Chapter 6: Lessons from the First Wave of Nanoventures – NanoInnovation: What Every Manager Needs to Know

Lessons from the First Wave of Nanoventures

If I know I'm right, I don't need to convince skeptics. I'm proceeding on the basis that I'm right, and if I'm right, I win.

– James von Ehr, Founder, Zyvex Corporation

In 2000 while keynoting an industry conference, I coined the term “nanodextrous” to describe the ability to work at the nanoscale as well as the macroscale. Nanoinnovators live in two worlds – nano and macro. They have to be equally proficient with nanoscale materials and properties and the macroscale products they enable. In other words, they need to be “nanodextrous.” For an organization involved in nanoinnovation, nanodexterity is a core competence.

The concept of nanodexterity has its roots in the concept of the “ambidextrous organization” developed by Charles O'Reilly and Michael L. Tushman [1]. An ambidextrous organization is an organization that simultaneously (i) exploits existing technologies and products and (ii) explores emerging technologies.

A nanodextrous organization is an organization that works with the nanoscale properties of materials, processes, and technologies while simultaneously developing commercial (macroscale) products based on those properties. Nanodextrous innovators are able to deal with materials and processes they can hold in their hand and see with the naked eye, as well as those that can only be viewed with an atomic force microscope and manipulated with a nanoscale probe. Nanodexterity requires different competencies and skill sets, sophisticated instruments, and a unique understanding of nano–micro–macro properties.

Consider the carbon nanotube (CNT), the iconic symbol of nanotechnology. You don't really see the individual tubes in a baseball bat or golf club infused with carbon nanotubes, or in the hull of a carbon nanotube boat. These products are rigid and hard. However, in bulk form, carbon nanotubes look like a spongy black mass. Incorporating this material in the hull of a boat requires an understanding of how nanotubes are produced, how they can be chemically dispersed in a composite material, and how their unique characteristics can improve the design of a seaworthy watercraft.

Very soon, every organization that manufactures products – cosmetics, pharmaceuticals, cement, solar panels, textiles, cars, boats and more – will be nanodextrous. All of these products will be nano-enabled or nano-enhanced in some way. In this nano-enabled world, you won't be able to compete, survive, and succeed in even the most traditional industry unless your organization is nanodextrous.

So, how do you become nanodextrous?

A good starting point is to look at the first wave of nanotechnology business ventures, and the strategies and practices they used to build their enterprises.

6.1 The First Wave of Nanoventures

After more than a decade of commercial development, we are now able to look back at the first wave of nanoventures and draw some intriguing insights. We can also begin to answer questions that can only be answered with the wisdom of hindsight – and from the inside perspectives of the people involved in these ventures. They are packed with insights – successes, failures, survival strategies, home runs, strikeouts, and so on.

This chapter includes profiles of several representative nanoventures, including Zyvex Corporation and its spinouts; Nantero, Inc.; QuantumSphere (QSI); Nanocomp Technologies, Inc.; InsituTec; Nanosys Inc.; and Graphene Frontiers. Most of these ventures survived and prevailed in spite of a challenging economic climate that included two recessions, a tech investment bubble, a liquidity drought, and a multiyear world economic crisis.

Most of these nanoventures were launched by men and women who met in college, were recent graduates, or collaborated with research faculty to develop technologies and ventures. The link between academic research and venture formation is strong and continuing. University and government nanoscience projects have seeded many of the ventures.

All of these ventures have benefited from venture capital (VC) funding. Most early-stage ventures received angel funding from a few large investors or friends and family, and then they sought additional funding from government research grants followed by funding from venture capitalists and corporate partners. The best VCs involved in the first wave of successful nanoventures had a solid understanding of the science involved and the potential for commercialization, and represented “patient money.” They understood the distinction between science projects and commercial business projects and structured their funding around a “business context.” Those who focused solely on the financial value proposition or the VC exit strategy didn't do as well, given the long lead times required to commercialize even the most promising nanotechnology research. Balancing science innovation, business realities and market needs has required a careful balancing act that is understood by nanotech VCs who include pioneers Jim Von Ehr, Larry Bock, Josh Wolfe, and Bill Tai.

Shakeout and Consolidation

It is noteworthy to mention that there were a couple of investment bubbles that hindered the development of nanoventures. The first occurred in the mid- to late-1990s when nanotechnology and gene therapy were hot and everyone wanted to rush into the field, often blindly. The bursting of the Internet bubble around 2000 (and to some extent the gene therapy and nanotech bubbles) forced venture capitalists to look harder and more critically at nanotechnology investments. In 2008–2009, the global economic crisis created a liquidity crunch that dried up second- and third-tier (mezzanine) funding for ventures already underway. Many ventures were forced to scramble to stay in business.

In addition, longer-than-expected timelines from laboratory to market, combined with scale-up issues and the liquidity drought, made for a toxic cocktail that impacted many nanotech ventures. Analysts have estimated that of the 1200+ nanotech ventures that existed in 2005, only ∼10% were selling products in excess of $1 million a year and of these, few if any were profitable. The economic crisis that began in 2008 created a consolidation that shook out some promising as well as failed ventures, and what remains today is a smaller, stronger core of ventures with more realistic commercial goals. Several nanoventures that survived the shakeout are profiled in this chapter; others are described elsewhere in this book.

The lessons from the first wave of nanoventures include some notable failures as well as successes. The most famous example of unfulfilled promise is Carbon Nanotubes Inc. (CNI), which was cofounded by Richard Smalley, who won the Nobel Prize for the discovery of fullerenes. Smalley died from leukemia in 2005 at the age of 62, and in 2007, CNI was absorbed by Unidym. According to insiders, CNI had trouble converting pioneering research and a sizable patent portfolio into commercial products and applications.

Many nanoventures found ways to avert disaster and survived the shakeout. Nanosys Inc. (which is profiled here) seemed destined to follow in CNI's footsteps, but was “resurrected” when their major venture capitalist (Venrock) took action to replace the CEO and set the venture on a commercialization course that undoubtedly saved the company. Another well-known venture had to cut its staff from 50 to 5 people in order to survive. Nantero sold its government business to Lockheed. Zyvex had to develop its Piranha boat prototype using mostly its own resources.

These and other examples confirm that flexibility is an important attribute for any nanotech enterprise. Being willing to make changes in leadership, products, and markets, or to tighten the belt and push through a crisis, are attributes that stand any entrepreneurial venture in good stead. The following examples describe achievements and strategies of several US-based nanoventures. I wish to thank the founders and managers of these ventures who generously and candidly shared their insights.

6.2 Zyvex: Divide and Conquer

The first nanotechnology company was Zyvex Labs, founded in 1997 in Richardson, Texas, by serial entrepreneur and computer software pioneer James Von Ehr II. When he founded Zyvex Labs, he adopted a strategy that might be called “divide and conquer.” He divided his company into several separate divisions, which allowed him to develop nanoimaging systems and probes, nanomaterials, and medical and marine products – while also conducting riskier long-term research on atomically precise manufacturing. Later, as these business units developed commercial value, he spun them off and shifted his focus to core businesses and research. This strategy not only made Zyvex a pioneer but also gave the company staying power, making it the world's longest surviving nanotechnology company.

Jim Von Ehr is a soft-spoken, earnest, optimistic business pioneer whose business and technology ventures straddle the “real” nanotech world today, and the visionary nanoworlds of the future. He is a serial entrepreneur, Internet pioneer, and philanthropist who began his career as a computer software developer. Jim was born in Grand Rapids, Michigan and earned a computer science degree from Michigan State University and a Master's in Mathematical Sciences from the University of Texas at Dallas.

After college he worked as an engineer and manager at Texas Instruments and in December 1984 he launched his own software firm – Altsys – which developed graphics applications and font editing tools for personal computers. In January 1995, Altsys was acquired by Macromedia, which became a multibillion dollar Web development company that was eventually acquired by Adobe Systems. Von Ehr used the proceeds from these successes to fund the world's first nanotechnology venture.

The Zyvex story is best told in Jim's own words (and with appreciation for sharing his story in an interview for this book):

“In 1993, I was developing Altsys and I received an email that Eric Drexler was coming to town to accept an award from Texas Instruments, where I had previously worked,” he recalls. “Drexler spent an hour talking about some of the most weird, fantastic stuff I had ever heard. So I special ordered his book (Nanosystems) and as I read it I thought to myself, ‘This is a revolution.’ I had studied enough physics and engineering to realize that this wasn't antigravity or perpetual motion or time travel or science quackery. This really made sense. So a couple of years later, I sold my company and decided to use some of the proceeds to fund a nanotechnology startup.”

“At first, I was thinking of becoming a venture capitalist. I spent about 9 months looking for a startup to fund but I couldn't find anyone I thought was credible so I decided to start my own company. My wife thought I was nuts.” He laughs as he recalls her reaction. “After ten years of 80-hour work weeks, I was launching a company that would require another decade of 80-hour work weeks!”

Von Ehr was one of the first nanotech entrepreneurs to embrace Drexler's vision of molecular nanotechnology – which he calls “atomically precise manufacturing.” He knew it could take decades to develop nanomanufacturing, which involved finding practical methods to fabricate nanoscale devices on an atomic scale. So he divided his venture into separate companies that could sustain Zyvex and generate profits while pursuing the longer-term vision of using atoms as building blocks. Von Ehr did not get caught up in the scientific debate that was raging at the time (the “Drexler–Smalley” debates), which he characterized as “not constructive.”

“You're not going to make it happen by arguing for or against it, but by going to the lab to make it happen,” he says. He notes that Richard Feynman, the scientific father of nanotechnology, said that the reason we haven't done it is not because of the physics, but because we're too big.

Surprisingly, Von Ehr says, “I am not a big fan of self assembly or self replication. To me, self-replicating nanorobots are a very tiny subset of nanomanufacturing. It's not uninteresting, but not a critical thing to me. I always envisioned that nanomanufacturing happens in a nanofactory, but it won't come from self-assembly. It will come instead from template assembly.”

“Nature uses templated assembly. It uses active biological machines and thermodynamics to transport materials. It uses diffusion to help building blocks find one another. Nature has created machines that move components around and manufacture precise nanoscale parts to create cells and organisms. Biological factories happen to be soft squishy factories rather than hard factories, but we draw encouragement from the fact that we know it's possible because Nature does it. In our nanotechnology world today, we can actively grab and transport parts and assemble them, atom by atom, block by block, subsystem by subsystem – what I call atomically-precise assembly.”

