By Tom Henderson
Small Times Senior Writer
ANN ARBOR, Mich., Dec. 20, 2001 — A group of angel investors has kicked in $100,000 and hopes to use its business savvy to help transform a struggling maker of nanopowders from “a science project” into a viable commercial enterprise.
The firm, TAL Materials Inc., makes relatively high volumes of powders from metal oxides, including rare earths.
The angels also brought to the table a backer from the bulk-metals industry who will fund
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| TAL Materials Marketing Director Walt Garff, left, and angel investor Steve Swanson stand in front of TAL’s furnace for processing nanopowders. |
“I’m here as an angel investor,” said Steve Swanson, part of a group that includes Peter Gray of Ann Arbor and Edward Lapekas of Chicago, former chairman and chief executive officer of American National Can Group Inc.
Swanson was named interim chief executive of TAL this month. He owned Swanson Capital Management, a money-management company for high net-worth individuals in Ann Arbor, for 24 years before selling it in 1997 to co-found Arbor Partners LLC, a venture-capital firm.
Swanson and Gray are principals in Arbor Partners, but Swanson said this was not an Arbor Partners deal. “If we see higher revenues later, we can take it to our company for funding. This is very early-stage equity money,” said Swanson, who said the angel group has pledged another $400,000 in increments as TAL hits certain goals.
TAL, which has three full-time and four part-time employees, was founded in 1996 out of research at the University of Michigan (U-M) by Richard Laine, a professor of materials science and engineering. TAL’s process for making mixed-metal-oxide nanopowders involves flame-spray pyrolysis, a rapid quenching of heated metal powders.
“The soot from the combustion is our nanopowder,” Laine said.
TAL claims to be able to make up to 5 kilograms an hour of nanopowders in its new, larger reactor. Until now, officials said, it has survived on federal Small Business Innovative Research (SBIR) grants and providing small quantities of powders for the R&D efforts of Fortune 500 companies, which they say they are prohibited from naming because of nondisclosure agreements.
OraSure Technologies Inc., a publicly traded medical diagnostics firm based in Bethlehem, Pa., has been a steady customer for TAL’s fluorescing nanopowders
OraSure’s chief science officer, Sam Niedbala, said his firm uses the powders in point-of-service diagnostic tests at medical facilities, and is about to use them in Europe in kits that test for illicit drugs and alcohol use at random traffic stops.
Niedbala said TAL is able to supply nanopowders in far greater volumes than its competitors. “Lots of people can produce very small quantities, but TAL is able to supply us with kilogram quantities, and even grams produced enough for millions of tests,” said Niedbala.
Swanson acknowledged that the current hype about all things nano is reminiscent of the hype that accompanied the dot-com era, an era he understands well since Arbor Partners invested in a wide range of e-commerce companies.
“Nano has become a buzzword, too, but there’s a difference. The dot-coms had high revenues and no profits. With nano, you can have much lower revenues and make a profit. You can have a very nice business.”
Swanson said that as interim CEO he will identify market opportunities, focus the company’s technology and help turn it from a research and development firm into a commercial maker and seller of products. Once he gets the company in the black, “we’re going to run a tight ship; in the not too distant future we want to be at the break-even point.” He also wants to hire a permanent CEO.
“The quicker we’re successful, the quicker I’m out of here. We’ve just taken off our training wheels. We don’t need a CEO at this point. I’m not getting paid, and you don’t get too many CEOs at that price,” he joked.
“A lot of university technologies are science projects looking for commercialization. This is a science project looking for commercialization that we think makes sense,” he said. He said potential applications include ceramic oxides for medical implants, metal oxides for fuel cells, pigments for the printing industry, coatings for specialty glass, phosphorescent powders to help fight counterfeit airplane and auto parts, and photonics materials.
A paper on photonic aspects of TAL’s powders, titled “Laser Action in Strongly Scattering Rare-Earth-Doped Dielectric Nanophosphors,” was accepted on Aug. 15 for an upcoming issue of the prestigious physics journal Physical Review A.
Swanson and Gray decided to invest after seeing a presentation by TAL’s Artem Doubov, a recent graduate of U-M’s MBA program and a former second lieutenant in the Russian army.
They in turn brought in Ann Arbor businessman Gerald Berger to fund a crucial proof of concept involving phosphorescent nanopowders and the fight against parts counterfeiting.
Berger is president of North American Minerals Corp., a supplier of minerals and alloys to the steel and aluminum industries. TAL has shown it can embed bar codes made up of metal oxides on the surface of metal products. Based on an alloy of terbium, aluminum and garnet, the powders give off visible red light when hit with an infrared laser light source.
In theory, the same technology could be used to scatter small amounts of powder into molten aluminum. As the aluminum hardened into ingots and later was made into parts, trace amounts of the metal oxides would end up on the surface. Hit with an infrared light source, they would emit red light.
By varying the quantities of the various metals, TAL thinks it can subtly change the color of the light emitted to allow manufacturers to tell when a particular metal was made and in what plant.
The result, said Berger, would help fight two big problems — counterfeit ingots that, for example, are stamped “Alcoa” but are actually made of inferior alloys made offshore; and counterfeit parts in the auto and airplane industries.
“I’ve already had interest from two aluminum companies and one steel company,” said Berger. “There’s nothing finer than to offer to put two ingots on a table and say, `We can tell you which one is ours. Shine a laser on it and it says Ann Arbor.’
“This is an enormous market,” Berger said. “The U.S. market is around 30 million tons of aluminum a year, at $2,000 a ton. What’s that? $60 billion a year? And the thing with nano is, a little pinch goes a long way. It’s not a tremendous additive to cost.
“It’s a fascinating venture. We’ll see if we can prove the principle out over the next several months. TAL’s got a shelf full of metals and rare earths. You can mix and match those nanopowders to give 100,000 different readings. You get a unique tag for each mixture. We want it to shine 100,000 different ways.”
“We’re at the very formative early stages of a process that we hope validates us,” Swanson said. “We’ll know a lot more in three months. This will get us from the science stage to the commercial stage IF we can prove out that we have something here.”
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CONTACT THE AUTHOR:
Tom Henderson at [email protected] or call 734-528-6292.