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

4/28/10

Yesterday, we ran Part 1 of my interview with Michelle Crumm, co-founder and chief business officer for fuel cell manufacturer Adaptive Materials of Ann Arbor, MI. We discussed how it took a decade of old-fashioned hard work to get to a point where the company is signing deals to supply the military with the fuel cells needed for unmanned aerial vehicles and robots helping to fight the war in Afghanistan. Today, in Part 2, Crumm talks about how, despite the 7,100 resumes she received for nine open engineering positions, the company has had difficulty finding workers who fit her company’s culture.

Xconomy: I’ve not only been reading about these recent contracts Adaptive Materials has been getting, but also the fact that you’re hiring new engineers.

Michelle Crumm: If you can put that in there, I’d love to have a great systems engineer.

X: Absolutely. You know, the way I first heard about your company was that it had been Tweeted a few times that you were on a resume-gathering blitz, looking to hire nine new engineers. How many resumes have you collected?

MC: We had 7,100 resumes during that resume blitz. We pulled in 90 people to come in for short interviews, then we pulled in 20 of those to come in for day-long interviews, and we ended up hiring five people. So, we still have four open positions that we’re trying to fill.

X: You must have a pool of a lot of qualified candidates. There are a lot of talented engineers in the area who are out of work. How was the quality of the resumes?

MC: Well, I think the biggest challenge is that there are a ton of really smart engineers out there—and some of them are employed and some of them are not employed, unfortunately. The biggest challenge is can we find the right cultural fit, and that is a lot harder than just having a smart engineer that’s out of work. You know, it’s so much bigger than that. Do they have the right attitude? Can they come in and make decisions? Are they an empowered thinker? How quickly can they learn? So, it’s all those things that we’re interviewing for. It’s the core values of the company that’s our weed-out process. They’re all intelligent, they all have their plaques on their walls, there are great, talented, wonderful people out there, but just because they’re great, talented, wonderful people does not mean that they’re a great cultural fit for our organization. We’re still small enough that every single person, you know, they have to fit in culturally. Otherwise, they can tip over the apple cart.

X: Sounds like you still have that startup mentality. People have to be flexible, think on their feet.

MC: Yes, that’s the way we hire. Our technicians out on the floor, they may have a high school diploma but they need to have a strong enough personality to push back to the engineers and say, “This is not a manufacturable design. Let’s work on this together to try to get something that I can actually put together a lot easier.” I don’t need a technician. I need a technician that’s confident enough that they can stand up for themselves, that they can talk to the engineers and work together to get these products so they design for manufacturability. So much of it is just a personality issue.

X: Let me broaden the conversation a little more and talk about the funding environment. Venture capital in this area has been pretty dismal for a while. It’s improving a little bit, maybe for early stage companies or companies right out of academia. But you’ve mentioned before that there is gap for companies like yours. What needs to be done, culturally, to change that in this area?

MC: I’ve never thought that it made sense to have venture capitalists—we always call it OPM around here, Other People’s Money. Well, Other People’s Money, to me, is something that you take 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 takes the funding. To get the equipment in, to get the supply chain built out, to get the products for a cheap enough cost that the commercial sector can get excited about it.

X: You mentioned that in five years you’d like to branch off into more non-military applications. Did I read somewhere that you also have an RV power product?

MC: Yes, there are a lot of common parts between our 300-watt military system and our RV commercial system. So, we’re going to do our RV commercial system this summer at the same time we do our 300-watt. The biggest difference is the military expects more durability than a consumer would. That’s good because it gets the cost down for the consumers so they can actually afford the product. We’re probably going to look at a launch in Europe first. Their power demands are a lot lower than Americans’ power demands when it comes to RVs. You know, you go camping with your kids and they want their XBox and you want your air conditioner and TV set in your RV. A lot of Europeans still “dry camp,” meaning they go out without any power, or very little power, so a fuel cell to them, at 250 or 300 watts of power, is a huge advantage.

X: Any other area beside RV in which you plan to expand over the next five years?

MC: I would say in the next few years I think we’ll probably get a lot more into remote sensing. We’ve been getting a lot of phone calls and a lot of pull for our products in that market—remote surveillance, things like that. We’re a great power solution where you don’t want to dig and drop wires or run out and change batteries frequently. That’s a really good application for us. So is homeland security along borders.

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