“We don't do this one at a time. Nature doesn't build an oak tree from one little molecular machine cranking things out really fast. It uses massively parallel processes. A tree spends a lot of energy replicating itself, surviving droughts, winter weather, famine and so on. We can engineer simpler systems that don't have to deal with these natural problems.”

While he is reluctant to make time predictions, Von Ehr believes that the first rudimentary molecular manufacturing systems could be in operation by 2020.

“Some people still say that nanomanufacturing can't be done. Some say it has to be done in solution because so many natural processes occur in solution. How many times have we heard that, in the history of technology and innovation? Before we had airplanes we had birds that flapped their winds and most people thought that airplanes had to have wings that flap. But airplanes don't flap their wings and they still fly!” He smiles and adds, “The same holds true for electricity. What happens with electricity in nature is different from how we transport electricity using copper wire. There are many examples.”

“Right now, I don't need to convince skeptics that I'm right. I'm proceeding on the basis that if I'm right, I win. If we can develop methods to do atomically precise manufacturing, we'll make the world a fantastically interesting and wealthier place. We will increase opportunities for humanity all over the world. We will solve the climate, health, energy issues, if we can learn from Nature and obtain precision at the atomic scale.”

The venture was developed using a combination of first mover advantage and a multipronged strategy that could be described as “divide and conquer.” Some early strategic decisions included forming an instruments company, choosing to process nanotubes instead of producing them, and focusing on solutions for semiconductors, sporting goods, and other large industries and markets.

After self-funding the core venture (Zyvex Labs), Jim Von Ehr divided the venture into several separate companies: Zyvex Labs, Zyvex Instruments, Zyvex Performance Materials (which later became Zyvex Technologies), and Zyvex Asia. Operating as a family of companies, Zyvex has produced a variety of impressive achievements. Zyvex companies have been awarded more than 170 patents, which are used in their own products and licensed to other companies. Zyvex's nanoinnovations range from techniques for dispersing carbon nanotubes in polymers and other high-performance composite materials to nanoscale probes and nano-manipulator systems used in semiconductor fabrication and quality control.

As with all first movers, Zyvex experienced its share of growing pains. In the early days, it was difficult to retain scientists, especially when some technologies failed to work or took longer than expected to commercialize, which is part of the innovation process. Nevertheless, Von Ehr persevered to create a family of companies that has achieved some impressive “firsts” in nano instruments, high-performance materials, and nanomanufacturing.

A key part of Von Ehr's strategy was to partner with academia and government, which greatly extended the small company's knowledge base and resources. Von Ehr has also provided endowments to universities in North Texas and Michigan to provide strong links to the academic community. His contributions to academia included a $3.5 million endowment to establish the NanoTech Institute and the James Von Ehr Distinguished Chair of Science and Technology at the University of Texas at Dallas, and an endowed scholarship at Michigan State University for 16 engineering undergrads. Jim worked with Zyvex President Dr. John Randall to initiate a consortium of universities and companies called the Atomically Precise Manufacturing Consortium. Zyvex also partnered with and received research funding from several government organizations, including DARPA, the State of Texas, the National Institute of Standards and Technology (NIST), and NASA. Zyvex also partnered with other companies. The Zyvex Partner Program, introduced in 2003, created partnerships with carbon nanotube suppliers, distributors, and manufacturers as well as customers.

Nanoscopes, Boats, and Baseball Bats

Zyvex was very clever in selecting its early target markets and products. An early partner was Easton Sports, which was looking for ways to design stronger sports materials. Zyvex helped create an improved carbon fiber baseball bat called the “Stealth” bat, which incorporated carbon nanotubes. The Easton bat was also one of the first mass market consumer products to incorporate nanotechnology. At the time, it was estimated that as many as half of all the baseball bats (which had lifetime warranties) were getting cracked and returned, which was very costly for baseball bat companies. The carbon nanotube bat eliminated the breakage problem. The original bat was donated to the Smithsonian Institute in May 2006. Zyvex also worked with Easton to create a lightweight bike frame containing carbon nanotubes. Zyvex has also partnered with NASA to develop ways to reduce the size of devices carried on space vehicles and stations, and with race car designers to provide lighter materials for race cars, and adhesives to speed repairs during races.

When Zyvex was formed, the largest market was the semiconductor industry, which was already working at the nanoscale in its computer chips and circuits. Coming from a computer background, Jim Von Ehr was one of the first to recognize that the semiconductor industry was an immediate customer for nanotechnology products – especially instrumentation and nanoscale testing devices. Systems were needed to “fail-test” the architectures of increasingly small semiconductor devices. As semiconductor features dropped from 90 to 65 nm, to 45 nm and smaller, the circuits, channels, and other features became so small that they could only be viewed with an electron microscope and tested only using nanoprobes and manipulators.

Zyvex Instruments created nanoscale imaging systems with multiple probes that enabled precise manipulation and detection of nanoscale structures, which provided a much-needed capability to the semiconductor industry. These imaging systems also benefited Zyvex's own research so in a sense they were also developing instruments for their own use at a time when nanoscale microscopes were expensive and did not have all the features needed by researchers.

Zyvex Instruments pioneered a family of automated multiposition nanoprobes that provided interactive 3D manipulation at the nanoscale, and it was not surprising that these systems found their widest application in the semiconductor industry (see Figure 6.1). The multiprobe systems are used extensively for device characterization; identification and localization of faults at 90 nm and smaller geometries; and measurement of temperatures, forces, and other factors related to design and production. A typical semiconductor customer uses 1000 probes/year, and a university laboratory typically uses 200 probes/year. Today, Zyvex nanoprobes are installed in virtually every major semiconductor company worldwide.

Figure 6.1 The Zyvex nProber™ shown here is used to measure device quality and conduct failure analysis in semiconductor chips. It is one of the industry's most precise tools for analysis and manipulation (photo courtesy of Zyvex Instruments/DCG Systems).

One of Zyvex's most important lines of business has involved helping customers incorporate nanomaterials into their products, which isn't always an easy fit. For example, carbon nanomaterials are inherently strong and have unique properties, but are not easily incorporated in other materials such as carbon fiber, resins, or plastics. Zyvex's Kentera™ technology (Kentera means “bridge” in Arabic) has provided materials solutions for such client firms as Lockheed Martin, Owens Corning, and PolyOne.

The Zyvex Piranha, made from materials developed at Zyvex, was the world's first boat made with carbon nanotubes. The Piranha is made with Arovex™, a proprietary nanotube-reinforced carbon fiber developed by Zyvex engineers. Zyvex also developed a line of adhesive products called Epovex™, which is used to repair damaged carbon fiber panels in race cars, boats, and other products.

Creating Artificial Retinas to Restore Vision

Zyvex Labs is a founding partner in NanoRetina, Inc., a joint venture formed in 2011 to develop artificial retinas. The company's partner is Israel-based company Rainbow Medical. The founders include Jim Von Ehr, Yossi Gross, Efi Cohen-Arazi, and Ra'anan Gefen. Yossi Gross, one of the cofounders of Rainbow Medical, has filed >500 US patents and founded/cofounded >27 medical device companies.

NanoRetina Inc. is developing an easy-to-implant artificial retina called the “Bio-Retina,” which is designed to restore sight. The venture's goal is to provide a bionic retinal implant that can be “glued” to a damaged retina in a 30 min procedure that would “instantaneously” restore sight and enable recipients to watch TV and identify faces. A prototype was created in 2011 to validate the technologies involved. Clinical trials were expected to begin in 2013. The market need for this technology is enormous, given the rate of mascular degeneration especially in older people – the company expects that the addressable retinal prosthesis market will reach 180 000 units annually by 2015.

Company Spinouts

In 2007, the Zyvex venture engine began spinning out its companies as separate entities. The first company spinout was NanoMed, Inc., which was originally launched by several Ph.D.'s: Dr. Rob Burgess, former VP-R&D at Zyvex Instruments; Dr. Gareth Hughes, former Group Leader-Life Sciences at Zyvex; Prof. Rocky Draper from the University of Texas; and Prof. Ellen Vitetta from the University of Texas Southwestern Medical Center. The company subsequently changed its name to Medical Nanotechnologies, Inc. The company's activities include research on nanoparticle-mediated therapies for drug delivery using thermal and photothermal activation, as well as protocols for assessing the purity and toxicity of carbon nanotubes in the workplace and in finished products and for studying the interaction of nanoparticle interactions with mammalian cells.

Zyvex Performance Materials was spun out in 2007 and relocated to Columbus, Ohio. The name was changed to Zyvex Technologies and the company is currently focusing on the development and marketing of commercial nanomaterials; nanoengineered composites; nanoengineered adhesives; and molecularly engineered rubber.

In 2010, Zyvex Instruments was acquired by DCG Systems Inc. in Fremont, California and became the company's NanoInstruments Division. Its products include self-cleaning multiprobe nanotechnology instruments with machine vision software. DCG Systems has deployed >1500 systems worldwide. The division continues to partner with other Zyvex ventures.

In November 2011, Zyvex Marine was established as a division of Zyvex Technologies, located near Seattle, Washington. The marine division is focusing on designing and building advanced maritime vessels.

Zyvex Asia Pte. Ltd. was created in 2007 as an independent Asian R&D facility located in Singapore (Figure 6.2). The company is able to draw upon research talent and resources from the Institute of Materials Research and Engineering (where the laboratory is located), Nanyang Technology University, National University of Singapore, and other A*Star Institutes. This strategic move allowed the company to access the very strong science and technology infrastructure available in Singapore and other Asian countries. The company is working closely with Zyvex Labs to develop atomically precise products, engineered and built atom by atom, under computer control. Research goals range from the production of quantum dots to (eventually) massively parallel nanoscale factories.

Figure 6.2 Zyvex Asia custom designed this ultrahigh vacuum scanning tunneling microscope (shown here under construction) to provide atomically precise manufacturing capabilities – in other words, being able to design 3D structures layer by layer using atoms as building blocks (photo courtesy of Zyvex Asia).

In 2010, a separate Singapore company, Zycraft, was created to develop and market an unmanned surface vehicle (USV) called the Vigilant. Jim Von Ehr is the managing director of Zycraft and is excited about the prospects for the craft. Like a Predator drone aircraft, the Vigilant can be remotely controlled by pilots using satellite links to guide the vessel, energy harvesting and storage devices, and nanomedicine technologies.

Today, Jim Von Ehr devotes most of his time to Zyvex Labs and Zycraft, working to facilitate his vision of atomically precise manufacturing and commercialize more products enabled by Zyvex nanomaterials.

