Category Archives: Fuel Cells

April 8, 2004 — A buckyball toxicity study that spawned considerable debate inside and outside the nanotech industry last week has been published in an environmental journal.

The journal Environmental Health Perspectives this week published Manufactured Nanomaterials Induce Oxidative Stress in Brain of Juvenile Largemouth Bass, written by Southern Methodist University environmental toxicology lecturer Eva Oberdorster. The peer-reviewed study, conducted by Oberdorster and her students, is believed to be the first to show that uncoated fullerenes can cause brain damage in aquatic species.

She and her group found the rates of brain damage to be 17 times higher in nine large-mouth bass exposed to a form of water-soluble buckyballs. The rate was in comparison to nine unexposed fish. The study found what she called “moderate toxicity” in the fish. The concentration of nanoparticles used in the 48-hour laboratory study was .5 parts per million.

Oberdorster presented the study last week at the national meeting of the American Chemical Society in Anaheim, Calif., which was attended by several media organizations and received broad international coverage. The study also became a hot topic among speakers and attendees last week at the National Nanotechnology Initiative conference in Washington. Some publicly accused the media of misleading the public about the environmental risks of nanoparticles.

In both her talk and the study, she stressed that further research needs to be done to evaluate the potential toxicity of manufactured nanomaterials on living organisms, and she is seeking federal money to continue her work. She also criticized some media reports that “twist your words around.”

“Considering the benefits of nanotech, I think it’s actually a great trade-off. Imagine if we can make more-efficient fuel cells and decrease our dependence on highly toxic fossil fuels,” Oberdorster told Small Times in an e-mail. “But that doesn’t sell newspapers. Scary stuff like ‘the buckyballs will eat your brains’ sells much better. Doesn’t matter that it’s not correct, as long as it sells papers.”

Still, she is grateful to have helped spur talk about the environmental impact of nanomaterials: “I think this also points out that the public really wants to know what the risks and benefits of nanotechnology are so that they can make informed decisions.”

March 18, 2004 — Two events this week show that investors and corporations put a high value on nanotechnology-related intellectual property. The company at the fulcrum of this week’s action is Nanogram Corp., which is reaping the rewards of an innovative IP strategy. But analysts are not yet ready to call Nanogram’s business model a success. 

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Evolution of an IP model: NanoGram Corp. was founded in 1996 and later changed its name to NeoPhotonics. In  2002, it spun off its medical devices business as NanoGram Devices Corp. and spun off a new NanoGram Corp. as an IP holding company. The holding company now licenses the IP to NeoPhotonics, NanoGram Devices Corp. and Kainos Energy. Each has rights specific to its respective industry.

On Tuesday, a nanotechnology company in the midst of a reorganization, NeoPhotonics, raised a whopping $40 million venture round. On the same day, a second nano firm, NanoGram Devices Corp. (NDC), was sold for $45 million.

“I think it validates the technology,” said Juan Sanchez, a nanotechnology analyst with Punk, Ziegel & Co. However, he and other experts say it’s too early to determine whether the events truly validate the business model of a holding company whose core IP is licensed by both companies.

NeoPhotonics and NDC license the same intellectual property from NanoGram Corp. “The objective of NanoGram Corp. is to maximize the value of its assets in several market verticals,” said Tim Jenks, who is chief executive of both NeoPhotonics and NanoGram Corp. (the IP holding company), which owns 28 patents. The complete portfolio, including patents pending, numbers more than 50, according to Jenks.

NeoPhotonics owns rights to exploit the IP for certain optical applications. NanoGram Devices owns rights for medical devices. A NanoGram Corp. subsidiary, Kainos Energy, is targeted toward fuel cell applications.

Jenks said the sale of NDC, which was acquired for $45 million in cash by Wilson Greatbatch Technologies Inc., does help to validate the business model of NanoGram Corp. (the IP holding company) insomuch as the company generated a sizeable return on a $9.2 million investment early last year. Greatbatch is a leading provider of batteries for pacemakers and other implantable medical devices.

