To say we are a nation of entrepreneurs would be an understatement. More than 25 million small businesses operate across the country, according to the latest U.S. Census Bureau estimates. About 40 percent of those are in high tech industries.
Behind these numbers are often intensely personal stories. This is the first in an occasional series of columns that will follow several startup companies as they attempt to develop and market their innovations. Some have substantial venture capital backing; others are go-it-alones. All are seeking to capitalize on disruptive technologies — Web services, new composite materials — or emerging trends, such as concern over the environment.
These enterprises can spring from almost anywhere: university research departments, major corporations, or even a neighborhood garage. Many are inspiring stories. Take, for example, Robert Rod’s. A lifelong entrepreneur, Rod has always lived by the inventor’s code: If you build a better mousetrap, the world will beat a path to your door.
In the 1950s, he developed a fuel-measuring system that increased the range of U.S. ballistic missiles. The government bought it, and he founded a thriving aerospace company on Long Island. Eventually, he sold it with the intention of retiring, but his concern about unsafe pesticides led to a second career. Although in his 80s, Rod bought the U.S. patent rights to a pesticide made from orange peel extract and launched Rod Products Co. to market Bugs ‘R’ Done.
It’s so safe the Environmental Protection Agency (EPA) has given the pesticide its least hazardous rating — Category IV. As such, a first aid statement and warning label are unnecessary. Yet, it kills even the hardiest insects, including cockroaches, by dissolving the waxy lining of their breathing passages, causing suffocation.
He may have built a better mousetrap, but the path to his door has been blocked by the realities of the marketplace. Shelf space is scarce, and companies often must pay steep stocking fees to get in retail stores. In addition, most regional distributors won’t touch a product unless it has $10 million in sales; “Bugs” has about $1 million.
Rod, who is now 86 and has endured a heart valve operation, a double bypass, and two stomach aneurysms, is still at it. He has been able to get his product in some Whole Foods Stores, but his goal now is to license it to a major manufacturer. “That way, we don’t have to worry about advertising, marketing, and distribution. By licensing we can sit back and collect royalties,” he says.
Licensing a product is often the end-game for many startups. In Utah, Advanced Composite Solutions, a 15-employee company founded in March, is attempting to market a design innovation developed by Brigham Young University. Known as an “IsoTruss,” the lattice-type design (based on an isosceles triangle) can be used to create a structure out of carbon fiber and Kevlar that has more than twice the weight-to-strength ratio of steel. What’s more, it can be “tuned” during production to give it different attributes.
To demonstrate its properties, the company has begun producing a mountain bike frame through a subsidiary, Delta 7 Sports. It’s stiffer and up to two pounds lighter than any other frame. And through tuning, it’s more impact resistant. The design can be used for everything from utility poles to aircraft and auto parts, says Marketing Director Lester Muranaka. Composite auto frames, axles, and driveshafts could cut a car’s weight by 40 percent with no loss in strength.
Production, however, is the bottleneck. Right now, each bike frame is handmade. The company, which is seeking $4 million to $10 million in venture financing, is working on a way to automate and mass produce various applications, a goal that is 18 months out. “The value of the company is developing automation,” says Muranaka.
The digital technology revolution has become the biggest source of innovation since the steam engine. New York City-based Motionbox is one of countless companies attempting to leverage the Internet. It’s trying to capitalize on the explosion of video cameras and camera phones by offering a Web-based service that makes it easy to upload, organize, enhance, and share personal videos with family and friends.
“As people go through the device upgrade cycle, they are getting very high grade camcorders; it’s just a whole new world,” says Chief Executive Chris O’Brien. “Projecting out a few years, they’ll have incredible, high-quality video with no way to share files that are huge.”
The company offers reliable online storage and tools to make the most of personal videos, and it’s starting to sell related products. The 25-employee company received an infusion of venture capital in 2006 from Silicon Alley Seed Investors and Canaan Partners in Connecticut. It will start seeking a second round this week, O’Brien says. From there, it’s a matter of developing marketing and sales.
Whether it’s getting a product onto store shelves, developing a promising new technology, or tapping the Internet to launch a new service, almost all startup companies face hurdles on the way to market, no matter how promising the product. Access to capital and labor, marketing, production, and distribution are all potential stumbling blocks. In some cases, competitors can present big obstacles as well.
I’ll follow these companies and others as they develop their businesses. If you know of a promising startup story, e-mail me with the details and I’ll try to include them as well. From time to time I’ll even write about my own efforts to join the digital revolution with a Web site project I’m developing. Like they say, build a better mousetrap…