A Few Recollections from Zyvex Alumni

Over the years, Zyvex has spawned several notable alumni who helped lead and develop the company, and who went on to other significant achievements. Several Zyvex alumni generously shared their recollections and insights for this book to provide additional perspectives on Zyvex.

Tom Celluci was President and Chief Operating Officer at Zyvex Corporation from 2002 to 2006. Tom subsequently became the first Chief Commercialization Officer at the US Department of Homeland Security. Looking back at his Zyvex days, he recalls, “We realized very early that the real value in nanotechnology was not in the raw starting materials such as nanotubes, but in processing them into a variety of nanocomposites. This allowed us to focus our efforts on the processing of nanotubes, which turned out to be a prudent and wise decision. We also spent a lot of time talking to customers. More often than not, unsuccessful technology firms have a solution looking for a problem. We did the reverse. We started with problems and worked to develop solutions, and this included moving Zyvex from a technology push to a market-driven approach.”

“Also, there were no standards when we began, so in many areas we had to become the standard-bearer for the industry, creating standards where nothing existed before. The first suppliers of carbon nanotubes couldn't provide quality control and reliability, so we worked with suppliers to provide standards as well as technical approaches to provide reliable, quality nanotubes, which translated into reliable, quality products.”

Mark Banash, cofounder and Vice President and Chief Scientist at Nanocomp Technologies, was director of production and quality for nanomaterials products at Zyvex from 2003 to 2007. He managed manufacturing operations, including pilot plant design and construction, and also invented the supply chain certification process that ensured quality in carbon nanotubes at a time when standards did not exist.

Mark recalls the development of the Stealth bat for Easton Sports: “Easton was getting tens of thousands of baseball bats returned every year because they broke. This meant they had to pay for the replacement bat, as well as the costs of shipping, handling, ordering, pulling production off line. We worked with them to provide the solutions for a new type of bat that had a ring of epoxy in the middle that prevents the bat from breaking. This innovation lowered the reject rate by 80 percent, resulting in savings that amounted to hundreds of thousands of dollars. It was one of our major achievements when I was at Zyvex.” A profile of Nanocomp with additional comments by Mark is included separately in this chapter.

Taylor Cavanah, President and CEO at mobile software development company Locai, worked at Zyvex from 2004 to 2010, both as a business manager and product manager. He is one of many nanoinnovators who talks about being guided into this field by a genuine epiphany.

“In high school, I saw a double rainbow in the sky and realized that I knew why that was happening, so I decided that instead of being a lawyer which was my original plan, I would be a physicist and try to learn everything there is to know about the universe; so I studied physics and nanotechnology at Rice University,” Taylor recalls. “I met Jim Von Ehr at a nanoventures event during spring break, during my senior year in 2002 and suddenly I knew that this stuff is amazing and this is what I wanted to work on.”

“Jim suggested that it would be a good idea to go to graduate school, so I attended UT-Dallas, where I studied with Anvar Zakhidov and Ray Baughman, the founders of the Nanotech Institute. This allowed me to simultaneously earn my master's degree in physics, do some teaching and conduct research. My duties included managing the arc discharge carbon nanotubes lab, and included two years working on a NASA research project, studying how to synthesize carbon nanotubes in outer space.”

One summer he worked for Zyvex, in the applications group that was developing the nanomanipulator. Taylor had a choice to stay in school and earn a Ph.D. or stay at Zyvex. He chose Zyvex. As an application scientist and product manager, he worked on the Zyvex nanomanipulator, which was developed by Chief Technology Officer Richard Stallcup and his colleagues.

“Our instruments provided tools for failure analysis engineers in the semiconductor industry,” he explains. “You may have a billion or more transistors on a single chip. When a chip fails, whether at a customer site or while designing a new process, the chip engineers need to do detective work to find out why it failed. The problem could be a single transistor failure (literally ‘one in a billion’) or something like an angstrom-sized crack in the gate oxide. Using our four or six or eight positioner system, they can electrically hook up to the transistors, and get the electrical data that points to a problem between the gate and the drain, for example. Once they see the problem, the system electrically tells them what's wrong. But they still need visual proof and more detailed evidence so they may do more work to verify and pinpoint the position and cause of the failed transistor, or the crack.”

Taylor piloted the spinout of Zyvex Instruments, which was acquired by DCG in January 2010, and served for a year as general manager of the division at DCG before leaving to establish his own entrepreneurial venture, Locai, Inc., which has developed a location-based marketing application in the emerging field of geosocial marketing.

These personal anecdotes help us understand how Zyvex got into the business of nanotechnology – and retained a leadership role. A better way to understand the company and its strategy is to look at one impressive nanotechnology product created by Zyvex that is large enough for all of us to see – and ride in.

6.3 Zyvex Piranha: The First Carbon Nanotube Boat

Somewhere in the Pacific Ocean, miles off the coast of the state of Washington, a 54 foot slices through the crashing waves. There is something oddly distinctive about this boat. Outside it looks like a large pleasure boat, but that's where the similarity ends. The hull of this boat is infused with carbon nanotubes, which makes it incredibly strong, durable, and lightweight.

The boat is a prototype USV being demonstrated for the US Navy. It's called the Piranha and it's made by Zyvex Technologies' Zyvex Marine division. The craft can be driven by remote control, so the captain of this boat does not need to sit at the helm. He or she can sit at a computer to drive this vessel. In many ways, the Zyvex Piranha is like an ocean-going version of a Predator drone aircraft. This remarkable innovation is the tip of a technological iceberg that could literally sink the current generation of unmanned military seacraft.

The Zyvex Piranha is the world's first boat made with nanomaterials (Figure 6.3). It has been called “the world's first molecularly engineered boat” and one of the world's largest structures built with nano-enhanced materials. It is one of the most fascinating products developed in the realm of nanoinnovation. The story of the Piranha offers lessons for anyone trying to launch a nanoinnovation into a traditional, centuries-old market.

Figure 6.3 The Zyvex Piranha incorporates carbon nanotubes and patented composite and epoxy technologies to provide a variety of totally new design options for unmanned surface vessels (USVs) The Piranha and future versions could revolutionalize how government agencies conduct surveillance, border patrol, antipiracy operations, and combat support in the very near future (image courtesy of Zyvex Technologies/Zyvex Marine).

The Piranha can be operated as a manned or unmanned watercraft. The 16 m (54′) vessel can be air dropped. It runs at a top speed exceeding 30 knots and can operate in rough seas. The vessel's 2 tonne payload can include people, weapons, or sensors. Its twin diesel engines can run up to 2000 miles on a tank of fuel. At 5000 kg, the weight of the Piranha is less than one-third the weight of a normal boat the same size. In spite of its performance advantages, the Piranha costs about the same as a comparable boat made with conventional materials. At a cruising speed of 20 knots, the Piranha consumes 12 gallons of fuel/h compared with 50 gallons/h for a traditional boat.

Commercializing the radical new design was a major undertaking that required the company's management to negotiate several early obstacles, according to Mike Nemeth, director of Commercial and Defense Applications for Zyvex Marine and VP-Business Development at the parent company, Zyvex Technologies.

“When we first came up with the idea of a boat made from our nanotube materials, no one would work with us to develop a prototype,” Mike explains, “so we had to fund and develop our own prototype, which essentially put us in the boat business. The first Piranha was only outfitted with basic systems to prove the concept. Our second craft started to attract the attention of other systems providers that proved to be important partners. Based on these prototypes, we were able to demonstrate the boat, and this allowed us to make our first sale – to a customer in Singapore in 2011.”

Mike explained that the material used to construct the vessel is a proprietary composite called Arovex, a nanotechnology-enhanced carbon fiber composite. In the materials industry, Arovex is known as a “prepreg,” which means it is preimpregnated with Zyvex Technologies' Epovex nanotube epoxy resin. The combination of carbon nanotubes, carbon fiber, and resin creates a material that is 40% stronger than conventional carbon fiber composites.

“Just as fiberglass replaced wood in modern boats and ships, we expect that Arovex will displace conventional carbon fiber composites, not only in boats but also in wind turbine blades, helicopters and other high performance applications. The best customers for the Piranha USV are large defense contractors who are searching for faster, better and lighter maritime platforms for their unmanned systems.” He added that the Piranha provides an affordable alternative to more expensive unmanned surface vessels that use heavier, costlier technologies. “This is especially important as Defense budgets are being cut and military planners are looking for innovative ways to reduce costs without reducing their mission capabilities.”

While applications in the US Navy and Coast Guard offer the most promising near-term applications, the boat's highly reconfigurable design allows the boat to be adapted for a wide range of missions, including antipiracy, surface surveillance, surface action, mine countermeasures, electronic warfare, and antisubmarine warfare. Armament options include stabilized machine guns, Mark 54 torpedoes and over-the-horizon missiles.

“The Piranha could find an important role escorting single ships or convoys,” Nemeth suggested, since it can be equipped with advanced sensors and networked satellite or terrestrial communications to detect pirates or other hostiles before they can threaten shipping.

Ironically, the first defense contractor Mike approached was a large defense-aerospace corporation with several large US Navy contracts. To his dismay, the corporation declined his invitation to fund the prototype and copresent the prototype to the US Navy. Why? The reason they gave is that there was no RFP (request for proposal) for a carbon nanotube boat! This corporation seemed to be saying that a totally novel product or system could not be submitted for a development contract if there was no contract request for it. Needless to say, this was a frustrating response.

Consequently, the Zyvex team developed and refined their prototype, and approached the Navy on their own. In April 2011, Admiral Nevin P. Carr, Chief of Naval Research, toured the Piranha at the Sea-Air-Space Exposition in National Harbor, Maryland (Figure 6.4a). This was not an easy sell. Designing a USV to military specification would take time. Also, a fleet of carbon nanotube USVs would require an entirely new infrastructure to repair the vessels. The repair process was closer to repairing fiberglass, but different enough to require new technologies for patches and adhesives. Zyvex had already thought of this. Their previously developed line of carbon nanotube adhesives and patching materials was being used to repair carbon fiber parts on high-performance race cars, and this function also worked for repairing a boat made with carbon nanotubes.

Figure 6.4 (a) Rear Admiral Nevin P. Carr with Mike Nemeth from Zyvex Technologies, tours the Zyvex Piranha at the 2011 Sea–Air–Space Exposition (US Navy photo by John F. Williams). (b) This photo of the Piranha in the harbor illustrates the size of the vessel (photo courtesy of Zyvex Technologies).

Zyvex's experience with the Navy is a good example of how a “white space” – an entirely new market opportunity – can open up unexpectedly. One of the most interesting outcomes of the discussions with the Navy was a request to study how heavy metal hatches and doors on Navy ships and other vessels can be replaced with CNT-based doors and hatches. Zyvex materials with equal or greater strength and durability and decreased weight could make the vessels lighter, and reduce energy and fuel costs. Zyvex is collaborating with military contractors with expertise in this sector to develop this opportunity.

