Kelly Hofer, Haskayne School of Business
May 10, 2019
Energy venture in the 'Startup Valley of Death' sees Creative Destruction Lab Rockies as oasis
You may have not heard of it, but entrepreneurs who have developed products based on fundamental science have been through it. The ‘Startup Valley of Death’ is the point at which most startups die.
Building a science-based venture that is going to radically change the way things are done takes funding. There is the fundamental research that is typically funded by governments and universities. There is product development, which also takes funding. Then there is commercialization.
“The government loves to fund new science,” explains Trevor Best, founding CEO of Syzygy Plasmonics, a venture in the CDL-Rockies Energy Stream. “Companies and venture capitalists love to fund commercialization. Nobody wants to fund product development.”
This is where Creative Destruction Lab comes in. CDL-Rockies is a seed-stage program for massively scalable, science-based companies. Following its first cohort of ventures in 2017-18, it expanded into two streams, Prime and Energy, for 2018-19. In the Energy Stream, located at UCalgary’s Haskayne School of Business, companies such as Syzygy have access to the CDL network of mentors, the Fellows and Associates. These Fellows and Associates have started, scaled and exited companies in the energy sector and they often invest in ventures that demonstrate a track record of achieving objectives.
“We are raising a relatively big round right now — $5 million,” says Best. “We are looking for someone to come in and lead the round and we are hopeful some of the members in the CDL network will participate.”
Taking fundamental science to industry
Syzygy is developing a new kind of chemical reactor that relies on light instead of extreme temperatures to create chemical reactions. Based on discoveries from two researchers at Rice University in Houston, Dr. Naomi Halas, PhD, DSC and Dr. Peter Norlander, PhD, the reactor can revolutionize the process for making commodity chemicals like hydrogen, ammonia and ethylene.
Previous technologies that use extreme heat are costly to build, and burn large amounts of fuel. Syzygy’s technology will allow chemicals to be made much cheaper than ever before, and there is the potential to put the reactor at point of use, providing additional savings by eliminating the supply chain.
Best says he and co-founder Dr. Suman Khatiwada, PhD, “actually went looking for a technology.
“We went looking at all the universities — and eventually we saw this publication from Rice. We started talking with the professors that invented it and ultimately decided to quit our jobs at Baker Hughes and license this.”
Halas and Nordlander are also co-founders in the company and are happy to let Best and Khatiwada do the day-to-day legwork of turning their discovery into a commercial product.
Hydrogen will be the initial market that Syzygy focuses on, with the vision of giving the world an alternative fuel to gasoline, especially for heavier applications that batteries aren’t suitable for.
Many different industrial sectors are starting to see increased interest in hydrogen. It is also gaining the attention of market analysts, with Best being invited to speak at CERAWeek, a major annual energy conference in Houston. “Hydrogen is a $120-billion market today. It is expected to grow more than $60 billion to $180 billion in the middle of the next decade,” he shared with the audience.
Beyond the funding gap
When a new technology is being developed, you not only need funding, you also need to convince people of the possibility. You need to mitigate risks and you need to show how you are going to create value at the end of the day, Best elaborated.
Taking a deep-science discovery to market, Syzygy is a perfect fit for CDL-Rockies. All the CDL sites are based in universities intentionally, to be close to the research-based discoveries that the program is designed to monetize.
“CDL-Rockies has provided Syzygy Plasmonics with introductions to leading scientists and academics in Canada working in complementary technologies with the potential to accelerate and optimize their solution,” says Trent Johnsen, BA’83, associate director, Creative Destruction Lab Rockies. Johnsen is the venture leader who has been working with Syzygy as it progresses through the eight-week sprints in the program.
The CDL Fellows and Associates work with founders to identify objectives they must complete during each stage of the program. The goal each time is to maximize the equity value creation for the venture.
“Everyone there has done it before. They have started and run companies,” says Best of the Fellows and Associates. “Collectively, I think in that room there are probably over a thousand years of experience.” In addition to mentorship, the connection to c-suite executives from global energy companies can often open up field-trial opportunities or other industry connections.
“As a first-time founder, mentorship is key for us,” says Best as he works to navigate past the Startup Valley of Death. “We have this incredible science that was funded by the U.S. government to be developed, we have taken it out of the lab, and now we are turning it into something that industry can use.”
CDL-Rockies was established through the university’s ongoing fundraising campaign, Energize: The Campaign for Eyes High, which is targeting $1.3 billion in support by 2020. The campaign, currently at more than 95 per cent of its overall goal, is helping the university invest in new student experiences, innovation in teaching and learning, and fostering deeper connections with the university.