Greatbatch’s president and chief executive, Ed Voboril, said in a conference call Wednesday that NDC’s technology would allow his company to extend its current medical battery product line as well as develop new power products.

However, Jenks said, the NeoPhotonics funding does less to validate the IP licensing model. “I think the NeoPhotonics funding is much less about the NanoGram model and much more about the capability that NeoPhotonics has to address the optical communications market,” he said.

Jenks and investor Charles Harris of Harris & Harris both said it was the value of NeoPhotonics’ technology, and signs of life in the optical networking industry, that helped justifying the funding round. The company’s IP portfolio also includes technology developed by Lightwave Microsystems Corp., a developer of optical components that NeoPhotonics bought in early 2003.

The funding was part of a larger plan to pull the company out of bankruptcy. NeoPhotonics filed for reorganization protection last November and its plan was confirmed in late February, according to court documents. Jenks said raising money was the next step required.

“We are post-confirmation and post-funding,” he said. “It’s virtually behind us.”

Jenks and analyst Sanchez also pointed to the company’s February launch of optical component products as evidence that it is successfully executing a turnaround.

And that, according to Sanchez, is where ultimate validation of NanoGram Corp.’s IP licensing model will lie.

“This doesn’t necessarily validate the business model,” he said. “You won’t validate it until there’s a product.” And, he added, revenue-generating sales.

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March 15, 2004 — Small tech companies continued to get a hand financially from federal agencies in 2003, but the recipients and givers varied significantly from the previous year. The startups’ ability to ferret out federal awards is critical for their growth and for that of the emerging small tech industry, especially at a time when venture capital is tight, analysts said.

Small Times identified hundreds of companies selected to receive Small Business Innovation Research (SBIR) grants in 2003 as part of its annual analysis of small tech’s leading states. The SBIR figures are one of handful of criteria used by Small Times to gauge innovative activity in a state. Each state received a score for innovation, as well as for five other categories: research, industry, venture capital, work force and costs. The scores were weighted and tallied for a final ranking.

This year’s final ranking placed California in the lead, followed by Massachusetts, New Mexico, New York, Texas, Illinois, Pennsylvania, Michigan, Connecticut and Ohio, in that order. Innovation proved to be one of the most volatile categories, with newcomers New Mexico, Ohio and Tennessee breaking into its top 10 list compared to last year. Some of that volatility can be traced to SBIRs, highly competitive funding opportunities within the Department of Defense, National Institutes of Health, Department of Energy, NASA and several other federal agencies.

“Follow the money flows,” said Robert Kispert, director of federal programs at the economic development agency Massachusetts Technology Collaborative. Massachusetts ranked second after California in Small Times’ rankings for innovation. “We have a lot of capacity and skill in following the money flows.”

Kispert authored a report in 2004 that found Massachusetts excelled at attracting federal funding for defense research and development. His results, although they covered all high tech, mirrored those of Small Times: Massachusetts’ small tech companies won the most awards from the Department of Defense in 2003, getting almost a quarter of all the 58 small tech-specific defense awards.

Overall, California nabbed the most SBIRs, landing almost 19 percent of the 274 awards identified by Small Times. Massachusetts raked in 12.4 percent of the total, and Texas carved out about 7 percent. Companies qualify for SBIRs if they have less than 500 employees, and the awards are divided into three stages: a feasibility phase with up to $100,000; a development-to-prototype phase with a cap of $750,000, and a final phase where the project shifts into a marketplace without any SBIR money.

SBIR funding is a pittance compared to venture capital investments, but it allows small businesses to test and develop technologies that could blossom into marketable goods and services. Federal SBIR funding totaled about $1.6 billion in 2002, with about half provided by defense, according to the Defense Department. Its SBIR budget grew to about $998 million for fiscal year 2004.

Venture capitalists invested almost that much money in small tech alone in 2003, according to a Small Times analysis of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. Small tech investment is only a fraction of the total VC activity, which slowed down drastically after the dot-com crash.