Zyvex Technologies President Lance Criscuolo is currently working with Mike Nemeth and the company's technical staff to turn the Piranha into a full marine product line, including the development of both military and civilian boats in different sizes and designs (Figure 6.4b).

There are lots of lessons embedded in this story. The management team at Zyvex Technologies refused to be discouraged by the initial lack of interest by a potential corporate partner. They grabbed the bull by the horns and developed their own prototype. They went directly to the potential end user, the US Navy. This provided proof of concept and allowed them to make their first sale (to a nonmilitary customer), which got them off and running. In 2014, Zyvex was acquired by Luxembourg firm Ocsial, forming the world's largest nanotech company.

6.4 Nantero: Patent, Fabricate, Outsource

In business, there is a continuing debate over the advantages of being a first mover in a new technology or market, or a fast follower. Some say that a first mover gains an early advantage, which was definitely true in the case of Internet portals (Amazon, Facebook, and Google); while others maintain that a first mover is typically eclipsed and passed by fast followers who enter the market later when the market is better understood (Blackberry eclipsed by smartphones).

In the field of nanotechnology, several first movers such as Zyvex entered the sector early and were able to quickly develop a strong patent portfolio gain in an early foothold based on core technologies.

Nantero Inc. was one of the earliest and best-known first movers in nanotechnology. This was also one of the first companies to figure out how to turn carbon nanotubes into commercial value. Nantero was launched in 2001 in Woburn, Massachusetts, by cofounders Greg Schmergel, Tom Rueckes, and Brent Segal. All three had graduated from Harvard. Tom and Brent were Harvard Ph.D.'s in chemistry and Greg had a graduate business degree, although they did not meet at Harvard.

As Brent Segal recalls: “I had a Ph.D. in chemistry and was working at a pharmaceutical firm, when I met Tom Rueckes. Tom was completing his doctoral degree, specializing in nanotechnology. I remember asking him, ‘What's nanotechnology?’ and Tom explained to me that it had to do with physical chemistry and being a chemist, this made a lot of sense to me. I found this to be very exciting so I left to start a company with Tom, and we brought in Greg Schmergel as CEO and all started Nantero together.”

“The initial venture derived from Tom's graduate work at Harvard, and came from his vision for a new type of memory technology using carbon nanotubes described in his doctoral dissertation. We went out to look for funding at a time when the market was kind of sour, since the Internet bubble had burst in 2001.”

Greg Schmergel picks up the story: “We were looking to start a new company in a field with a high entry barrier. Tom, Brent, and I had met through a mutual friend, and they had an idea for a nanotube memory switch. In 2001 when we started, there were only two venture-backed nanotech startups: Nantero and Nanosys. It was a tough time for startups in general. Back then when I met with venture capitalists, almost none of them even knew what nanotech was, and certainly didn't know what carbon nanotubes were.”

“We raised $6 million in a Series A round, co-led by two VC firms (Stata Venture Partners and Draper Fisher Jurvetson). Bill Tai and Bruce Sachs from Charles River Ventures led the B round in 2003 and Ullas Naik and Globespan Capital Partners provided funding in 2005, which brought our venture funding to $31.5 million. We have not needed venture capital since 2005, since we were able to sustain ourselves on revenue since then.”

Bill Tai, a general partner with Charles River Ventures, led the venture capital firm's investment in Nantero in 2003. He recalls that the venture capital “story” at Nantero seemed solid and well planned. Also, the science at Nantero was very impressive. “Nantero's founders observed that both carbon and silicon sit in the same column in the periodic table – in other words, they both have four valence electrons and thus could be made to electron bond pair in a way that uses very little energy and with structures that are incredibly dense compared to conventional silicon based memory.” (Note: Valence electrons are the electrons of an atom that can participate in the formation of chemical bonds).

When asked to describe what he thought were Nantero's “best practices,” Bill Tai offered his views of three of Nantero's best practices from a venture capitalist's perspective that are applicable to any nanotechnology venture:

  1. Innovation is always important, but to the extent a start-up can focus on an area that is massively disruptive, it's more exciting and easier to fund.
  2. If you do have important intellectual property, ensure you protect it.
  3. Surround yourself with great people. Nantero did a great job of hiring top flight researchers and attracting exciting people to its board of directors who could help get it business. Any business will go through ups and downs and if people don't understand this, the rough patches become really hard.

In addition to venture capital, Nantero drew funding from government agencies that functioned as partners at a time when everyone was still trying to figure out how to leverage the benefits of nanotechnology and specifically, materials and devices that incorporated carbon nanotubes.

“A large part of our revenues came from government programs in the early years,” Schmergel explained. “Our government division was started by Brent Segal. He established some government contacts and realized that they were interested in the radiation resistant properties of our memory technology which we called NRAM. This is a nanoelectromechanical switch using carbon nanotubes, so it is not affected by radiation, which is of obvious importance to the military, and to NASA. You can send these chips into space without radiation errors, and they can be used in combat situations where radiation could also be a problem.”

“We at Nantero started using carbon nanotubes in a production semiconductor factory in 2003. At the time, this was considered radical and many people thought this was impossible. Surprisingly, we still run into people who say carbon nanotubes are just a research material, they'll never be used in a production facility, they'll never work, they'll cause safety and contamination problems, and so on. The reality is that carbon nanotubes have been used in semiconductor fabs for many years now. As a nanomaterial, carbon nanotubes are fairly mature and are used in a wide range of applications, including semiconductors. Some carbon nanotube suppliers produce 20 or 30 metric tons a year.”

“A key part of our story involves intellectual property. We now have over 200 patents and patent applications pending and more than 125 of those are already granted. Recently Nantero was rated as having the 2nd strongest patent portfolio in the worldwide semiconductor industry in two separate independent studies. Companies like Samsung and Intel were ahead of us and the ones that followed us on the list were companies like Texas Instruments. For a start-up of our size with just under 50 people, to make it onto a list like that tends to validate our IP strategy.”

“Some of the broadest and strongest patents were filed from 2001 to 2004. We were able to file broad patents because we were one of the very few and perhaps the only company taking carbon nanotubes seriously as a material that could be used in mass production of electronic devices, at a time when most experts in the field thought it was impossible because of contamination and fabrication issues. People were asking: How do you position a carbon nanotube on a silicon wafer? Do you pick them up one at a time and put them on your wafer – that would take a million years! Do you grow them on the wafer? Students and scientists spent long periods of time trying to position one nanotube on a wafer.”

“In 2000, Tom Rueckes published a paper that drew a lot of attention. He showed a carbon nanotube switch with just two nanotubes – one suspended perpendicularly above the other, and in the ‘off’ state where they are not touching there is essentially infinite resistance. Then he used electrostatic attraction to bend the top nanotube down to create an ‘on’ state – which was a memory switch with very distinguishable on and off states. It was a fantastic demonstration of the concept of a switch using carbon nanotubes, however, it was completely unmanufacturable.”

“So the challenge once we started the company was to figure out how to mass manufacture carbon nanotube switches and get millions or billions of switches all on one chip, since you want to have billions of switches per chip. To provide gigabits of memory we needed tens of billions of switches on one chip. At the time, everyone said that's impossible!”

“One day, Tom said, ‘Yes, that's impossible – so what I'm going to do is put the nanotubes everywhere on the wafer and get rid of the ones that are in the wrong place, so what I wind up with is nanotubes in the right place. We put the nanotubes in solution and spin-coated them on the wafer to create a single layer of nanotubes that evenly coats the wafer, just one nanometer thick; then we used lithography and etching to remove the nanotubes that were not in the right place (i.e. where the memory cells are) which gave us a mass manufacturing process, using a combination of spin coating, lithography and etching, which are commonly used fabrication processes. These used no exotic processes or steps not already used in some form at every semiconductor facility in the world. The fact that it's an elegant process with only a few steps means it's also easy to manufacture, and cost effective. If you have a complex process, it's expensive almost by definition. A smaller number of steps is more cost effective. This was one of our first major innovations in the company and the subject of many of our early patents. We trademarked the name for our memory as NRAM.”

He went on to explain that in the early years the company worked with single-walled carbon nanotubes. Experimentation led them to find applications that use double- and multiwalled nanotubes.

“Nantero also decided that its business strategy would be to develop as a licensing company, rather than a production company or fabless semiconductor company. Its licensing customers were primarily semiconductor manufacturers. The most urgent need for NRAMs involves replacing a type of flash memory called NAND Flash used to make high density (gigabyte level) data storage such as memory cards used in digital cameras and computers. Another type of flash (NOR Flash) is a higher speed, lower memory nonvolatile storage for solid state drives. Memory storage keeps growing. I recently bought a 16 gigabyte storage card for my 12 megapixel digital camera with HD video—in a couple of years, 16 gigabytes will be small. We're already working on the next generation of solid state drives, which would no longer use flash memory but will use NRAM instead.”

Lockheed Acquires Nantero's Government Business Unit

When the liquidity crunch created a tough environment for funding in 2008–2009, Nantero was able to sustain itself from its revenues, but Greg Schmergel observed that for many nanotech companies this was a difficult and in some cases fatal period.

In August 2008, Nantero sold its government division to Lockheed Martin, which generated capital to allow Nantero to sustain its core commercial semiconductor development, while allowing Lockheed to implement a “fast follower” strategy.

The Nantero government business unit formed the basis for the newly created Lockheed Martin Nanosystems group. The acquisition included licenses for technologies and research capabilities for a variety of nano-enabled devices, including memory and logic devices as well as sensors. Approximately 30 Nantero employees joined Lockheed, including Nantero cofounder Brent Segal, who became Chief Technologist in the new Lockheed Martin Nanosystems group.

When the nanotechnology revolution gained traction in the late 1990s and early 2000s, many large corporations resisted the temptation to jump into the nanotech sector. Instead, many corporations opted to take a wait and see or fast follower strategy. It's not unusual for corporations to wait for emerging technologies to develop and define the market, and enter the market later by acquiring companies or divisions after the technology is better defined. This is also a way for companies to acquire portfolios of patents they may need to anchor their own research and it's very telling that the Nantero–Lockheed deal included a broad patent licensing agreement.

Since the acquisition, Lockheed has continued to work with Nantero and the companies have announced some of their joint work on next-generation nonvolatile digital storage solutions and other technologies, and Nantero continues to work with multiple corporate partners and licensees to move NRAM closer to mass production for commercial applications.

