Time to Take the Leap?

Start my own company. Most engineers dream about it, but relatively few will ever abandon a steady paycheck to launch their own business.

Yet think of some of the most admired engineers through the decades, and you'll find those names dominated by people who leveraged their technical know-how to spawn innovative companies. Among them:

Evidence that the fires of entrepreneurship still burn bright are evident in the logjam of U.S. patent applications and the record number of people—some 2.5 million—who sought help from the Small Business Administration last year. "Take a look at the technologies associated with new patents, and you get a good idea of where the next flurry of start-ups will come from," says Chad Moutray, chief economist for SBA's Office of Advocacy.

To find out what it takes to become an engineer-entrepreneur, Design News looked at four companies founded by technical professionals. Their profiles give a glimpse of the exhilaration—and frustrations—of being your own boss.

EnergyCS: Pushing the Range of Hybrids

Hybrid vehicles have definitely arrived. Toyota is selling its Prius gas-electric hybrid at the rate of 11,000 a month—more than the entire Mercury line—and is planning to build a U.S. factory to produce the coveted car. Other automakers also are ramping up hybrid introductions. J.D. Power-LMC Automotive Forecasting predicts that the number of hybrid models will jump from 10 today to 44 by 2012.

In Monrovia, CA, two electrical engineers think they can do a whole lot better than the 50 mpg that the Prius delivers. In the midst of doing contract projects for alternative energy systems at their R&D firm, Greg Hanssen and Pete Nortman managed to get their hands on one of the first Prius models to hit U.S. shores in the fall of 2003. "We immediately took it apart," recalls Hanssen.

A few months later, the engineers had their first prototype of a "plug-in" hybrid, a vehicle that has tested at between 120 and 180 mpg for the first 50 to 60 miles of driving-easily inside the daily driving range of many car owners.

What the engineers did was to swap out the stock Prius 1.3 kWh NiMH battery for a 9 kWh high-energy lightweight lithium-ion battery pack from Valence. They also substituted their own control system for the Toyota controller. Among the components in the EnergyCS design: cell monitoring and balancing for the lithium batteries, as well as pack voltage and current sensing, fan and charger control, user display, and flash data recording. The battery pack can be charged with the on-board 120-140V charger in less than eight hours. At lower speeds, the vehicle may run without burning any gasoline at all. When the battery is depleted, the control system emulates normal Prius operation.

The EnergyCS plug-in design proved its worth in May at the Tour de Sol's Monte Carlo-style rally at Saratoga Springs, NY, where the vehicle won first place in the modified hybrid-vehicle category for both fuel-efficiency and performance, achieving 105 mpg. What's more, it took only nine kilowatt hours of electricity to charge the Valence lithium-ion batteries—at a cost of less than a dollar.

While acknowledging that his tiny, 8-person company must still battle costs to make the system affordable, Hanssen describes the technology itself as a "slam dunk."

Earlier this year, EnergyCS joined with Clean-Tech, a Los Angeles systems integrator, to form a joint venture called EDrive, which will install retrofit kits of the plug-in hybrid system beginning in 2006. Projected cost: about $12K. Target markets include California's army of electric vehicle enthusiasts, as well as utilities and municipal fleets.

The engineers don't expect to get "Bill Gates" rich with their new operation, but they see alternative fuel designs becoming more and more mainstream as automakers introduce their hybrids. "Car owners won't change their habits unless they are given the choice," observes Nortman, whose engineering experience includes a stint with Paul MacCready's prestigious AeroVironment operation. "We may look like the lunatic fringe, but so were the people who put their cans out for recycling 15 years ago."

Nantero: Chasing the "Next Big Thing"

Anything "nano" turns heads in the engineering world, but Nantero, a Boston area startup, may well be one of the first to make big money in the burgeoning nanotechnology field. The company already has attracted more than $31 million from five leading venture capital firms, whose managers are smitten by Nantero's patents and development work in a new type of computer memory that harnesses carbon nanotubes.