Kispert said SBIR awards help tide companies over during VC droughts. “The good news about the defense industry (awards) is that it does provide an opportunity for new players to move forward with less private equity,” he said. “They’re not having to invest as much of their own money … particularly at a time when private investment is harder to come by.”

The SBIR programs also help launch new businesses and sustain more mature companies. The award of two defense SBIRs in 2003 prompted MEMS veterans Lawrence Muray and James Spallas to pursue their vision of building a tabletop scanning electron microscope through their young startup, NOVELX, according to the two co-founders.

At the other extreme, established small businesses such as Materials and Electrochemical Research (MER) Corp. in Tucson, Ariz., and TPL Inc. in Albuquerque, N.M., include SBIRs among their strategies for success. The 19-year-old MER makes and sells fullerenes, nanotubes and other materials as well as develops fuel cell and battery technologies.

TPL, founded in 1981, lists itself among the top 50 SBIR companies in the nation. It shifted from its roots as a technology company serving the oil drilling industry to a material science-based company because of SBIR opportunities, according to Hap Stoller, TPL founder and president. TPL’s small tech programs are as diverse as nanoscale powders to power supplies for MEMS.

“I decided I’m going to bait as many technology hooks as I can and see what I catch,” said Stoller, referring to efforts to keep the company afloat in lean times with SBIRs. “It was an act of desperation. Most VCs then (in the 1980s and ’90s) and maybe even today would be horrified at the tack I took.”

Flexibility may be an attribute for companies that view SBIRs among their business strategies. Small Times’ analysis found that the number of small tech-related SBIR awards grew modestly between 2002 and 2003. But the numbers fluctuated greatly from one year to the next within individual funding agencies.

For instance, the Department of Defense selected twice as many small tech companies for SBIRs in 2002 than it did in 2003. California won almost 19 percent of 116 defense awards in 2002, with Massachusetts close behind with 17 percent of the total. The National Institutes of Health, conversely, awarded 103 SBIRs to small tech companies in 2003 and only 46 in 2002. California dominated the NIH list in 2003 and tied with Massachusetts for the top slot in 2003.

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BOSTON, March 10, 2004 — Some of the most influential corporate and government voices in nanotechnology gave the industry a stern warning this week to get cracking on commercially viable products, as people from around the world flocked here for one of nanotech’s largest-ever gatherings.

Nanotech 2004, a trade show that started on Sunday and wraps up Thursday, has drawn an estimated 1,800 people — far more than expected, and three times the turnout from only two years ago. What’s more, for the first time the event has a distinctly commercial feel. Seventy-five groups have sponsored booths on the exhibition floor, hawking everything from nanotubes to thin films to legal services.

“The success of the show has mirrored the explosion in nanotech,” said Matthew Laudon, executive director of the Nano Science and Technology Institute and Nanotech 2004’s organizer. “When we started out seven years ago, we were a small gathering of scientists … and now we’ve become a full-fledged trade show with exhibitors, investors, early-stage and research companies from all over the world.”

Still, a dominant theme here is the need to demonstrate useful results — that is, products and jobs — from government money pouring into nanotech research. The U.S. federal government alone has earmarked $921 million for the National Nanotech Initiative this year, plus several billion more in the future.

Clayton Teague, director of the National Nanotechnology Coordination Office and the keynote speaker, warned that lawmakers in Congress will eye nanotech investment with ever-more scrutiny as federal expenditures surpass $1 billion in the next several years.

“I assure you that everybody expects some return on that investment,” Teague said. “They’re looking to you and me in the research community” to deliver practical economic benefit.

Fellow keynote speaker David Tennenhouse, meanwhile, warned that not enough federal and university dollars are going to applied research to solve problems in areas such as nanomanufacturing. Tennenhouse, director of research for Intel Corp., said the trend worries him so much he now raises his concerns at the start of his public speeches to ensure the audience hears it.

“In general, our spending hasn’t kept pace. … I’m particularly concerned that the application of this [basic] research is lagging,” he said.