6.5 QuantumSphere: Competitive Catalysts

QuantumSphere is a privately owned nanotechnology venture based in Santa Ana, California that engineers and produces advanced catalytic materials called nanospheres. Their manufacturing facility is located 10 min from John Wayne Airport in the heart of Orange County.

Every day, the company produces large volumes of nanospheres, which are used as catalysts in a wide variety of industrial processes. The current plant is capable of producing hundreds of kilograms of its proprietary nanospheres each month.

Market applications for QuantumSphere catalysts include multibillion dollar growth sectors such as batteries, fuel cells, emissions reduction systems, and industrial chemicals such as ammonia synthesis for food production. The company is presently focused on metal–air batteries and ammonia synthesis applications of its advanced nanocatalysts.

The venture was established in 2002 by Kevin Maloney (President) and Doug Carpenter (Chief Technology Officer) (Figure 6.5). If you call the company, the phone is likely to be answered by one of the many MBAs, engineers, and Ph.D.'s who are working to commercialize and scale the company's integrated catalytic solutions. The company's scientific advisory team includes a distinguished group of scientists from several universities and companies, including Prof. George Olah, the 1994 Nobel Prize winner in chemistry and Caltech board of trustee member, Jon Faiz Kayyem, Ph.D.

Figure 6.5 Kevin Maloney and Doug Carpenter, cofounders of QuantumSphere.

A Garage Nanoventure

One of the misconceptions about nanotechnology ventures is that the technology is too complicated to develop in a garage like the Apple personal computer. Actually, there are several notable examples of nanoventures that got their start in garage-like atmospheres, and QuantumSphere is a prime example.

Kevin Maloney grew up in Pasadena, California, about 1 mile from CalTech, and was a self-described “beach bum.” In 2001, he was a 29-year-old graduate student enrolled in the MBA program at Pepperdine University. He had worked in finance, sales, and marketing and planned to continue his business career, but he also had keen interest in science. While finishing his MBA, he met former rocket scientist Dr. Doug Carpenter, who was seeking a way to use nanoparticles to increase the burn rate of rocket fuel.

“Doug's solution was to create a better, smaller, faster, more efficient catalyst by using nanotechnology to build the tiniest nano metal particles with the largest surface area in existence,” Kevin recalls. “So we raised $ 100,000 from two Caltech Ph.D.'s and built a small lab and pilot-scale reactor in the back corner of my brother's neighborhood warehouse, the size of a two car garage. A year later, we had a manufacturing process that became the core technology for QuantumSphere. We succeeded in producing and scaling tiny, several nanometer sized catalysts, and then quickly focused on demonstrating their commercial viability in valuable clean energy and portable power applications (way before these became hot buzzwords in 2007–2009, and quickly shifted away from military applications which can be quite dangerous and take much longer to bring to market).

A nanometer (nm) is one billionth of a meter, or 1000 times smaller than the diameter of a human hair, or roughly the size of a marble when compared to the earth. QSI catalysts typically measure 5–25 nm. A good catalyst is something that facilitates a more efficient chemical reaction, preferably using less energy. The higher the surface area of the catalyst, the more efficient the chemical reaction. A handful of the micron-sized raw materials QuantumSphere starts with have roughly the surface area about the size of an 8.5 × 11 sheet paper. Once converted using the Company's patented process, a handful of QSI-Nano catalysts have an increased surface area about the size of a soccer field.

QSI's nanocatalysts provide superior functions because of their unique physical properties, including spherical shape, high purity, uniformity, narrow distribution, controlled oxide layer, and extremely large surface area. This can translate into greater efficiency in the generation, storage, and use of energy. The first key patent was issued in October 2007, for a laminar flow gas phase condensation reactor, a closed loop system under vacuum that uses electricity and gases like helium to produce nanoscale particles. The patent was 40 pages long and included about 75 broad claims.”

The process they developed involves a ceramic heating element used to liquefy a raw material, in the form of metal wire or micrometer-sized metal particles, and evaporating it in a stainless steel vacuum chamber containing helium. Tiny droplets of molten metals such as nickel, iron, copper, silver, manganese, gold, or palladium are allowed to condense at specific temperatures and pressures, and this creates small uniform spherical particles called nanospheres. A thin layer of oxygen encases the metal particles to keep them from sticking together and bursting into flames when exposed to air. Without the oxide layer, the particles will burn or ignite if they come into contact with air.

Kevin recalls what it was like to be an under-30 CEO: “I was the high risk guy, one of the younger CEOs with a lot of passion and ambition, connected to enough people, with modest capital to get started. In the first year, it was just four of us in a 20 by 20 square foot facility. The culture is different when you start from grass roots and max out your credit cards a few times to keep things alive. We were never overfunded, and always tried to steer away from the hype. We kept our organization lean, focused, and acted as if every dollar we received was the last we would ever receive. We've seen several overhyped, overfunded VC-backed companies lose focus, spend too much on too many things, effectively getting ahead of themselves from a personnel and capacity perspective, and then run out of money. Oftentimes, they were significantly off in their estimations of the time it would take them or their customers to bring products to market; it is the least predictable part of the cycle.”

“At QSI, we got a lot of things wrong like most small start-ups, but we found a way to keep the doors open long enough for one or two things to occur and drive some value which allowed us to procure additional capital and time to bring products to market. We did not spend hundreds of millions of dollars using investor capital or government loans trying to build carbon nanotube elevators to the moon, cure cancer using anti-matter, or compete on low efficiency commoditized products. We simply had to do more with less in terms of capital. To this end, we have engaged our customers, tried to understand their biggest pain, their near term market needs, and bring ideas to them that will hopefully solve problems that can be validated and commercialized in a reasonable time frame. Customer driven innovation is a key part of the strategy. Working together to bring the products to market is paramount as the large players in the clean tech industry already have key sales and distribution channels in place and can move quickly with large budgets.”

“From the beginning, we were very clear about our status. Like a famous VC once said, ‘Saying you're a nanotechnology company is like saying you're an electricity company. It's what you're doing to harness the electricity or nanotechnology that really matters.' We have always viewed nanotechnology as an enabling technology. We happen to be working with very small elemental materials at the nanoscale, but we differentiate by delivering meaningful products and results.”

The Advantages of Nanosizing Catalysts

The concept of nanosizing catalysts is a proven “best practice” in the field of nanoinnovation. Nanosizing a catalyst capitalizes on one of the most important nanoscale characteristics that involves increasing the surface area, which is a critical feature in chemical catalysts.

Kevin Maloney provided a vivid example to explain how nanosizing works: “Imagine a bulk material the size of a basketball, and we utilize the surface of the basketball for use as a catalyst in a chemical application. The catalyst on the surface of the ball reacts with the chemical to make something happen – that's what a catalyst does. Now, instead of one large basketball, let's fill a basketball-sized bowl with playground marbles and use those marbles as the catalyst. Now, the surface of every marble is available for the chemical reaction, which greatly increases the amount of catalyst available for the process. This is because the ratio of surface to mass increase dramatically the smaller we go, which increases the level of efficiency for the catalyst or imagine lighting a handful of dry kindling to start your fire versus a wet log. Like the marbles, the kindling has a much greater surface area.”

Silver is a photocatalyst used in various photographic materials and in nanoparticle inks. It also has bacteria-fighting properties. If you create a solid silver sphere that weighs 10 g, the surface area will be ∼5 cm2. But if you create 10 g of silver in the form of nanospheres that each has a diameter of 10 nm, the total surface area of all the nanospheres will be almost 600 cm2 – increasing the total surface area by ∼1.2 million times! [2].

Metal–Air Batteries

In 2005, with only five people in the business and very little capital on hand, the company engaged a zinc–air battery expert to help screen its catalysts, design, build, and demonstrate the company's proprietary high-rate gas diffusion electrode (the active layer or “engine” in the battery) in a complete zinc–air battery system. The resulting data and performance led to another external validation, partnership, and subsequent codevelopment and supply agreement with a major global battery manufacturer. This traction gave the company immediate credibility and validation among the scientific and investment community. Several other small and well-known companies are also engaged with QSI, leveraging its zinc–air battery technology for commercial use. QSI plans to launch its own line of portable zinc–air battery systems with key manufacturing partners in late 2014.

After several years of R&D, QSI now considers itself an industry leader in the design, development, and manufacture of high-performance, low-cost nanocatalysts and integrated systems such as metal–air batteries. The company sees this segment of the battery market as a large and emerging opportunity.

QSI's ISO 9001:2008 quality management systems and patented production processes include advanced catalyst materials and high-rate gas diffusion electrodes that enable its line of MetAir™ batteries to deliver the highest energy density of any commercially available battery, at the lowest cost per kilowatt hour (by weight and volume). QSI batteries provide a shelf life up to several years, employ a modular cell construction and customized form factors, utilize recycled zinc (one of the most abundant elements in the United States.), and are lightweight, safe, and environment-friendly. The batteries contain zero lead, mercury, cadmium, or lithium. QSI's portable power systems are designed for remote, outdoor and recreational use, emergency preparedness and response, and are used by manufacturers developing backup power systems for consumer electronics and military and electric vehicles. QSI and its partners offer metal–air battery components (cathodes), replaceable power stack modules, and complete battery systems directly to end user customers, as well as through reseller and distributor channels.

Nanocatalyzing Ammonia

One of the company's largest potential markets involves the production of ammonia, which is a huge 100 billion dollar market. Most of us think about liquid ammonia as a household cleaner, but 85% of ammonia is used to make fertilizer for food production and biofuel feedstocks. Fifty percent of all protein on the planet comes from ammonia. By dollar amount, ammonia is the one of the most massively produced chemicals on the planet, second only to sulfuric acid. Ammonia production consumes 2–3% of the world's annual energy supply and generates 400 million tonnes of greenhouse gases every year. Most of the world's 500 plants that produce ammonia run on coal and natural gas.

Most ammonia is produced in reactors using the Haber–Bosch process, which has been used for more than 100 years. The process was first demonstrated in 1909 by a German chemist named Fritz Haber. The rights to Haber's tabletop system was purchased by the German chemical company BASF, and scaled up by Carl Bosch for industrial level production, which began in 1913. The Nobel Prize was awarded to Haber in 1918 and Bosch in 1931. The process combines nitrogen and hydrogen gases (NH3), which are run under high-pressure tubes over an ∼450 °C heated bed of small iron rocks, which acts as a catalyst. This is how ammonia has been produced for more than a century – until QuantumSphere developed an improved process using high-surface-area nanocatalysts to increase efficiency and output.