Called NRAM^™ (Nanotube-based/Nonvolatile RAM), the new technology was invented by company co-founder Thomas Rueckes, who completed his chemistry Ph.D. at Harvard. Together with Harvard MBA Greg Schmergel and fellow Harvard chemist Brent Segal, Rueckes started Nantero in 2001—in effect, turning his Ph.D. thesis into a company.

Rueckes claims that NRAM will be faster and denser than DRAM, consume substantially less energy than DRAM or flash, and be highly resistant to environmental forces, such as heat, cold, and magnetism. The Nantero founders also see it being used as a "universal memory" chip that can replace DRAM, SRAM (static RAM), flash memory, and eventually hard disk stories. The potential payoff is enormous, with the annual market for memory devices estimated at $100 billion.

The key to the company's success, however, will be its ability to get the technology from the lab idea stage into real production, and the Nantero principals think they're well on their way. Says Rueckes: "We've been able to attract the support of venture capitalists because we had a real engineering plan on how we can build a product using carbon nanotubes as the electrically-active storage element."

Schmergel adds that Nantero was quick to forge partnerships with established companies in the semiconductor field, which has helped build credibility for the fledgling company. For example, LSI is working with Nantero on an embedded NRAM for ASICs. The goal: production samples of an embedded NRAM chip from LSI in 2006 and commercial product by the end of 2007. And working with ASML, the world's leading lithography equipment maker, Nantero built an array of ten billion suspended nanotube junctions on a single five-inch silicon wafer. Nantero's design uses these junctions as memory bits, with the "up" position representing bit zero and the "down" position representing bit one.

Such ties have impressed venture capitalists. "Nantero's multiple partnerships validate the enormous market potential of this technology," says Ullas Naik of Globalspan Capital Partners, the lead investor in $15 million of new funding for Nantero, announced in March. "Few, if any, nanotechnology companies have made the transition from lab to fab the way Nantero has."

Schmergel does not expect that Nantero will need additional large infusions of capital. Rather than produce the NRAM chips itself, Nantero will license the technology to semiconductor manufacturers.

Now that NRAM has survived tough reliability tests at LSI, Rueckes is convinced that the technology is sound and that the real challenge now is to improve manufacturing yields. He also must educate engineers about the advantages of the technology, such as parts reduction and simpler circuit designs. "Engineers enjoy working with new and exciting technology, but they are always cautious about taking risks," explains Rueckes.

Looking back, the Nantero founders believe they have gotten off to a good start largely because they had the right team. Still, they don't minimize the challenges. While the German-born Rueckes insists that the climate for entrepreneurship is much more encouraging in the U.S. than in Europe, he observes: "It is always difficult to start a new company."

AngioDynamics: Health Care for Baby Boomers

In June, Business Week ranked AngioDynamics among its Top 100 Growth companies, with revenues of $60.5 million and an annual sales gain approaching 25 percent. But as far as founder Eamonn Hobbs is concerned, his medical device firm is behind schedule. "When I started the company in 1988, I had a five- year plan to be at $100 million," says Hobbs, who earned a bachelor's degree in plastics engineering from what is now the University of Massachusetts-Lowell.

Unfortunately, recalls Hobbs, he launched his company at the very time that David Kessler was beginning his tenure as commissioner of the Food and Drug Administration. In response to scandals involving generic drug makers, Kessler "converted FDA from a regulatory agency to an enforcement agency," according to Hobbs, whose company manufactures catheters and other devices to treat vascular diseases.

As Hobbs remembers it, FDA's "adversarial relationship with industry" lengthened the approval process and played havoc with his new company's business plan. "We had to scramble to make ends meet," he recalls.

Now, the FDA pendulum has swung the other way, and Hobbs no longer fears the agency. Located in the Adirondacks community of Queensbury, NY, the company is always moving one or more products through the FDA mill.

Why build a company around medical plastics? "It is a very gratifying business," says Hobbs. "You get to see patients smile because they've been cured and were spared trauma because your device made minimally invasive surgery possible."

