The Intentional Entrepreneur

Bringing Technology and Engineering to the Real New Economy

David L. Bodde

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780765614155
• eBook ISBN: 9781317456223
• Topic: Business
• Subtopic: Business General
• Index: Business

The Intentional Entrepreneur will help technology professionals and student of business, engineering, or science learn the art of entrepreneurship. David Bodde emphasizes the real-world experience of men and women who are creating new ventures that will survive in the post-bubble economy. The book adds structure and context to its stories with chapters interpreting recent research on business models, marketing, new venture finance, and intellectual property. Unlike most books on entrepreneurship, The Intentional Entrepreneur gives special emphasis to technology markets throughout.

1

A Tale of Two Entrepreneurs

Adams Field, Little Rock, Arkansas
Friday afternoon, December 3, 1998

Anxious travelers packed the terminal at Little Rock’s airport, and a dark line of approaching thunderheads promised that the customary delays would be even longer. Two entrepreneurs sat in the crowded terminal awaiting their flights home, one to Atlanta, the other to San Francisco. The waiting did nothing to relieve their depression.

The two had invested their most precious resource, their time, in a sponsored forum intended to link emerging businesses that relate to renewable energy with sources of venture capital. Both were questioning the wisdom of that investment. Kevin Bolin, founder and president of EnerTech Environmental of Atlanta, Georgia, had presented his company to a panel of new venture investors and technology experts. The presentation had been thoughtfully prepared and thoroughly rehearsed. It had elicited spirited discussion during the question period and in the halls afterward. But Bolin also knew that protracted negotiations lay ahead before any solid offers for investment might appear. For Kevin Bolin, unresolved issues of financing his company’s growth would accompany him on the flight home to Atlanta.

Maurice Gunderson, a founding partner of Nth Power Technologies, a venture capital firm in San Francisco, had heard the presentations of many start-up companies during the two-day forum. He had tried to contribute helpful suggestions to all the presenters, even when such advice was received with all the enthusiasm of a proposed root canal. He had discovered many interesting business models, some of which might even work, but had found no company that matched his own investment criteria. For Gunderson, an incomplete investment portfolio would accompany him on the long flight to San Francisco.

EnerTech Environmental

Kevin Bolin gazed idly out the window of his homeward flight, the enforced leisure giving opportunity to reflect on the events that had brought him to this place and time. The road to Little Rock had not been the unerring progression of triumph that one reads about in the success magazines. Rather, EnerTech’s progress showed the more common experience: promising starts, a rueful learning from events, and a fresh start with an improved business model.

A Family Matter

They got the news in early 1993 while driving north from Atlanta to a family wedding. On their way out the door, Kevin and his wife, Laurel-Ann, had grabbed a stack of letters to open in the car. Among the bills and assorted junk mail was a letter from the National Science Foundation notifying them that the company they had formed in February 1992, EnerTech Environmental, had won a $50,000 federal grant. The grant from the Small Business Innovation Research (SBIR) program¹ would pay for a series of tests needed to validate the new firm’s core technology, the SlurryCarb Process.

But the value of the grant reached beyond mere money. This first external confirmation gave hope that the technology developed within Bolin’s family might actually offer enough value to support a commercial enterprise. The psychological lift was priceless. The money wasn’t bad, either.

The chemical process that came to be known as SlurryCarb had been invented by Norman L. Dickinson, Bolin’s maternal grandfather. Dickinson had retired in his mid-fifties from M.W. Kellogg, a large engineering and construction firm, where he had been employed as a chemical engineer. In retirement he had pursued his real ambition, chemical process inventions. The first patent that would become the basis for SlurryCarb was issued in October 1981, and over the next fifteen years, Dickinson broadened and deepened his capture of the relevant technologies with over a dozen U.S. patents.

This would have been an impressive achievement for any person. But Dickinson, born in 1915, created the basic technologies at an age when conventional wisdom suggests that idle reminiscence is one’s chief mental activity. His energy and persistence were driven by a fundamental belief in the value of his creation, and a desire to see it put into practice.