Tennenhouse also urged researchers to think very small: 10 nanometers or less. The semiconductor industry already knows how to reduce logical gates from 90 nanometers today to 22 nanometers by 2009, he said. The real challenge will come in the subsequent decade, as gates shrink to 5 nanometers and the industry tries to incorporate exotic ideas such as gates wrapped around a transistor rather than layered on top.

“We really need to get much more focused there,” Tennenhouse said. “It would be much more constructive for the community to get focused on that work.”

Others warned that U.S. universities and corporations must accelerate their commercialization of nanotech before other nations beat them to the punch. Louis Ross of the Global Emerging Technology Institute noted that Japan’s investment in nanotechnology virtually equals that of the United States. Moreover, he said, much of the first wave of nanotech commercialization is likely to be in composite materials.

The customer base for that sector is filled with large Asian manufacturers. Those businesses have historically sent precious corporate research dollars to U.S. universities, but might shift that money closer to home if institutions in Japan and other Asian nations prove just as capable in nanotech research. “I think that will be scrutinized a bit more,” Ross said.

Despite the cautionary notes struck by Teague and Tennenhouse, other Nanotech 2004 attendees hinted that real results will be forthcoming soon. NEC Corp. said the company plans to release a fuel cell next year based on carbon nanohorns, to keep laptop computers running for days rather than hours.

NASA researchers are developing an artificial retina with carbon nanotubes to fight macular degeneration. And more than 25 startups pitched their stories in various venture forums during the trade show, promoting nanotech in everything from thin films to magnetic resonance imaging to optical components.

Warren Packard, managing director at the renowned Silicon Valley-based venture capital firm Draper Fisher Jurvetson, praised the flurry of nanotech startups as a hothouse of innovation — sure to drive some unwise speculation, he said, but crucial to find the underlying technical processes to make nanotech a viable technology.

“Clearly there’s going to be a bubble,” Packard said. “But that’s OK.”

Jan. 8, 2004 — Power & Energy Inc. is using a U.S. defense research contract to develop nanostructured membranes for fuel cell applications, according to a news release.

Power & Energy plans to make the thin-film membranes to enable fuel cell users to generate high-purity hydrogen-on-demand from any reformed fuel source. The company said the membrane technology is ideal for early adoption of fuel cells in remote, portable and mobile applications, such as backpack fuel cells for soldiers or distributed electric power generation for ships.

The Phase II Small Business Innovation Research contract awarded by the Defense Advanced Research Projects Agency, allows the Ivyland, Pa.-based company to continue its fuel cell work.

Dec. 11, 2003 — Almost without notice, a number of innovative, advanced material firms in the emerging fuel cell market have been acquired by larger firms. Two recent examples of the trend are Cabot Corp’s acquisition of Superior MicroPowders for $16 million in the United States and Belgium-based Timcal’s takeover of Erachem Comilog’s carbon black business unit in Europe.

 

Both of the acquired businesses are poised to supply materials to fuel cell makers. Things like nanopowders, nanostructured coatings and the like will play an important role in next generation fuel cell systems. “Nanomaterials have the potential to increase power density, extend durability, and lower costs,” said Toddington Harper, a business development manager at Fuel Cell Markets, a U.K.-based consulting company.

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“It’s all about getting the more productivity out of small volumes. As a result, there is a great deal of investor interest in the firms able to supply such technologies,” said David Berkowitz, a partner at Ventures West in Vancouver, a pioneering investor in fuel cell companies.

 

Industry observers, such as Atakan Ozbek, director of energy research at ABI, a market research firm, see the merger and acquisition activity as a jockeying by the larger players to position themselves to serve the emerging fuel cell market. The large players do not want to be left behind “once fuel cell systems become premium energy suppliers,” he said in an e-mail interview.

 

Ozbek expects this trend to continue in the coming years.

 

Berkowitz agrees, “There’s been a great deal of M&A activity to date and the trend will continue in the coming months.”

