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Jan. 28, 2003 — A wave of new materials with revolutionary properties. New products that will transform industries from energy and electronics to transportation. Emerging markets with vast potential and a swirl of media attention.
“Sound familiar?” asked Keith Blakely, chief executive of NanoDynamics Inc., a new nanomaterials company in Buffalo, N.Y.
Blakely, speaking at a recent conference, wasn’t talking about nanotechnology — he was reciting the promise that surrounded engineered ceramics in the 1980s. While the parallels between the two tech trends are decidedly sobering, small tech companies may benefit from some of the hard business lessons Blakely garnered in more than 20 years launching advanced materials startups, including Advanced Refractory Technologies Inc. (ART) in 1981.
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Lesson One: Make sure the technology is ready for market.
In Blakely’s view, market readiness begins with ensuring that your intellectual property is not only well defined, but that a product or process doesn’t potentially infringe on other companies’ patents. “Claims of infringement will come after time, money and effort has been invested and cannot easily be recovered,” he said. He suggested that startup executives should assume that a successful technology is likely to draw legal challenges.
Blakely also noted how difficult it is to produce high-tech bulk products like nanomaterials with consistent quality and performance. This “repeatability and reliability” of a product is essential, but also elusive.
For example, in 1993 ART acquired a license to a Russian technology for making a diamond-like nanocomposite coating that had great advantages over existing products. But the company ran into problems producing the material with reliable performance characteristics, and those obstacles kept the product from gaining commercial acceptance for seven years.
Doug Jamison, vice president of Harris & Harris Group, a venture capital firm focused on small tech, sees parallels with carbon nanotubes, a material that offers a wide range of potential applications, but “synthesizing them with carefully controlled properties and in significant quantities” has proved more challenging than developing novel uses for them in the lab.
Communicating the value of its performance in potential customers’ products or processes is the next important challenge. “Performance advantages should have measurable economic impact,” said Blakely, because “customers generally are not interested in spending more and need compelling reasons for doing so.”
Blakely called this attitude “economic sanity.” New materials and technologies are almost always initially more expensive than those they seek to displace. That’s why the path to a product’s ultimate cost competitiveness should be “well understood and rational.”
Lesson Two: Make sure the market is ready for the technology.
In 1987, Blakely’s company had developed submicron aluminum nitride powder to improve how electronic devices manage heat. The technology was novel and the process was able to produce material in volume and at low cost. So why did it take a decade for ART’s powder to make it to market? Cheaper thermal management solutions such as fans and heat sinks, as well as improved chip designs and less costly substitute materials created roadblocks.
Isaiah Cox, chief executive of Cool Chips plc, agreed that Lesson Two applies to companies aiming to commercialize small tech. “The goal is always to significantly undercut the dominant technologies,” said Cox. “A new technology, like our quantum tunneling cooling wafers, must be both demonstrably superior and less expensive. A young company cannot realistically expect to shake up a major industry without the technology being superior in every respect.”
Lesson Three: Strike a balance between technology push and market pull.
Even the most beneficial new material or product needs some evangelizing. According to Blakely, such “missionary work” means being as visible as possible through industry events and journals. Equally essential is demonstrating a product’s benefits with actual data, prototypes and test results.
Advanced materials companies are at the front of the food chain. They need to naturally appeal to the appetite of companies farther up that chain and make themselves even more appetizing by being credible, adaptable and understandable.
Barry Weinbaum, chief executive of optical component maker NanoOpto Corp., said that in today’s business climate, “you’ve got to convince a potential customer that you understand their business and have a solution that clearly and evidently saves them money.”
Lesson Four: Be objective about your technology and your market.
Blakely encouraged nanotech companies to remember that their product “won’t do everything and isn’t cheaper than dirt.”
NanoOpto’s Weinbaum also noted that it is important to keep an eye open for unexpected opportunities. While NanoOpto has been focused on the optical and telecom market, Weinbaum said he’s been approached by companies in other industries such as medical imaging equipment and digital projectors.
Being objective about the market for a product, Blakely said, also means understanding that “your customers are always looking at other ways to improve their product and reduce their cost, so you won’t have their undying love for eternity.”
“Building a nanomaterials business is challenging, time-consuming, expensive, exasperating and risky,” he concluded. “I highly recommend it.”