Like many process innovations, SlurryCarb is an aggregation of related technology pieces. No single patent covers its entire scope, but the base of intellectual property, taken as a whole, serves to protect this rather simple, flexible chemical process. The process that emerged from this fifteen-year evolution converts municipal sewage sludge (or other organic wastes) into a uniform, pumpable, slurry fuel suitable for combustion, co-firing, or reburning in industrial and utility boilers. The manufactured slurry fuel can be pumped and transported through pipes or tankers to industrial and utility users, where it is stored in tanks and used as needed as a supplement or substitute for conventional fuel sources such as coal or oil. With environmental and economic advantages over current methods, the current EnerTech process can stand alone or mesh with existing or planned waste-disposal strategies.

An Answer in Search of a Question

Neither the growth path that this technology would take nor the business model that would best convert its technical promise into economic reality had been obvious in the beginning. EnerTech had grown out of a company started by Norman Dickinson in the early 1980s called DIPAC, an acronym for Dickinson’s Pure Air Combustion. DIPAC would earn its cash by licensing the basic technology and would serve as the platform through which the patent base would be deepened and extended. But after ten years’ work, only one license had been signed despite notable technical progress. Like many technologists, Dickinson had little interest in marketing, and so did not pursue it aggressively.

By the early 1990s, Dickinson had become frustrated by the pace of events, and so began a series of discussions with Kevin Bolin, his grandson. Bolin seemed an unlikely candidate to participate in a technology start-up. Graduating from Notre Dame in 1985 with a bachelor’s degree in accounting, Bolin had worked in public accounting for KPMG Peat Marwick and as a media salesman for an Atlanta television station. As he grew restless at his TV job, the opportunity that Dickinson had posed began to resonate within him. Bolin had always been an enterprising person, holding three entrepreneurial jobs while in college. The opportunity for another such experience became compelling.

And so in February 1992, EnerTech Environmental was formed as the commercial platform for Dickinson’s waste-to-fuel technologies. Bolin remained employed at the TV station until November of that year, and his wife, Laurel-Ann, also left her job practicing corporate law at an Atlanta firm. After a two-month break for travel, both plunged into the EnerTech venture full time.

First Business Model

In the beginning, the business model for EnerTech owed much to the thinking that had founded DIPAC. It would be a licensing company, building a proprietary position through the inventive genius of Dickinson and licensing the technology to developers and users for an appropriate fee. This strategy gained apparent validation when a Canadian company came across a Dickinson patent that matched its own in-house technology. Realizing that they would have to license if they wanted to practice the technology in the United States, the Canadians contacted EnerTech. The license, however, was for a peripheral invention, and not for EnerTech’s core technology. Even so, it reinforced Bolin’s belief in the licensing model, and Kevin and Laurel-Ann set out to market the company and its capabilities.

The marketing challenge derived from the technological origins of the company. Despite their technological successes, neither the Bolins nor Dickinson were known within the waste disposal industry. Articles in technical publications helped add credibility, as did EnerTech’s affiliation with the business incubator at the Georgia Institute of Technology and a second federal grant from the SBIR program. Even so, they found it difficult to attract more than casual attention without a tangible demonstration of the technology.

The Technology Demonstration

Small-scale tests had shown enormous promise for EnerTech’s core technologies. But chemical processes are notorious for glitches that appear only in full-sized plants, and Bolin had estimated that a demonstration large enough to be credible might cost as much as $14 million. EnerTech was caught in a classic trap for the early-stage technology company. On the one hand, without a demonstration at near-commercial scale, EnerTech could not convince potential customers that the technology would actually perform. But on the other hand, the company could not raise funds for the demonstration plant in the absence of some confirmation of performance. Customers seemed to hold the philosophy that, while the early bird might get the worm, the second mouse usually gets the cheese.

