Feb. 21, 2003 — Tim Weihs and Omar Knio knew they were on to something in 1997 when companies began calling to request their nanoengineered foil.
The only hitch: the Johns Hopkins University researchers weren’t in business yet.
“Callers would ask what the company’s name was and how they could submit an order,” recalled Knio, now vice president of what became Reactive Nanotechnologies Inc. (RNT), based in Baltimore.
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In June 2002, RNT landed a $2 million investment from Toucan Capital Corp. in Bethesda, Md. More recently, Silicon Alley Seed Investors (SASI), a new early-stage venture capital company based in New York, made its first small tech investment with a $400,000 stake in the company.
As two new players on the small tech scene, SASI and RNT agreed to share some of their experience bringing the company to market as well as offer advice for other nascent small tech entrepreneurs.
Weihs began developing a metal foil made of alternating atomic layers of nickel and aluminum six years ago. When ignited with a spark, the material produced an intense, but brief, heat reaction of more than 1,500 degrees Celsius in less than 10 milliseconds.
The process enabled dissimilar materials such as ceramic and metal to be joined together. More important, the reaction didn’t produce excess heat that would melt or damage delicate circuitry, making it useful for joining silicon chips with other materials.
What intrigued SASI co-founder George Abraham about the team was the blend of Weihs’ materials science expertise and Knio’s computer modeling skills. The modeling software Knio developed had enabled Weihs to refine the foil and produce a wider range of recipes for different joining applications.
SASI, founded in January 2001 with $35 million from partners Sevin Rosen Funds, Canaan Partners and Rho Capital Partners Inc., is focused on early stage and seed investing in companies in or near the New York metropolitan region.
Abraham said that while SASI isn’t specifically targeting small tech startups, his company offers its partners opportunity to invest in its portfolio companies in later funding rounds.
As Abraham explained, SASI typically looks for startups just out of a university or research lab, with prototype technology that hasn’t yet generated revenue or been funded by institutional investors.
In fall 2000, Weihs and Knio started on their path to commercialization through Emerging Technology Centers, a nonprofit business incubator program in Baltimore that helped them build a basic business plan, find a lawyer and seek funding.
Weihs, now RNT’s chief executive, said that he and Knio developed a sense of the industrial joining problems and market opportunities — in the defense, semiconductor and optical component industries — from some of the calls and inquiries they had received over the years.
SASI’s Abraham said that this fundamental understanding of a startup’s potential customers is critical for founders to develop, particularly for scientists or researchers not accustomed to thinking like entrepreneurs.
Weihs and Knio said their schooling in business realities came from early presentations to prospective investors. “We learned that our pitch should focus on the business opportunity, not on the novelty of the technology,” Weihs said.
“Scientists and engineers need to be able to explain their technologies in a commercial context,” Abraham said. “They should show that they’ve thought through some of the fundamental realities of turning technology into something valuable.”
Abraham also emphasized that aspiring entrepreneurs need to “know what they’re asking for” when they approach venture capitalists.
His advice to small tech startups: Do some homework by spending a weekend reading books on how the venture capital system works. “Visit vcexperts.com, subscribe to VentureWire and get familiar with the system,” he said. This kind of preparation is critical, said Abraham, because it indicates the kind of thoughtful approach that managers need to build a business.
“You have to learn the language of business,” said Abraham. “Because if you’re talking to a venture capitalist, you’re already a businessperson.”
As an early stage venture firm, Abraham noted, SASI isn’t just buying a piece of a company, but looking to develop it. “We can contribute to that investment by being a good partner to a young company.” To that end, Abraham said, SASI is helping Weihs and Knio build out their strategy and management team.
With pilot production set for this summer, RNT has added some key personnel with business backgrounds to target initial markets and develop the distribution channels to serve them.