to operate the mechanical system.”

Number of patents: 155, plus 208 patent applications.

Cold hard cash: Fallbrook reports just $871,000 in revenue for the nine months ending September 30, 2009, down from $1.96 million during the same period a year earlier. The company has never been profitable, and reports net losses of more than $11.72 million for the first nine months of 2009, up from $10.56 million in 2008 and about less than $6.6 million in each of the previous years (2006 and 2007). Fallbrook plans to use the proceeds from the IPO “for general corporate purposes, including the repayment,” of $2 million in outstanding debt.

Where Fallbrook’s tech can be found today: In bicycles. The company says its technology is “currently available in the global market for bicycle transmissions, where it has been used to replace the rear wheel gear assembly.”

What’s up next: Lawns, wind and cars. Fallbrook says it’s in the process of “developing applications for…alternators, air conditioning compressors and superchargers for the automotive accessory drives market, primary transmissions for the electric vehicles, wind turbines, and lawn car equipment markets.

What it means for electric cars: Fallbrook claims its “NuVinci” CVT can “increase vehicle driving range and top speed in typical day to day driving conditions,” while also improving battery life. In addition, Fallbrook anticipates that, “using a NuVinci CVT to optimize the speed of the motor while allowing for the vehicle’s varying driving conditions and speeds provides greater control flexibility and can be used to simplify the motor controller in either EVs or hybrid vehicles potentially reducing or eliminating the reliance on complex, relatively inefficient and expensive power electronics, therefore creating system level cost savings.”

Starting with scooters: According to the S-1, Fallbrook has found in testing (it’s been working with a standard electric scooter) that the NuVinci CVT “allows EVs to accelerate, climb hills and pull loads at more efficient motor speeds to increase vehicle range and limit peak current levels.” When the NuVinci CVT is “used as a main driveline transmission connecting the motor to the wheels,” Fallbrook says it “allows the motor to operate at more efficient or optimal speeds for any vehicle speed to both improve performance of the EV and increase its efficiency.”

Where this tech might hit the road first: China. Fallbrook says it has partnered with Shanghai-based Advanced Strategic Leadership Limited, “for market development and consulting services for the Chinese EV market.”

The commercialization plan: “We will initially focus on smaller vehicles with lower barriers and shorter time to entry and move towards hybrid automobiles and full electric automobiles,” Fallbrook explains. But at this point, it’s mainly trying to build interest through “limited sales” of a prototype to “targeted vehicle developers and vehicle manufacturers.”

Further down the road, Fallbrook plans to partner with car makers, “to adapt our existing CVT products to their EV.” At least one relationship is now forming. Fallbrook says that a development partner is currently demonstrating its prototype in a medium-sized electric vehicle.

Manufacturing in flux: Fallbrook’s CVT for bicycles first rolled out in January 2007, under an agreement with Aftermarket Technologies Corp. in which Fallbrook collected revenue from ATC’s product sales, license fees and payments for engineering services.

About a year later (after Fallbrook says “a long lead and unstable component supply base,” required it to provide “more engineering support than expected,” primarily for work developing tech for vehicle transmissions, and to incur a negative gross margin from license fees), Fallbrook ended the relationship with ATC. It struck a deal to have a company called MTD Products start manufacturing the bicycle transmission, while bringing sales and marketing in-house.

The following year, however, Fallbrook shifted gears again, and in October 2009 it ended the contract manufacturing agreement with MTD after determining that, “the per unit cost of the bicycle CVTs manufactured by MTD was prohibitive,” largely because of a “long lead time supply chain.”

The new game plan: Go to China. Fallbrook signed on Shanghai, China-based Tri star Group in January 2010 as its contract manufacturer for a new generation of the bicycle CVT. The plan is to “concentrate the supply base in one off-shore region or location” for the new model and phase out the old design.

What’s different: The next generation of Fallbook’s bicycle CVT, which entered prototype production in December 2009, will be half the cost of the previous version, weighing at least 35 percent less with less than half of the number of parts.

Getting into wind: Fallbrook says in its S-1 that the NuVinci transmission offers a few benefits for small wind turbines, including increased reliability and energy capture and lower costs. The system can “shift quickly enough to capture energy dense gusts and absorb torque spikes,” Fallbrook explains, and also “brake the rotor during lulls to extract the stored energy from the rotor.” In all, Fallbrook says a NuVinci CVT can boost energy production by some 15 percent.

The company has licensed the rights to manufacture and sell the NuVinci CVTs for small wind turbines to Viryd Technologies, a former subsidiary that spun out from Fallbrook in December 2008 and continues to receive administrative, operations and engineering support services from Fallbrook.

Timelines: Fallbrook expects production of the N360 for bicycles as well as the NuVinci CVT for small wind turbines to kick off in 2010. It expects to launch production for electric vehicles and other applications in 2011, “using one or more contract manufacturers.”

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