 

Cabot Corp. acquired Superior MicroPowders for its proprietary process to make “low precious metal content” electrocatalyst powders for proton exchange membrane (PEM) fuel cells. It is now doubling the number of R&D employees and moving to a larger facility in New Mexico.

 

Timcal acquired Erachem Comilog for its carbon black process in September, which is reportedly critical to lithium ion batteries and fuel cells. The unit has an annual turnover of approximately $18 million and owns an innovative special carbon black manufacturing process.

 

A wider trend

 

The silent snapup of nanomaterial manufacturers is part of a larger consolidation trend in emerging fuel cell market taking place on both sides of the fuel cell supply chain, according to Walter V. Nasdeo, an analyst at investment banking boutique Ardour Capital, in New York.

 

He goes as far as to say that fuel cells are a “commodity” and that the suppliers of parts and services are the ones who stand to have the “fattest margins” in the value chain in the future. This includes parts manufacturers, electrode assembly firms, power electronics, testers, materials suppliers, and on the other side of the fuel cell chain, the firms that can integrate fuel cells into systems.

 

PriceWaterhouseCoopers also noticed the trend in its “Fuel Cell Survey” published in October, pointing to Hydrogenics, which acquired venture-backed Greenlight Power and EnKat of Germany, to form the largest fuel cell testing equipment vendor in the world.

 

Indeed, the likes of GM, Shell and ChevronTexaco are starting to “hedge their bets on the sector, not just from one angle but from multiple platforms -both technically and strategically,” said Ozbek.

 

“Too many companies were funded during the boom. There was too much capital available and now there is too little. Startups are learning that one little piece of technology does not a company make,” says Berkowitz.

 

In other words, consolidation is driven by the financial distress of companies that are making one component or element of a fuel cell system. They need to find stronger, cash-rich partners in order to develop their technology into a product.

 

Another driver is the realization among larger firms that it is taking a lot longer to get to market than they expected and they need to buy in the pieces of the puzzle that are still missing. “There used to be an aversion to components or sub systems from outside suppliers, a not-invented-here mentality,” said Berkowitz. “But that is quite rapidly being abandoned,” he posits.

 

The trend will lead to “stronger companies,” according to PWC.

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Dec. 8, 2003 — Move over, lab-on-a-chip. Those microdevices from firms such as Affymetrix Inc. and Caliper Technologies Corp. are advancing life sciences, but a lesser-known tributary of microfluidics is working toward one-upping them with a “chemical-plant-in-a-box.”

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Just last week, Global Hydrogen Inc. — a joint venture between Velocys Inc., a startup based in Plain City, Ohio, and ConocoPhillips — revealed plans to apply microchemical processing to convert natural gas into pure hydrogen or synthetic diesel fuel.

Like labs-on-a-chip, these microchemical reaction systems are composed of tiny channels, mixing chambers, heaters, reactors and other components. But rather than manipulating or analyzing biomolecules and DNA, microreaction technology is designed to conduct chemistry that is possible only with extremely small quantities of fluids in small spaces.

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Potential applications are as diverse as there are chemical processes, so device dimensions are not really confined to the “box” metaphor. Researchers at Pacific Northwest National Laboratory (PNNL) in Richland, Wash., have built what they believe to be the world’s smallest fuel processor, about the size of a pencil eraser, for use in hand-held wireless equipment and sensors by the U.S. military.

Some of the other key organizations working on microchem technology include the IMM in Germany and Stevens Institute of Technology in Hoboken, N.J. Other commercial companies include Ehrfeld Mikrotechnik AG outside Frankfurt, Germany, and GTL Microsystems, a joint venture of FMC Technologies Inc. in Houston and U.K.-based Accentus plc.

Microchem prototypes run the gamut from a standalone apparatus — like the six-pound cooling system PNNL is working on for U.S. soldiers to wear — to multiple machines networked together for higher-volume industrial applications.

