Fuel Cell Developer Adaptive Materials On Finding Engineers and the Company’s Future

4/28/10

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when you have a product that you’re ready to commercialize. You’re taking a lot of the risk out of it. You know, because I would hate to take somebody’s money not knowing if the basic technology worked or not. So, for us, venture capital money was not an option, angel investments were really not an option. We wanted to figure out a way to get our basic science paid for where the high risk was something that is common, normal and accepted, such as Department of Defense and DARPA.

You know, DARPA funds high-risk programs that have an 80 percent fail rate. They only expect about 20 percent to be successful. SBIR is the Small Business Innovation Research grants. They’re also like that. They would love everything to be successful, but the reality is that you have to fund a lot of crazy ideas to see the best and brightest ideas come to the top.

We didn’t go after any venture capital money or any private equity or any angel investment. DARPA gave us our first contract. We worked our butts off on that first contract to make sure we were successful. So, we did everything we could. We thought about our messaging, we thought about our product. We just put a demo unit on their desk at the end of six months and said, “Look. Here’s a fuel cell. It turns on. It makes a watt of power.” And 10 years ago, that 1 watt of power was enough to get them giddy enough to hand us over another contract. We just met every single baby step R&D success to get us to the next funded research and development program.

Now, some people can argue, “Well, it took you longer to get to the commercial market.” Well, maybe it did. But we know a whole heck of a lot about our funding, we own 100 percent of our equity. So, there are some pros and cons. Would we be there faster [if we had taken venture capital]? Yeah, but I also would not be making my own decisions, I probably would have got pushed into making statements that I didn’t really believe in. I’m proud of the fact that we were able to hold off venture capital and just grow organically with government programs.

Now, the challenge is that in the normal government procurement process with the Department of Defense is that they fund the wild and crazy ideas like crazy, but once you get a couple of success stories out of there, they don’t quite know what to do with that. We can still get research and development programs because we’re really good at what we do, but we don’t want to be [exclusively] a research and development house. We want to start manufacturing. And so that transition takes a ton of funding, and nobody can get too excited about that, about funding that transition. They either want to fund the wild and crazy idea or they want to buy a product. They don’t want to fund what’s in between. And so that’s going to take an investor, a partnership, private equity or something as part of our growth plan. The government is helping us through some of those transitions, but they don’t have a clear strategy on how to help the companies that do well through their earlier programs.

X: Well, they got what they needed out of you, to some extent. You’re selling to them now.

MC: Yeah, we’re still selling less than hundreds of units to them. We would love to be able to start selling thousands of units to them. But, it’s a chicken-or-egg thing. That’s the part that … Next Page »

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