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Arizona Republic Article

8/7/2009

Tempe Startup Draws Interest from Auto, Military

by Andrew Johnson - Aug. 7, 2009 02:48 PM

The Arizona Republic

 

SDCmaterials Inc.'s tiny technology has garnered huge interest from prominent investors and product manufacturers.   The Tempe startup has spent the past five years developing "nanomaterial" chemical powders its executives say can help produce more

environmentally friendly automobile parts and stronger body-armor plates for the military. 

SDC has yet to begin selling its powders because are testing them, but the firm has attracted millions of dollars of venture capital and assembled a team of highly skilled, high-paid engineers and scientists. The company is among a growing number of developers of nanotechnology, or materials and devices smaller than 100 nanometers. A nanometer is one billionth of a meter. 

SDC focuses on producing nano-size powder dispersions used to accelerate the production of other chemicals and reduce the amount of expensive metals, such as platinum and palladium, used by auto-parts makers, Chairman and Chief Executive Officer Maximilian Biberger said. 

The company also has developed nanopowders used to strengthen ceramics, with a large producer of military body armor now testing the powders, Biberger said.  He could not name the company because of a non-disclosure agreement, he said.   "We can put nanotechnology to use," Biberger said. "We really don't make the final end product, but we make the final end product a whole lot better by adding in small amounts of nanomaterials." 

Biberger, a native of Germany, founded SDC in 2004 with a business partner no longer with the company. Its executive team includes a former factory-operations head at Motorola and a former marketer at Intel.  A key reason nanomaterial manufacturers have struggled is because they developed products in hopes that the various industries would find a use for them, Biberger said.  But SDC identified the auto industry and body-armor market as prime candidates for nanomaterials, he added.  "We actually looked at the end result and then worked our way back," Biberger said. 

But that's not to say SDC hasn't faced hiccups.  An early challenge was teaching customers how to handle the nanopowders, which can pose health risks and burn if handled incorrectly.  "There are a lot of practical barriers to using these kinds of materials," said Nikhilesh Chawla, a professor of materials engineering at Arizona State

University's Tempe campus.   "They're so small, some of this stuff can actually go into the skin, it can get trapped in your lungs," he said, explaining that a nano-size particle is

two to three orders of magnitude smaller than a single piece of hair.   The company realized it needed to change the way it delivered its products to potential customers, said Shawn Beckman, vice president of and finance.   "We assumed that our customers knew a lot more than they actually knew about how to handle these materials," said Beckman, who worked in marketing and finance at Intel in Chandler for 17 years prior to SDC. 

The firm now converts the powders into liquid dispersions that can be added directly to a customer's manufacturing process.  The company has yet to begin generating revenue, forcing it to use its cash reserves wisely.  One method is repetitive manufacturing, where it uses a machine that can produce a variety of different nanopowders by tweaking the ingredients.  The company has two of the machines, which it developed in-house and is trying to , at its Tempe headquarters, where it performs development work. 

Earlier this year, SDC opened a manufacturing facility that houses several identical machines. It eventually plans to open a high-volume manufacturing plant in the United States, Biberger said. 

SDC has financed its development and testing through venture capital, raising more than $20 million through three funding rounds to date.  In July, it closed a $14 million round of funding that included backing from the investment arms of global chemical company BASF, Volvo and others."What SDC has at its core was being theorized by several people for a couple of decades, but no one had been able to make it work, including ourselves," said Keith Gillard, a principal with BASF Venture Capital America Inc. in Fremont, Calif., and a director on SDC's board. "You can imagine our surprise when we found a little startup in Tempe that had actually been successful in this with only a few hundred thousand dollars of angel money. It was pretty shocking."  In addition to development and testing, a large chunk of the investments has paid employees salaries.

SDC has 26 employees in Tempe and five in Germany. Average annual salaries for U.S. workers are in the range of $80,000 to $100,000, Biberger said.


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