A single small device, for example, could process liquid methanol into hydrogen gas inside a micro fuel cell. Hundreds of micro reactors could run in a massively parallel fashion for large-scale production of materials such as hydrogen peroxide, or for the kind of specialized chemical engineering needed in making pharmaceuticals.

The New Jersey Center for MicroChemical Systems at Stevens Institute is working on all these areas.

Ronald Besser, who co-leads Stevens’ microchem center, explains that chemical reactions in extremely small volumes of fluids inside microchannels have a number of advantages over traditional chemistry.

Heat from such reactions dissipates very rapidly, allowing ingredients to be combined at temperatures, pressures or concentrations that on a larger scale would be explosive.

Chemicals blended by the microdrop also mix extremely fast (hence Velocys’ name), which could create new categories of compounds. Surface-to-volume ratio of liquids in a microreactor or channel also interact more rapidly with catalytic particles or thin films, increasing efficiency and reducing cost.

Clyde Payne, chief executive of chemical industry consulting firm The Catalyst Group, sees the early promise for microchemical systems in low-volume, high-value applications such as specialty chemicals and pharmaceuticals. But he cautioned that most prototype systems are essentially expensive, handmade projects today. He estimated it would take several years to make the equipment affordable for commercial production.

What makes the effort worthwhile is that “reactions in very small spaces simply gives you access to chemistry you can’t do at larger scales,” said Besser. That’s why Stevens Institute, with funding from the Department of Energy and the state of New Jersey, is working on micro chemical pilot projects with pharmaceutical giant Bristol-Myers Squibb Co. and FMC Inc., one of the world’s largest producers of hydrogen peroxide. Lucent’s New Jersey Nanotechnology Consortium is also a partner in the project.

Through Velocys, ConocoPhillips and other partners have invested more than $70 million to develop industrial applications for microchannel technology. Two promising areas are producing hydrogen and converting “stranded” natural gas into a synthetic liquid diesel fuel in the field. Gas reserves in places like Alaska are large but uneconomical to develop if they can’t be transported. The challenge for Velocys is making the gas-to-liquid conversion cheap enough to produce liquid fuel at prices competitive with conventional oil.

On Dec. 4, Velocys revealed plans for a full-scale demonstration module in 2005 and hopes for an industrial rollout in 2006.

Wolfgang Ehrfeld, who helped pioneer microreaction technology in the early 1990s, started Ehrfeld Mikrotechnik AG in 2000 after leaving the IMM. Ehrfeld, who helped found the IMM in 1991 with his wife Ursula, also co-authored a seminal book on microreactors in 2002.

Ehrfeld said he left IMM to start his own company because he wanted to spur the commercialization of microchemical systems. While he declined to specify customers, Ehrfeld said the company has developed a modular microreaction system with broad and flexible application. He added that Merck &Co. has used microchemical systems to produce the liquid crystals for LCD screens.

But Ehrfeld noted that wider implementation of microchemical processes in industry will require a shift in thinking. Conventional chemical plants built to last thirty years lock manufacturers into technology and processes that can become outdated.

He contends that the chemical industry, or at least a sector of it, must become more like the consumer electronics and computer industries where products are constantly upgraded and have shorter lives in the market.

A modular microchemical infrastructure would, he believes, cost less and take up less space than conventional capital equipment. It could be reconfigured more easily to keep pace with a faster development cycle.

Dec. 1, 2003 — The global nanotechnology market is expected to grow to $18 billion by 2005, with nano-enabled flat-panel displays and fuel cells expected to launch within three years, according to a survey reported in Asia Pulse.

Nihon Keizai Shimbun Inc.’s second corporate survey on nanotech found that 40 companies are developing nanotubes and other nanomaterials. Most expect to release commercial products in one to three years, the report said.

The survey results, tabulated from 240 firms ranging from nano R&D to production, also said respondents tend to be developing materials such as nano-based glass or fibers. Products include high-capacity memory and environmental cleaning systems.

Nov. 12, 2003 — A University of California, Riverside, research team under contract with Pacific Fuel Cell Corp. has developed a fuel cell using carbon nanotube-based electrodes, according to a news release.