“We discovered this about five years ago when we were working on a catalytic converter for automobiles and looked at some ammonia related applications,” Kevin explained. “We took our process to the Casale Group in Switzerland, a 90 year old company that designs, engineers, and refurbishes more than 50% of the ammonia production plants in the world, using its patented systems. The company doesn't own or operate the plants. They design and engineer the reactors which use heat, pressure, natural gas or coal, hydrogen, nitrogen and iron catalysts to produce the ammonia. There hasn't been much of a breakthrough by way of new catalysts for these systems for decades.”

In 2009, QuantumSphere signed an arrangement with the Casale Group and has been working with them and other major participants in the global ammonia industry, to test and validate its high-surface-area novel catalysts to lower the cost and increase the output of the world's aging ammonia plants as well as next-generation reactors, which may require much less capital to build and operate. QuantumSphere has several patent applications pending on the technology and early on showed >20% increase in ammonia production yield with just a very small loading and coating of nano iron particles onto existing commercial iron support materials and has subsequently improved these results in many instances. The company's current technology has produced as much as a 40% increase in catalyst activity in laboratory validations. The company has been working with a large chemical producer in China, and in November 2013 the company completed a pilot project to validate its high-efficiency ammonia catalyst technology in a real-world scenario and is now working to commercialize its technology for industrial scale.

QuantumSphere continues to work on other large thermochemical opportunities, leveraging the earlier mentioned concepts for hydrogen and methanol production, among others.

Capital Efficiency

Kevin and Doug pride themselves on the company's capital efficiency, noting that QuantumSphere has been able to maintain itself from a combination of revenues generated from operations, private equity funding, and partner funding. Most of the capital secured to date was used to fund R&D, develop and prosecute its intellectual property portfolio, scale manufacturing, and research future growth-related activities.

“To date we have secured more than $23 million in funding and another $1.5 million in government grants. We're still a relatively small company, but we are very excited about the zinc-air battery systems we are introducing with partners in 2014, and longer-term the major opportunities that exist in the chemicals sector,” Kevin says.

6.6 InsituTec: From Grad Students to Commercial Venture

Many of the most interesting and successful nanoventures were started by graduate students. You might not think that something as complex as a scanning probe microscope would be developed in a university laboratory, but in the early 2000s, these systems were so expensive that students chose to design and build their own systems.

Developing a scanning probe microscope in a university laboratory is roughly analogous to Steve Jobs and Steve Wozniak developing the Apple computer in a garage – extremely complex and requiring a great deal of ingenuity – but it can be done. That's how InsituTec, Inc. got started.

The North Carolina-based company specializes in designing and producing nanopositioning systems and metrology tools and sensors. The company has been profitable for several years and has a solid research team, growing product line and customized service portfolio, as well as distributors in China and Japan. This is impressive considering that InsituTec was started by Shane Woody and his wife Bethany when they were still graduate students.

In 2001, Shane and Bethany were graduate students in mechanical engineering at the University of North Carolina at Charlotte, studying metrology, the science of measurement.

“UNC had an industrial affiliates program where students and faculty worked on solving problems for industry,” Shane recalls. “We were working with the automotive and aerospace industry to measure very small features, about the width of 50 microns, but we wanted to measure surface features that were less than 10 nanometers which is needed in high end precision manufacturing. One application involved measuring the size and shape of nanoscale holes where fuel is sprayed and atomized into the chamber of an engine. The diesel injector industry wanted to understand the dynamics involved, and how improvements could be made. A major bottleneck was having a quality inspection tool to measure these holes and extract information about the process.”

“Fuel efficiency in diesel engines is linked to how well the fuel is sprayed into the engine. If the spray holes are worn or distorted over time, too much fuel is injected, resulting in emission of black soot and CO2. The thinking was, if you could more efficiently atomize the fuel in the chamber you could lower the CO2 generated, and this is a big deal because the auto industry is hard pressed to lower CO2 levels. We built a tool called a Standing Wave Sensor that could do these measurements.”

“During our research, we learned that being able to accurately measure these processes is directly related to the quality of precision manufacturing. This is especially true in the semiconductor industry and also has applications in biologics and medicine. For the diesel injector project, the sensors had to be long and slender, with a very small sensor tip. If the tip is too large, you can't measure defects such as scratches or pits in the engine part. The smaller the sensor, the more detail you can measure. So the challenge was to scale down the sensor so it could move into the cavities and holes without sticking to the surfaces. At this scale, sensors want to stick to the surface because of the van der Waal's force, or electrostatic or magnetic forces, which is complicated by something called the meniscus effect, a water layer that builds up on the parts you're trying to measure. One of our innovations involves shaking the sensor to create a very pronounced wave pattern which allows us to change the shape and velocity of the wave to measure surface information.”

What we did that was actually unique and different – we shook the sensor ∼32 000 times per second. Imagine having a jump rope – you hold one end, I hold the other. When you shake it, you produce a wave pattern – to form a wave – when we shake our sensor, we produce a very pronounced wave pattern. My sensor is held at one end where we shake it, it's long and narrow, we can shake it at 32 000 times a second – some really intriguing things happen when we do this. The tip of the probe bends back and forth many times. When that wave is turned on, we can program it so that it can be quite pronounced. The velocity on that is up to 10 m/s, which is one of the highest velocities for a sensing element. In metrology, when we contact surfaces, the wave changes shape and we can use that information to infer what is going on at the surface.

As a result of this research, Shane and his wife designed their first instrument, which they called “Standing Wave Actuator Technology™” (SWAT). In 2001 while still students, they formed InsituTec to commercialize their innovations. Funding was provided by the National Institute of Standards and Technology.

Another discovery involved microfluidics. During a laboratory experiment, Shane activated a wave sensor in a fluid environment and expected the wave to die off, but instead the sensor continued to create a wave pattern. “When we activated the sensor in the liquid, the particles were attracted to the sensor and concentrated there in a matter of seconds. We thought that's really wild – we could turn this on and get particles to concentrate. If you can get certain types of cells to stick to a sensor quickly, you can detect and analyze them. This opened up a new field of investigation.”

InsituTec has filed patents on this technology and has been working with Brown University to apply this to advanced fluidics. The company's researchers are also working with Duke University on biointerfaces; and the Carolina Medical Center to study applications for infectious diseases and orthopedic trauma. The company has received a research grant from the National Institutes of Health. A new method for diagnosing disease using this approach would add an important diagnostic tool to the medical science portfolio.

“Currently, when a patient with infection or wound comes into a trauma center, the hospital cultures a sample and sends it to a lab, which takes about 72 hours to identify it,” Shane Woody explains. “Technologies such as PCR take less than an hour, but these tests cost hundreds of dollars. We're working on a method for performing the same test in less than a minute, for under $20 per test. Our approach involves chemically attaching an antibody to a sensor, inserting this into the sample, and looking for cells that attach to it. Our first target is a test for staph infection, which is a very large problem in hospitals and nursing homes. This can also be used to diagnose MRSA and other serious infections. We're collaborating with the Carolina Medical Center to develop this technology.”

6.7 Nanocomp: Taking Nanotubes to Jupiter and Beyond

Nanocomp is a good example of a nanoventure that focused on commercializing the new forms of nanocarbon. Nanocomp Technologies, Inc. was the first company in the world to master the ability to reliably produce large industrial-size sheets and yarn made with carbon nanotubes. Their production was sold out years in advance and the demand for their sheets was so high that they were able to pay off their investment in their production system in only 3 months. In 2012, the company outgrew its last start-up-sized facility in Concord, New Hampshire and moved into a 100 000 ft2 manufacturing plant in Merrimack, New Hampshire.

Carbon nanotubes were one of the first nanomaterials. When they were discovered, they provided an intriguing chemical “surprise” that opened the door to a wide range of innovations using one of the most common materials on the planet. In an era when rare earth materials are predicted to become increasingly expensive, scarce, and eventually unavailable, keen attention has been focused on carbon nanotubes and various types of composite materials. While many articles and media reports have extolled the virtues of carbon nanotubes and their inherent strength (lightweight, stronger than aluminum and steel, etc.), the industry faced a very basic challenge: How to turn carbon nanotubes into sheets of material that could be used in commercial products?

Nanocomp Technologies was formed in June, 2004 in West Lebanon, New Hampshire as a spinout of Synergy Innovations, Inc., a technology development company. The venture was initially funded by the founders, along with contracts from the Office of Naval Research, the US Army, and later a substantial SBIR grant from the US Air Force. Partners include some of the nation's largest defense/aerospace companies. A nonexclusive license was obtained to the single-wall carbon nanotube composition of matter patent from IBM. The company has filed >20 patents.

The company's core technology involves the design and production of materials and products that use “long” carbon nanotubes (as long as 1 mm each) that have different properties than “short” nanotubes, which are typically tens of micrometers long. Short nanotubes are typically found in powdered form and have limited industrial uses because of limited macro properties and they are difficult to incorporate into manufacturing processes. Nanocomp's long nanotubes can be produced in sheets in large volumes and exhibit high-performance characteristics needed for manufacturing and commercial use. Nanocomp mostly uses multiwalled nanotubes, although single-walled nanotubes can also be used. Most of their materials are formed with 100% nanotubes.

A decade ago, carbon nanotubes were too expensive to use in many products, partly because the purification process was very costly. Nanocomp developed techniques for growing and producing very pure materials that did not require expensive postgrowth purification. They also developed proprietary methods for fabricating these long nanotubes into structurally strong and electrothermally conductive fibers, yarns, and sheets. Applications include thermal straps and blankets, shielding “skins” and high-strength sheets, and yarns. Yarns are used as core conductors for cables, and in many other applications.

Nanocomp was founded in 2004 by Peter Antoinette, President and CEO, along with its former CTO David Lashmore, Ph.D., who has since returned to academia. They were intrigued by the challenge of finding a way to first produce long carbon nanotubes with compelling macro properties and then turning them into sheets and spun yarns that could be used in commercial products. The challenges of turning carbon nanotubes into useful macro products were daunting.

Peter set the tone for the company by declaring, “This is not a science experiment. This is a company.” That sense of pragmatism was essential to the company's development. Until Nanocomp developed its processes for creating nanosheets and yarns, similar form factors had only been achieved by combining nanotubes with a thermoplastic material (polymer), dissolving it in a solvent and casting it in a mold where the solvent was made to evaporate, to form the sheet. “That's fine for a science project,” Peter said, “but this won't be effective if we want to make thousands of square feet for industrial use.”

