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IDEAL POWER INC.

September 17, 2013

VIA EDGAR

Ms. Amanda Ravitz, Assistant Director

Securities and Exchange Commission

Washington, D.C. 20549

Re: Ideal Power Inc.

Registration Statement on Form S-1

Filed August 6, 2013

File No. File No. 333-190414

Dear Ms. Ravitz:

    This letter is in response to your letter dated August 30, 2013 to Ideal Power Inc. (the “Company”) regarding the Company’s Registration Statement on Form S-1 (the “Registration Statement”).  For your ease of reference, we have repeated the comments included in your letter immediately above each response.  In conjunction with this letter, the Company is providing amendment number 1 to the Registration Statement (the “Amendment”) for your review.

Prospectus Cover

1.  Please revise the cover page to disclose your relationship with MDB Capital Group.

    We have revised the cover page as you requested.

2.  We note your disclosure that this is a firm commitment offering. Certain of disclosure throughout suggests a different arrangement, however. For example, we note disclosure on page 4 that you will terminate the offering if you fail to raise $10 million, which seems inconsistent with a firm commitment to take or pay for a certain number of shares. Please revise to clarify the underwriting arrangement.

    We have revised the disclosure throughout to make clear that the offering is a firm commitment offering.  Please see the prospectus cover page and pages 5, 6, 8, 20 and 51 of the Amendment.

3.  Please define or remove technical terms and other jargon so that your document can be understood by an investor not in your industry. Examples include “topology,” “utility dispatchable PV,” “reference product,” “PV inverter,” and “distributed storage.” It may also be useful to include a brief introductory explanation of where your product fits into the electric power market. For example, is it a consumer or industrial product? Which types of OEMs might be interested in using your product?

    We revised the disclosure throughout the Amendment, as you requested.  We deleted all references to “topology,” “utility dispatchable PV” and “reference product.”  We revised the disclosure to explain what a “PV inverter” and “distributed storage” are.  We also provided a brief introductory explanation of the industry and where our products fit into the industry.  Please see the discussion titled “About Ideal Power Inc.” at page 1 of the Amendment.

4.  Please provide us support for the market and industry data that you cite in the sections entitled “Our Proprietary Technology” on page 2 and “Our Target Markets” on pages 3 and 4. Clearly mark the material you provide to identify the data you cite in your document, and tell us whether you commissioned any of the data disclosed in your prospectus.

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    We have included with this letter documents supporting the market and industry data together with an index that includes each statement for which support is provided and the location of the supporting information.  The Company did not commission any of the data disclosed in the prospectus.

5.  Please provide us support for your statements regarding your leadership throughout the prospectus, such as your statements about leadership in the first and last paragraphs on page 21 of the prospectus.

    We have deleted all references regarding our leadership with the exception of the first sentence in the discussion of our business on page 23 of the Amendment.

Our Proprietary Technology, page 2

6.  Please provide us with support for your claims in the bullet points in this section about best-of-class safety, greater efficiency and greater reliability. In addition, where you provide statistics, please explain what they mean. For example, what does 96% efficiency mean?

    As noted in our response to comment number 4, we have included with this letter documents supporting the market and industry data together with an index that includes each statement for which support is provided and the location of the supporting information.  We have also revised the disclosure as you requested.  Please see pages 3 and 25 of the Amendment.

7.  Please expand the disclosure in the first bullet point on page 3 about “uses below 10kW to over 1MW” to briefly provide examples of the types of uses at the low and high end of the range so that the uses at either end of the range can be understood by an investor not in your industry.

    We have revised the disclosure as you requested.  Please see page 3 of the Amendment.

8.  We note the disclosure in the last sentence of this section about a government grant. Please expand the appropriate section to disclose, if applicable, any rights that the government has to your technology and patents.

    We have revised the disclosure to include information about the rights of the government to our technology and patents.  Please see pages 4, 26 and 27 of the Amendment.