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Pacific Fuel Cell expects that use of multiwall nanotubes as a platinum support for proton exchange membrane (PEM) fuel cells will reduce manufacturing costs. The Tustin, Calif.-based firm plans to create joint ventures for commercialization, the release said.

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Pacific Fuel Cell, listed on OTC Bulletin Board, closed Tuesday at 23 cents, up from 10 cents Monday.

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Nov. 5, 2003 — Nanotechnology startup Optiva Inc., is not only a cash magnet, but it’s also a member of a new breed of technology company, where the brains and innovation are in Russia, but the company is headquartered in the United States, Europe or East Asia.

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“It is world-class technology. Remember that it was the Russian Soyuz that rescued the NASA space station crew,” points out Jean Charles Herpeux, chief executive of ACOL Technology, a Swiss/Russian manufacturer of high brightness light emitting diodes (HB-LEDs).

Typical Russian research spinoff technologies are fuel cells, sensors that work in extreme conditions, nanopowders and high-power compact microscopes. Examples include NT-MDT, a manufacturer of atomic force and scanning probe microscopes, and one-year-old Independent Power Technologies, a manufacturer of advanced fuel cell systems.

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Optiva’s founder is Pavel Lazarev, a sixty-something, gregarious Russian who has raised more than $40 million for his firm’s innovative and surprisingly simple thin-film technology. He’s the former head of MDT, an atomic force microscope company in Moscow.

Despite having a large number of patents and scientific papers to his name, Lazarev is an entrepreneur. Don’t call him a researcher. He uses phrases like, “the best founders are dead founders,” showing he understands the thinking of the venture capital crowd. Currently, Optiva’s shareholders are entertaining the first bids from interested buyers.

Esther Dyson, an early investor in Russian technology firms, says that Russia doesn’t really need VC money; it needs management savvy. People like Lazarev are rare.

That means that investors who wish to be successful have to take a hands-on approach. UK-based Flintstone PLC is trying the incubator model. It seeks chemical and surface technology deals that are close to being ripe for the market. It then gives the inventors shares in a new UK-based company, which takes over all the intellectual property.

It is a model that worked well for Flintstone’s founder Ian Woodcock’s first Russian deal. He ended up selling Sterilox Technologies Inc., a maker of nontoxic sterilizations systems to investors in 2000 for an undisclosed sum. Woodcok decided to repeat the process, forming Flintstone as the incubation vehicle.

Researchers are paid a salary and key members of the team move to the United Kingdom. But not everyone agrees that moving Russian scientists to Great Britain is the best method to build value in an early stage company.

“My issue with the Flintstone model is that it removes one of the major benefits of Russian tech — the relatively low cost,” said a Moscow-based private equity investor. “Employee and infrastructure prices are lower here than in the UK.”

It also adds more risk: homesickness, culture shock and the like.

Marie Trexler, who heads Intel Capital in Eastern Europe and Russia, agrees that it is better to keep R&D teams in Russia due to the savings to be achieved.

Even Flintstone might be reconsidering its model. “Getting visas and traveling to Moscow is not as difficult as it once was,” says David Chestnutt, Flintstone’s CEO. In addition, one of its portfolio firms, a company that had found a way to make super-rechargeable batteries, lost its Russian chief scientist when he suddenly resigned and returned to Russia.

The two companies in the Flintstone portfolio closest to profitability are Hardide and Keronite. Hardide’s key researcher was the leading expert in chemical vapor deposition technologies at the Institute of Physical Chemistry of the Russian Academy of Sciences, an important space research center in Russia.

Keronite is a startup developing a surface treatment to boost the hardness of aluminum and magnesium to the level of steel. Magnesium is a material cherished for its lightness and luxe look compared to plastic, but it is soft and susceptible to corrosion and wear.

Its process has actually been around for decades, but it took Russian perseverance and ingenuity, in the form of a Moscow State University researcher, Alexander Shatrov, to be able to run the process using a reasonable about of energy.