Vascular surgeons and interventional radiologists use the company's balloon catheters and other devices to treat peripheral vascular disease (PVD). This condition, which affects 11 million Americans annually, involves blockages—often with severe associated pain—in arteries and veins that carry blood to the legs, arms and vital organs. One especially deadly consequence of this condition: pulmonary embolisms, which kill 250,000 annually in the U.S.

"PVD is growing rapidly and is now affecting the baby boom generation," observes Hobbs. "But unlike past generations, who might have put up with the pain, baby boomers have no tolerance for health problems that are going to slow them down."

Over 50 percent of the public company's sales come from products unveiled in the last five years. One key introduction—VenaCure^™—combines a medical laser with the company's proprietary catheter delivery system to treat varicose veins. The procedure takes just 45 minutes.

Many of the new product ideas stem from Hobbs' own close relationship with the medical community. "You've got to spend at least half of your time with your customers," he stresses. In April, the Society of Interventional Radiologists (IR) named Hobbs an honorary fellow for his long partnership with that medical specialty.

Above all, the Angiodynamics CEO insists that the essential prerequisite for any entrepreneur is passion. Says Hobbs: "If you believe that you can do something better than anyone else, the customer base is going to pick up on that, and you'll be successful."

Daktronics: Scorekeeper to the World

If you've admired the dazzling color and video displays at a major league ballpark or NFL stadium, there's a good chance that scoreboard was made by a company called Daktronics. Based in the unlikely spot of Brookings, SD, the company was founded in 1968 by two South Dakota State University electrical engineers—Aelred Kurtenbach and Duane Sander. Since then, it has manufactured more than 75,000 scoring/display systems for more than 37,000 customers. Its fiscal 2005 sales: $230 million.

Looking back, Daktronics Chairman Kurtenbach admits that he couldn't envision such growth in the early years of the company, when he personally peddled its first products—wrestling-match scoreboards and electronic voting systems for state legislatures. "We were just focused on survival," recalls Kurtenbach, who earned his engineering Ph.D. from Purdue.

Sustained in part by funding from local South Dakota investors, the company became the leader in voting systems within five years and got a big break in the sports market by winning scoreboard contracts in the 1980 Winter Olympics at Lake Placid. Now, sports installations account for about 60 percent of the company's sales, with the balance coming from displays for a long litany of applications—ranging from airport and train terminals to banks, shopping centers, and entertainment establishments.

Key components of the company's large scoreboards include: hundreds of LED modules, PC-based control systems, high-data-rate fiber optic transmission, proprietary software, and integrated video systems. The mammoth Daktronic scoreboard at the Cleveland Indians' Jacobs Field, for example, measures 40 ft high by 90 ft wide and contains some 4,000 high-resolution LED modules. At Dodger Stadium, Daktronics this year installed the world's longest LED display—extending 1,114 ft along the ballpark's upper fascia from the edge of the left field seating to the edge of the right field stands.

As Kurtenbach sees it, customer satisfaction is at the heart of Daktronics growth. "Our strong suit is service," he says. "We do custom design, have a strong after-sales network, and assist customers in content development for our displays." He also credits continued advances in technology with helping to keep costs under control, which has widened the customer base.

Kurtenbach traces the roots of his entrepreneurship to growing up on a farm and to his days at Purdue, when integrated circuits were beginning to transform the electronics world and engineers were talking about starting their own companies.

But it wasn't until Kurtenbach returned to South Dakota and joined the SDSU faculty that he took the plunge into business. In fact, his long ties with that university have played a major role in the company's success. Of Daktronics' 1,200 employees, about a third are SDSU students—many of them from the engineering school. Most work full time in the summer and part time during the school year. The company's current president, electrical engineer Jim Morgan, was one of the first students hired by Daktronics.

For engineers contemplating starting their own companies, Kurtenbach stresses the importance of developing a sales attitude. "Selling is just another term for helping people," he says, "but some engineers don't appreciate the cost and challenges of developing a market."

Ultimately, the real challenge for engineers and for anyone wanting to start a business is simply taking the first step. "Just do it," urges Kurtenbach. "People are afraid to get out of their comfort zone, but the risks may not be as great as you think."