9.  We note the disclosure in the last sentence of this section about developing and commercializing power switches and the disclosure in the second paragraph on page 3 that you are in the process of developing two more reference products. Please expand the sections entitled “Plan of Operation” and “Business” to clearly discuss each step you must take to reach commercialization of your proposed products and your estimated capital needed to achieve each product. For example, you disclose on pages 3 and 24 that the bi-directional insulated gate bipolar transistor is being funded partially by a $2.5 million grant. However, you do not mention the total capital needed to achieve that product or the two other products mentioned on page 24.

    We have revised the disclosure in the “Overview” discussion included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the “Business” discussion, as you requested.  Please see pages 27, 28 and 38 of the Amendment.

Our Business Model, page 3

10.  Please expand the disclosure in the fifth sentence of this section to disclose the number of companies that have purchased your products. In addition, explain to us why you chose the customer names you included here. In this respect, please note that we do not consider name recognition to be a sufficient basis for identifying a customer in your disclosure.

    We have revised the disclosure as you requested.  Please see page 4 of the Amendment.

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Our Target Markets, page 3

11.  Refer to the first bullet point under this heading. It is not clear why the rapid decline in the cost of solar cells causes growth in the PV inverter market or helps your business. Please revise to clarify.

    We have revised the disclosure as you requested.  Please see page 4 of the Amendment.

12.  Please eliminate disclosure that appears to be marketing. For example, we note the disclosure in this section about “dozens of markets that could benefit” and the “strength of the PPSA value proposition for those markets.”

    We have revised the disclosure throughout the Amendment to eliminate a marketing emphasis.

13.  Please expand the disclosure in the appropriate section of your filing to clarify your relationship with the U.S. Department of Defense and NRG Energy. In this regard, we note that you mention in the third bullet point of this section that the U.S. Department of Defense and NRG Energy are your “partners.”

    We have revised the disclosure to delete the word “partners.”  Our significant relationships are described at page 34 of the Amendment.  We have also included additional information regarding NRG Energy at pages 5 and 33.

Status as an Emerging Growth Company, page 4

14.  Please supplementally provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you, or anyone authorized to do so on your behalf, present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering.

    The Company has not entered into any “testing the waters” activities and has not communicated with any potential investors in reliance on Section 5(d) of the Securities Act.  To our knowledge, there have been no research reports about the Company published or distributed in reliance on Section 2(a)(3) of the Securities Act.

Please clarify that despite opting out of Section 102(b)(1) of the JOBS Act, you may still take advantage of all of the other provision of that Act.

    We have revised the disclosure as you requested.  Please see page 6 of the Amendment.

The Offering, page 6

15.  We note that you disclose that you intend to use some proceeds for “existing product development and commercialization,” “protection of [y]our intellectual property” and “general corporate purposes.” However, on page 57 you state that you intend to use some proceeds for the “development of existing products, including product and equipment purchases,” “patent filings and the protection of intellectual property” and “working capital and general corporate purposes.” Please reconcile.

    We have reconciled the disclosure as you requested.  Please see pages 8, 38 and 65 of the Amendment.

To date we have had a limited number of customers, page 10

16.  Please expand the disclosure in this risk factor to quantify the percentage of your net revenues in the fiscal year ended December 31, 2012 from the Department of Energy and Lockheed Martin, respectively. Also, expand the disclosure to quantify the percentage of your net revenues in the fiscal year ended December 31, 2011 from Lockheed Martin and Meridian Solar, respectively.

    We have revised the disclosure as you requested.  Please see page 12 of the Amendment.

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17.  If your revenues in the last two years from Lockheed Martin were received in connection with your agreements entered into in 2009 and you do not expect any additional revenues from these agreements, expand the disclosure in this risk factor and in your section entitled “Plan of Operation” to discuss the lack of future revenues from agreements with Lockheed Martin. In this regard, we note the disclosure in the last paragraph on page 28 about your agreements with Lockheed Martin.

    We have revised the disclosure as you requested.  Please see pages 12 and 41 of the Amendment.