The use of a catalyst to “grow” carbon nanotubes was an early trade secret used by the first wave of ventures that produced and used carbon nanotubes. The breakthrough innovation that turned Nanocomp's research from a “science project” to a commercial process was the discovery of a way to stabilize catalyst particles at a desired size and hold it stable to allow the nanotube to grow to millimeter length. This is not as simple as it sounds. Computers control 30 different parameters from temperature levels and gradients to gas flow rates and chemical mix. This allows their engineers to “dial in” settings that create single- or multiwalled nanotubes in the configurations they need.

In 2007, Dr. Mark Banash joined the company as a Vice President and serves as Nanocomp's Chief Scientist. Mark is a Zyvex alumnus who previously served as director of production and quality for nanomaterial products. John Dorr, Vice President, Business Development, and Dave Gallus, Vice President of Engineering, round out the management team.

Mark Banash described some of the engineering challenges they faced: “Carbon nanotubes have a lot of hydrophobic surface area. In bulk form they exist as powders. Short nanotubes are really tough to get into a composite because of the way they aggregate. There are safety issues. They are hard to produce and even harder to incorporate and disperse in a composite material. Making something that can be used in a commercial application – like a sheet of material – requires billions and trillions of nanotubes.”

To turn nanotubes into nanosheets, he explained, the nanotubes are synthesized as a cylindrical mesh that is then collapsed onto a metal belt and the sheet is built up layer by layer. The size is only limited by the dimensions of the belt. The longest roll of sheet material made by the company so far is >400′ × 52″ wide. Some sheets sold to industrial customers are produced in a 4′ × 8′ size, which is the standard size of a sheet of plywood, others are cut into custom sizes or even seamed to form tapes. Nanocomp also produces yarns, which are typically shipped in kilometer long spools.

Dr. Banash calls the uses for Nanocomp's products not as “killer apps” but rather “assassin apps.”

“This is an exciting time to be working in nanoinnovation,” he said. “We are still early enough in the evolution to see some firsts. There are records to be broken. One of the greatest challenges of the last decade was to figure out how to create industrial size sheets incorporating nanotubes or graphene. In 2008, we produced the world's largest sheet made with nanotubes. This clearly demonstrated our ability to manufacture commercial quantities for industrial users. The first nanosheets took several shifts to produce. That time has been reduced to hours with plans to go to minutes over the next two years.”

The company has also climbed a very steep learning curve along with its customers. Mark recalls one customer telling him once, “This is too squishy,” which he then had to translate into the functionality represented by “squishy.” It turned out that squishy meant that when the object was placed in lateral shear, it did not recover its original form fast enough.

Nanocomp has also done extensive testing including air sampling, thus ensuring the safety of its products. Mark indicated they have “shredded, punctured, twisted, pulled, snapped, and ground up their materials and tested the results with air sampling instruments to test for contamination.”

Nanocomp is forging ahead with a broad range of exciting applications for its nanosheets. The company is even taking its technology into space. In 2010, Nanocomp's nanotube-based sheet material (Emshield™) was incorporated in the Juno spacecraft, launched on August 5, 2011, to provide protection against electrostatic discharge (ESD) as the spacecraft makes its way through space to Jupiter. Specifically, the Juno development team used Nanocomp material as an ESD protective surface layer on several critical components of the flight system's attitude control motor struts and the main engine housing. Nanocomp worked in partnership with Lockheed Martin, the prime contractor on the project, to integrate Emshield during spacecraft development and construction.

“The Juno spacecraft has many key components throughout the spacecraft that require ESD protection especially as it will be travelling through Jupiter's extremely strong radiation belts,” Peter Antoinette explained. “Lockheed was interested in implementing an alternative ESD solution to traditional aluminum foil that is typically bonded to the surface of composites. By adding Emshield CNT sheet layers during fabrication of the composite, they were able to integrate ESD protection directly onto the structure, making the composite a multifunctional element of the spacecraft. Becoming ‘space qualified' against the rigorous standards set by NASA in support of a very important space mission is a major accomplishment for Nanocomp, and another example of the progress being made in the field of nanoinnovation.

A New Application for CNT Sheets

Carbon nanotube sheets have proven applications such as EDS and EMI shielding in data and power cables, according to Peter Antoinette. Data cables of various types have already been developed that are half the weight of their copper-based counterparts. He predicts that carbon nanotubes will produce improvements in the electrical conductivity of low-frequency higher power cables, which today stands at only ∼3 × 106 S/m. Applications for CNTs in battery anodes have been limited to constraining the deformation due to intercalation of lithium in graphite powder, he explains, but so far, CNT sheets have not been used as the current collectors themselves. The advantages of replacing copper and aluminum foils in these batteries seem to suggest a very large commercial market for this material.

“We predict that a significant increase energy density can potentially be achieved while eliminating thermal runaway due to the CNT positive temperature coefficient of thermal conductivity,” Dr. Lashmore elaborated. “Non-metallic CNT sheets – comprised of millimeter length CNTs – provide enhanced surface area and properties that manage thermal energy better than metals. For the first time, dissimilar metal current collectors such as copper and aluminum need not be used, saving weight eliminating corrosion couples, and enabling the use of more aggressive and superior high conductive electrolytes. Coating these CNT current anode collectors with silicon or certain metal alloys can potentially result in a high capacity electrode with a comparative reduction of electrode resistance; therefore the Joule heating associated with high current performance is diminished.1)

Carbon Nanotubes and Ballistic Protection

Early work was supported by the Natick Soldier Center and the Office of Naval Research, and duplicated by several prime contractors, confirming that Nanocomp layered CNT sheets can stop bullets.

Near-term benefits have come by combining CNT sheets with aramids and HDPE resulting in dramatic improvement in the overall performance of soft armor systems. The leading manufacturer of soft ballistics has seen a 30% reduction in weight with >20% reduction in thickness, thus utilizing Nanocomp sheets in soft armor. AR500, a commercial supplier of ballistics protection based in Phoenix, Arizona, has introduced commercial vests incorporating Nanocomp sheets to enhance performance.

Whereas soft armor protects from handgun rounds and fragments, ceramic hard armor protects soldiers from rifle fire, even those that can pierce metal armor. This level of protection comes at a cost; ceramic vests are heavy, weighing as much as 7 lb each. Nanocomp's sheets used as a surface wrap can reduce this weight by >10%, while improving fragment and multihit resistance. CNT hybrid armor is also showing promise for use in helicopters, boats, and aircraft where it can improve protection over current systems without adding appreciable weight, and reduce fuel costs. In 2012, DuPont Corporation entered into a formal strategic relationship with Nanocomp to further develop ballistics and honeycomb core structures.

6.8 Nanosys: Resurrection and Redemption

Most of the nanoventures in the “first wave” had to reinvent themselves once or twice before they started hitting their commercialization targets. A great example of this is Nanosys, which was launched in Palo Alto, California in 2001 by Larry Bock, Drs. Charles Lieber, Peidong Yang, and Paul Alivisatos.

Nanosys was founded on the premise that strong IP in the emerging nanotechnology field would be the key to building a successful company. Nanosys successfully secured exclusive IP licenses in foundational areas from many leading research institutions, including Harvard, UC Berkeley, UCLA, MIT, and CalTech. Based on this, and the promise of nanotechnology, Nanosys developed a reputation quite early as a high-flying start-up. The company received venture funding from such prestigious VCs as Venrock Associates, Arch Venture Partners, Harris & Harris Group, and Lux Capital.

In April 2004, the company announced that it was going public with an IPO, with the normal amount of media and investor attention that an IPO engenders. However, without any products or customers, the appetite for such an IPO was poor and less than 4 months later, the company announced that they were withdrawing their filing and opted instead for a $40 million private equity financing round. This increased the number of venture capitalists and corporations that had invested a total of ∼$100 million in the company to 17. Four years later, Nanosys still did not have a commercial product, and was not profitable. Many in the industry had all but written off the company.

Nanosys is not an unusual case. During the early- to mid-2000s, many nanotechnology companies showed great promise initially and developed impressive research and patent portfolios, but then ran out of funds, failed to scale up their research, or could not commercialize their technology. Some nanotech ventures were simply moving too slow to stay in business and had to cease operations, drastically scale back, or find a stronger company to acquire them.

By 2008, Nanosys had worked on developing its technology in many different fields, ranging from medical devices and implants to printable electronics, advanced semiconductor materials, and even chemical–biological warfare suits. The company still didn't have a commercial product and seemed to be drifting as it struggled to find its identity. That year, a shakeup ousted CEO Calvin Chow and the company's major investors acted to save the company. Venrock partner Steve Goldby became chairman and in October, 2008, Jason Hartlove was recruited to transform Nanosys into a product company.

Hartlove is a Silicon Valley engineer who has been called the “MacGyver” of Silicon Valley. During his 18 year career at Hewlett-Packard and its spinoff Agilent Technology, Hartlove piloted many different technologies out of HP Labs and into products on the marketplace, including optical position sensing (think of the optical mouse), CMOS image sensors (think of camera phones), and others. When he left Agilent, he was a VP and GM responsible for over $500 million in annual revenues. He then moved to South Korea and managed MagnaChip Semiconductor and in 2008 was recruited to become CEO at Nanosys.

“Walking into Nanosys for the first time in 2008 felt a lot like walking into HP Labs,” Jason recalls. “The company had great science and technology behind it, a strong team of deeply talented people, but no sense of where the commercial markets were or what their needs were. The modus operandi of the company had become to stay alive by pursuing funded research programs; whether or not there was any practical or commercial market or business case for doing so did not matter, as long as the partner with whom the company was engaged was paying for the work.”

“Unfortunately,” Hartlove continues, “this did not ultimately lead to a recurring revenue stream. Although there were some very well recognized marquee names that Nanosys partnered with, they were always working with the equivalent of a central research lab within those companies, on technologies that were not on the near term product roadmap of any of the businesses within those companies. So when I joined, I began to work with the product divisions of major technology companies, to look for how our technology could solve relevant problems that they had today or that they would have in the near future. From this dialogue, I was able to identify a few opportunities which were high-growth, which were real and happening now, and for which we had a compelling value proposition with a material that we could actually manufacture.”

“But that wasn't all. Another key realization was that we had to do the work of nano-material integration as well. While our customers wanted new materials such as high efficiency narrow band emission phosphors, they also did not want to develop new manufacturing processes for integrating them into their products, for doing all of the reliability and quality engineering to optimize them for high volume usage and so on. So Nanosys began focusing not just on doing great materials science but on designing and building ready-to-use component products that manufacturers could deploy easily. We learned a lot about manufacturing things such as LCD display backlights and folded that knowledge into our operations so we could make a product that drops directly into standard manufacturing processes already in use by electronics makers.”

