Ann Arbor-based startup Sakti3 this week secured $7 million in venture capital, funding the company considers critical to accelerating the development of its lithium-ion battery technology for electric vehicles.

The financing marks the second time that Silicon Valley-based Khosla Ventures, one the premier alternative energy venture firms in the world, has invested in Sakti3. Global investment firm Beringea invested in the University of Michigan startup for the first time.

Sakti3 CEO Ann Marie Sastry, pictured during the 2010 Detroit auto show in January, said her company would use its latest financing to support development of its lithium-ion battery technology.

Angela J. Cesere | AnnArbor.com

Sakti3, which has close to 20 employees at its Ann Arbor headquarters, is developing lithium-ion battery material and manufacturing technologies for use in second-generation electric vehicles.

"This is a critical phase in the growth of any high-tech company -- the recruitment of new partners and the development of the capability to build prototypes at a larger scale," Sakti3 CEO Ann Marie Sastry told AnnArbor.com. "Our plan now is to keep our heads down and to keep developing our technology and to spend these funds wisely so we can get the prototypes to customers."

The investment comes as a variety of major players are diving quickly into the development of lithium-ion battery technology for electric vehicles and smart grid applications. Firms like Dow Chemical, Johnson Controls, A123Systems, General Motors and Ford have all announced plans to invest in battery operations in Michigan.

Jeff Bocan, managing director of Beringea in Michigan, said there's room for a startup in the battery field despite all the big companies emerging as competitors.

"Ann Marie and her team are some of the best people in the world at doing what they do in the battery space," he told AnnArbor.com. "Over the years they have developed a level of expertise that's unmatched really just about anywhere."

Sakti3, part of Michigan's emerging battery technology supply chain, is enhancing intellectual property first developed at the U-M College of Engineering. Sastry, also director of U-M's energy systems engineering program, has been purposely silent about the details of Sakti3's technology and strategy.

But the company's ability to attract Khosla and Beringea as investors lends an aura of credibility to the firm's ambitions.

"They know a lot about batteries and they've got a lot of great ideas about what makes the best battery and how to make the best battery," Bocan said. "There are a variety of different ways to make them, and the Sakti3 approach is very different than the current approach. As a result, we believe they will have much more powerful and radically cheaper batteries that will make the electrification of cars more of a reality than it is today."

Beringea invested in Sakti3 out of a $100 million pool of financing dedicated to boosting Michigan-based technology companies through the InvestMichigan! Growth Capital Fund.

Sakti3 already had $2 million in funding from Khosla and $3 million from the Michigan Economic Development Corp.'s Centers of Energy Excellence program. The company also received a $2.3 million MEDC tax credit in 2008 to support a plan to hire 112 workers in Michigan over the next several years.

"We want everybody to know that we're still serious about the way in which we used state funds," Sastry said. "We consider this a very profound responsibility."

Khosla's investment, for one, is likely to draw additional attention to Sakti3 because of the venture capital firm's global reputation. The investment firm is led by legendary clean tech investor and former Sun Microsystems CEO Vinod Khosla, who also recently invested in Canton Township-based wind technology firm Danotek Motion Technologies.

"We're pleased to see Sakti3's progress and growth," Khosla said in a statement. "It's the kind of play we like -- one that uses advanced computational science and manufacturing to produce a potentially disruptive technology."