Rising Sun, Rising Hope

EnerTech’s relationship with Mitsubishi began at a trade show in late 1994. The Japanese conglomerate quickly became interested in the core technologies, which offered a solution to two long-standing problems for their crowded island: fuel security and waste disposal. After a year and a half of tough negotiations, Bolin found himself with a shelf filled with well-worn “how-to-negotiate-in-Japan” books and a signed agreement. Mitsubishi, leader of a Japanese consortium of four companies, gained a license to use the EnerTech process throughout Asia. In exchange, Mitsubishi and its partners would: (1) build the demonstration plant; (2) turn over to EnerTech the know-how derived from the plant for use in the U.S. market; and (3) pay EnerTech a cash fee of $500,000.

The plant was commissioned in March 1997, at Ube City, Japan, with Kevin Bolin and Norman Dickinson attending. A three-year technology demonstration would be performed under a research protocol largely dictated by the Japanese government, which had also put money into the project. The project, however, soon encountered difficulties.

First, the Japanese elected to use municipal solid waste as feedstock, following the precedent set by EnerTech, which from the beginning had focused its technology development on that material. However, municipal solid waste in Japan differs significantly from that in the United States, chiefly due to a much higher plastics content. This raised unanticipated technical hurdles, as the plastics tended to clog the pipes of the demonstration plant. And with the technical hurdles, the cost of the project swelled beyond the $14 million originally estimated.

At the same time, the economic recession in Japan deepened, and companies fabled for their patient technology development came to recognize some very near-term constraints. After one of the consortium partners dropped out, others followed quickly. The Japanese companies completed the demonstration, but delayed indefinitely their commercial use of the waste-to-fuel technology.

From Bolin’s perspective, however, the demonstration plant proved the effectiveness of the technology and contributed three precious jewels to the EnerTech crown: credibility in the U.S. marketplace, know-how concerning the commercial-scale SlurryCarb process, and strategic insight concerning the real nature of the opportunity.

Rethinking the Opportunity

While the demonstration proceeded, doubt began to grow in Bolin’s mind about the ability of the licensing model to capture the value inherent in the technology. Most obviously, there had been no licenses negotiated since Mitsubishi and the original one with the Canadian company, and neither firm appeared likely to make commercial use of the technology any time soon. This hint from the marketplace became increasingly hard to ignore.

But other subtle and powerful forces were also at work. Whether licensing or not, Bolin recognized that the technical credibility was not, by itself, enough. In addition, he needed a marketing capability that would give EnerTech a deep understanding of the U.S. waste-disposal market and a network of contacts in that market. For this, he hired Charles Carter in August 1997.

Carter had thirty years’ experience in environmental and waste-conversion markets, previously serving as president and chief executive officer of the Bedminster Bioconversion Corporation, an environmental engineering firm. At Bedminster, Carter had structured and negotiated municipal solid waste and sewage sludge composting projects. In his four years there, he took the company from the development stage to market success, with $40 million in construction revenues and over $200 million in pending negotiations.

Now executive vice president of EnerTech, Carter brought to the company a deep understanding of the culture and economic imperatives of EnerTech’s target customers; and he had the gray hair to prove it. Among his first priorities, Carter reexamined the nature of the opportunity afforded by EnerTech’s growing technology base. His conclusion matched Bolin’s: The licensing model was unlikely to succeed, and EnerTech would have to develop its own plants if they were to be built at all.

Rethinking the Technology

From the beginning, EnerTech had focused its attention on municipal solid waste, and its federal grants had supported technology development for that market. But the accumulating experience from the Mitsubishi demonstration plant led Bolin and Carter to question that focus. While the technical difficulties afflicting that plant could be fixed, the solution would impose higher capital costs. Too few markets in the United States seemed capable of bearing those costs, and in most cases, the alternative disposal method—a municipal landfill—would be more economical. Faced with these stark realities, Bolin and Carter began sniffing around for an alternative feedstock.