With a new commercial market focus and with new management, things began to change. The company began to rise from what looked like a funeral pyre, and started developing products and solutions for major electronics companies.

Within 2 years, the company was back on track and pushing hard into the market with its first commercial products. One of these products is a lithium ion battery anode material called SiNANOde™, which increases the energy density of batteries, allowing more charge to be stored in smaller batteries, using existing manufacturing processes. The second commercial product is the Quantum Dot Enhancement Film, or QDEF™, which improves the brightness and efficiency of LED backlights for media-rich devices like tablets, notebook computers, and HD television screens and became the primary focus for the Nanosys display business in 2012.

The first customers for this technology were LG Innotek and Samsung. These sales helped Nanosys achieve its first break-even month (in mid-2010). Samsung, the South Korean electronics giant, has become a major technology partner and investor in the company.

In 2010, Jason Hartlove was able to negotiate a Series E venture round, raising ∼$30 million, of which $15 million was provided by Samsung Venture Investment Corporation. Nanosys also negotiated a multimillion dollar licensing agreement with Samsung for use of its nanoengineered structures, what they call “architected materials,” in thin-film photovoltaic panels and LCD displays. As Hartlove said, “these are areas which, due to the size of investment required, we cannot fully exploit but which can be brought to commercial products by someone with significant financial and manufacturing scale.”

At the end of 2013, Nanosys spun off its SiNANOde energy storage technology into a new company called OneD Material. The split has enabled the two companies to focus on developing technologies in different stages of development for distinctly different end markets. OneD Material continues to refine and scale up the company's SiNANOde materials for consumer electronics and electric car batteries. While Nanosys is now completely focused on scaling up quantum dot manufacturing to meet increasing demand from display customers, it continues to develop a new generation of light-emitting materials.

Today, the company has a staff of more than 120 employees, its patent portfolio includes more than 200 granted and pending patents for light-emitting materials and systems. In 2013, Nanosys achieved a number of significant milestones, including shipping QDEF in their first commercial product—the Kindle Fire HDX 7—opening a new, expanded 60 000 ft2 manufacturing facility in Milpitas, California and their first ever full year of profitability. With a number of products in the pipeline for 2014, the company is profitable and growing, and continuing to fulfill its destiny as an advanced materials architect.

Paul Alivisatos, cofounder of Nanosys, recalls that Larry Bock once told him that the three most important things in a start-up are the CEO, the CEO, and the CEO. “You could have an absolutely great technology, but that doesn't necessarily mean the company is going to thrive. You could have a lousy science base and a good CEO will find a stronger science base needed to make products. You can put in all kinds of rules about what you want to happen and a lot of that gets thrown out the window when you finally get around to doing it. The people are really important. You have to have the right ‘oomf' to push something along.”

“It's very important for the CEO to have a deep appreciation for the science, and not a casual one. Almost invariably the inventing scientists are not the best CEOs for these ventures. We need a whole generation of people living in both worlds, science and business. I see a lot of students in physical or electrical engineering programs coming over to the business school to take a few classes, whether their advisor knows it or not. The need has outstripped the availability of people needed to push these ventures along in a business sort of way. There is a need for talent that combines science and management. Companies and universities have to work together to make this happen.”

6.9 Graphene Frontiers: Commercializing Graphene

The first wave of nanoventures included several companies that successfully commercialized materials using carbon nanotubes. The next wave of nanoventures will also include some notable innovations that involve carbon, but instead of carbon nanotubes, the next decade's major challenge will be the commercialization of graphene.

Graphene Frontiers, LLC, a nanoventure launched in Fall 2011, is one of a handful of ventures pursuing this opportunity. In this case, the challenge is not just to create products using graphene. The real challenge starts earlier in the supply chain, since there still isn't a cost-efficient method for producing commercial sizes and quantities of graphene. The founders of Graphene Frontiers believe they have the solution.

Graphene Frontiers got its start at the University of Pennsylvania when directors of Penn's Center for Technology Transfer and its UPstart program brought together three talented entrepreneurs: A.T. Charlie Johnson, professor of physics and director of the Johnson Research Group studying experimental nanoscale physics; Zhengtang Luo, a postdoctoral fellow in Johnson's group; and Mike Patterson, a member of the Wharton Executive MBA Program.

Charlie Johnson has authored more than 130 peer-reviewed articles; he holds 2 patents with 18 other patents pending. Dr. Luo has more than a decade of experience in the synthesis of carbon nanomaterials and related product development. Mike Patterson is a proven entrepreneur and business builder with an undergraduate degree in physics.

Producing a sheet of graphene is much different from producing sheets made from carbon nanotubes, Professor Johnson explained. Graphene begins as a flat sheet of carbon atoms arranged in a honeycomb framework, while sheets made from nanotubes are made from millions of nanotubes formed into sheets.

Applications for graphene include replacing silicon in electronics, development of composite materials (especially those based on combining layers of different materials), energy storage (fuel cells), transparent electrodes, chemical and biological sensors, and applications that require high thermal conductivity to control heat, energy storage, and thermal management. Membranes made from graphene can be used as molecular water filters.

“We're still at the very beginning of the graphene revolution,” Johnson explained. “Graphene production methods are being developed at several academic research centers, but these approaches use high vacuum chemical vapor deposition, require rare metals and expensive substrates, and provide limited production.”

“At Graphene Frontiers, we're commercializing a method to produce large sheets of graphene on an industrial scale, using chemical vapor deposition under room temperature and pressure. The graphene we produce will be developed into a variety of commercial products and also sold to other manufacturers.”

The first group of applications include a microelectronic grade conductive film loaded on a silicon wafer, a transparent conductive film loaded on transparent glass slides, and a support structure for samples in electron microscopy.

Mike Patterson described some of the business challenges the venture is facing (Figure 6.6). Mike is a 34-year old business builder with experience in consulting, international business, and manufacturing. He started his career as a physics major at Princeton University and was on the entrepreneurial team that built global supply management pioneer FreeMarkets Online during the era. After Freemarkets was acquired in 2004, Mike spent 6 years helping Bank of America grow its international operations. In 2010, he enrolled in the Wharton Executive MBA program, planning to be a Finance major but switched to Entrepreneurial Management.

Figure 6.6 Can you see the graphene? You will have to look really close to see the 5″ square sheet of graphene being held by Mike Patterson, the CEO of Graphene Frontiers. This sample includes a few layers of graphene applied to one side of a much thicker sheet of polyethylene terephthalate (PET), which is a safe plastic used for beverage containers. As you can see, it is fully transparent, even with several layers (photo by Michael Tomczyk).

“We believe we have a bold and exciting vision to develop the best company doing graphene research,” he enthused. “We are in discussion with several large corporate partners. We're lucky to be based in Philadelphia because there is a lot of carbon know-how here. Pennsylvania companies have been making super thin graphite films for thermal management and other applications. The steel industry has been making graphite anodes for arc steel. These roots go back over 100 years. We are proceeding very thoughtfully to plan how we as a for-profit venture can work with academic and technology centers in the Philadelphia area. We believe our production technology can help Pennsylvania become a hub of a graphene innovation cluster.”

“We're also looking very closely at the best ways to fund the venture, and how to position our finance message. We need to have a pragmatic message for VCs. If I tell a venture capitalist that we want to build an organization of 50 Ph.Ds that will create a $100 or $200 million business in 10 years, the VC may say that's too long. If I say we want to build a $5 million business around a graphene niche product, the VC may say that's too small.”

“As a new venture, we need to focus and define our goals but we also need to leave some options open. For example, we decided not to focus on touch-screens, which is a very promising market for graphene, but we decided to swallow hard and say, ‘We're not going after that market right now.' We want to build an organization that includes entrepreneurial scientists, a core of people who know we've got something special and want to capture value from it, and who are willing to take the risks involved to get us there.”

Graphene Frontiers is a terrific example of a nanoventure that is moving into a wide-open market where a lot of applications are still largely undefined. To cross the chasm to this market, the venture team has to negotiate some very tricky technical and financial hurdles. One thing is sure. They have no shortage of talent or enthusiasm.

It would seem that manufacturing solutions such as the graphene production, technology being commercialized by Graphene Frontiers, suggests that “smart production” goes hand in hand with “smart products” and this is a challenge that will continue to face all nanoinnovators.

The same properties that make nanomaterials so promising also complicate the commercialization process. Companies like Zyvex, Nantero, Nanosys, and even Intel took years to figure out how to stabilize carbon nanotubes, nanocomposites, and nanoscale architectures so they can be turned into something with uniform consistency and reliable quality. Thus, it's clear that it isn't enough to simply invent a carbon nanotube boat or a chip that uses 3D architectures or a nanocatalyst or nanosized drug molecule, or a new way of designing a battery or solar cell. You have to also invent the production method, and often the production method is more complex than the original nanoinnovation.

The examples included in these company profiles are representative of the many strategies and different types of challenges faced by the first wave of nanoventures. They offer a variety of lessons and insights, and provide just a glimpse of the commercialization process for nanoinnovations. The good news is that current and future nanoinnovators are able to draw on the lessons of this “first wave” to build the next wave of ventures.

6.10 Carbon Nanotechnologies: Early Promise, Not Fulfilled

Since this chapter draws lessons from the first wave of nanoventures, it is appropriate to mention at least one venture that did not work out as planned – noting that there were many of these. The most famous example of a venture that “lost its way” is Carbon Nanotechnologies, Inc. (CNI). CNI was a nanoventure cofounded in 2000 in Houston, Texas by Nobel Prize laureate Richard Smalley. The venture was based on Dr. Smalley's research, which was licensed exclusively to CNI by Rice University. Professor Smalley's death in 2005 drew some energy from the venture, but the real problem was the inability to commercialize its carbon nanotube technologies. In April 2007, CNI was acquired by Unidym, a subsidiary of Arrowhead Research Corporation.

Daniel Colbert – who was a Rice University chemistry professor and a cofounder of CNI – recalls what happened: “The scale-up problems we had at CNI resulted in the company being acquired, basically at cost. The problem was that we ran out of funds before we could scale up our technology. The scale-up problems we had were a great lesson for me because as I later went into venture investing, it made me personally very sensitive to scale-up risk, and served me very well in a number of investments that I looked at.”



  1. 1. O'Reilly, C., III and Tushman, M.L. (2004) The ambidextrous organization. Harvard Business Review, April.
  2. 2. Göran, L. et. al. (2010) Considerations on a Definition of Nanomaterial for Regulatory Purposes. JRC Reference Reports. Page 7.