18.  If your grant revenues from the Department of Energy in the fiscal year ended December 31, 2012 and in the quarter ended March 31, 2013 represent substantially all of your revenues that you expect to receive from the grants from that agency mentioned in the third paragraph on page 29, expand the disclosure in this risk factor and in your section entitled “Plan of Operation” to discuss the lack of future revenues from those two grants from that agency.

    We will continue to receive funds under the ARPA-E grant.  Please see pages 34 and 39 of the Amendment.

We have not devoted significant resources toward the marketing and sale, page 11

19.  Please expand the disclosure in the appropriate section of your filing to discuss the material terms of your strategic marketing and distribution agreements mentioned in this risk factor.

    We have not entered into any strategic marketing or material distribution agreements at this time.  We have revised the risk factor to clarify this.  Please see page 13 of the Amendment.

Business Strategy, page 23

20.  Since you do not appear to have sold any 30kW hybrid converters, 30kW micro-grid converters and bidirectional insulated gate transistors, please revise throughout to remove claims about the characteristics of these product or their benefits, or revise to indicate that they represent management's belief. Examples include the disclosure on page 24 about “charging systems with greater energy and cost efficiency,” the disclosure in Figure 5 on page 24 of the incremental benefits of BD-IGBT implementation, the disclosure on page 27 about a “lower cost, more efficient integrated solution” and the disclosure on page 28 about the product “should perform at lower cost and higher efficiency.”

    We have revised the disclosure throughout the discussion of the business, as you requested.

Intellectual Property, page 24

21.  We note the reference in this section to a “proven ideation process.” Please provide us support for your statement about a “proven” process. Also, please briefly explain the phrase “ideation process.”

    We have revised the disclosure in this section to delete this phrase.

22.  Please disclose the duration of your material patents.

    We have revised the disclosure to include this information.  Please see page 29 of the Amendment.

Revenue Recognition, page 33

23.  We note that you have been awarded two significant grants from the U.S. Department of Energy and have received approximately $1.0 million in revenue to fund long-term research and next generation product development. Please revise to describe how you recognize revenue from grants. Describe how the revenue is earned and how you determine the timing for revenue recognition.

    We have revised the disclosure as you requested.  Please see page 39.

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24.  As a related matter, please clarify if the grants are for the reimbursement of costs and how you determined that grants are appropriately classified as revenue rather than netted against related expenses incurred. Please also clarify where you record expenses related to grant revenue in the statement of operations. We reference your disclosure on page F-7 that government grants are agreements that generally provide the company with cost reimbursement for certain type of research and development activities over a contractually defined period.

    Our historic policy has been to recognize monies received from government research grants as a component of revenue in our statement of operations.  We believe that one of our important business strategies is to build governmental awareness of our solutions that may reduce dependence on fossil fuel and improve grid resiliency.  Performance of research and development activities under government grants represents a core strategy to the growth of our operations.  Throughout our history, we have been able to supplement our research with U.S. government grants, including approximately $1.2 million in grant funds that remain available at June 30, 2013.

    U.S. GAAP provides limited guidance on the accounting for government grants by for-profit companies.  IAS 20 recognizes that there are two broad approaches for accounting for government grants: the income approach or the capital approach.  We have assessed the nature of the grants and have determined to recognize grant receipts under the income approach, classifying the proceeds as revenue, as that best represents the economics of the arrangements.  In following this policy, we adhere to the guidance of Statement of Financial Concepts No. 6, Elements of Financial Statements, paragraphs 78 — 79 (“CON 6”).  Performing research and development activities under government grants has historically represented a major and central aspect of the Company’s ongoing operations as defined by CON 6 and therefore grant funds have been consistently recorded as revenue.

    Expenses related to grant revenue are expensed under cost of revenues.

Stock-Based Compensation, page 33

25.  Please revise to disclose how you determined each of the assumptions required in valuing stock options. In discussing how you determined the fair value of your common stock, disclose the following:

·

The aggregate intrinsic value of all outstanding o