The plain candidate was municipal sewage sludge, principally human waste treated by the sewage systems of urban communities. As a feedstock, this material offered several advantages. First, it is relatively uniform in content, thereby eliminating the difficulties imposed by plastics and other materials incompatible with the SlurryCarb Process. Second, it comes in a liquid form, thus saving a costly processing step. And third, EnerTech could compete well against the alternative disposal methods, which tended to be more costly and raised unpleasant social issues.

Armed with a new business model and feedstock, Bolin and Carter then turned to building the company. The push toward commercial-scale plants would also require a much stronger engineering capability, so the company hired two experienced engineers early in 1998. One of these was Heinz Ropers. As senior vice president for engineering and technology, Ropers brought to EnerTech twenty-five years of chemical engineering experience. His Teutonic thoroughness and efficiency would set the tone for technology development in the company. Between Carter and Roper, EnerTech had acquired half a century of engineering expertise and industry experience. By contrast, Kevin Bolin the accountant, was thirty-four years old.

The Road Ahead

Bolin recognized that many aspects of EnerTech had become stable, though not set in stone. The SlurryCarb technology and its implementation in practical, economical plants had plainly become the core capability of EnerTech Environmental. And the business model had centered around building and operating these plants. As he looked to the future, Bolin saw the next great challenge as financial. To be sure, EnerTech was expecting $1 million in new investment capital from a wealthy environmentalist with an interest in new businesses. But EnerTech would need much more capital to grow.

Bolin pondered these financial issues as his plane approached Atlanta in the December dusk. How could EnerTech secure the resources to expand at a pace that matched the scale of the opportunity? Could the company really generate the exponential growth in valuation that was being demanded by professional venture capital investors? And how would EnerTech maintain its progress if the funds were not immediately forthcoming? The questions proliferated. The answers did not.

Nth Power Technologies

Maurice Gunderson squirmed to accommodate his six-foot, five-inch frame to the meager room offered by his coach-class seat. He was not looking forward to the five-hour flight home in a space presumably designed by the interrogation squad of the Bosnian secret police. Not that this act of compression was unusual. To the contrary, Gunderson had spent many hours in airplane seats since launching Nth Power Technologies with partner Nancy Floyd in August 1993.

If EnerTech was born of a technology insight, Nth Power was born of a market insight: that the wave of state and federal deregulation that would follow the Energy Policy Act of 1992 would create enormous opportunities for entrepreneurs in energy. Yet there were no venture capital firms with special expertise in deregulating industries and energy. Nth Power was created to fill that void.

The Founders’ Insight

Both Gunderson and his cofounder Nancy Floyd were experienced entrepreneurs, which is to say they had actually made money—lots of money. Prior to cofounding Nth Power, Floyd had built and sold three energy and telecommunications companies. In the energy arena, she founded NFC Energy Corporation, an independent power company utilizing advanced technology developed by NASA and Sandia Labs. She developed over $30 million in projects and sold the company after three years, generating a twenty-five-fold return on the original capital investment. In 1984, while at Pacific Telesis, Floyd helped found and spin off Spectrum Services, a network management company for private voice and data networks. Spectrum Services was ultimately sold to IBM in 1987.

Her experience with Pacific Telesis left Floyd with two insights that were to shape the Nth Power idea. First, she c...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Tables and Figures
• Foreword
• Preface and Acknowledgments
• Introduction
• 1. A Tale of Two Entrepreneurs
• 2. Creating the Opportunity
• 3. Marketing the Better Mousetrap: A Technologist’s Perspective
• 4. Evolution and Competition in Technology Markets
• 5. Technology and the Fight for Competitive Advantage
• 6. A Tale of Two Entrepreneurs: The Journey Continued Through Heights and Valleys
• 7. New Venture Finance: An Entrepreneur’s Perspective
• 8. Building Competitive Advantage from Intellectual Capital
• 9. Corporate Entrepreneurship: Two Perspectives
• 10. The Real New Economy
• 11. Toward a Personal Entrepreneurial Strategy
• Notes
• References
• Index