L. A. SECTION ENTERPRISE CHAPTER

On November 1, 2005, in one of the most comprehensive presentations the AIAA Enterprise Chapter has heard, Barbara K. McQuiston, President of McQuiston & Associates covered the ingredients for success in a technology firm in a meeting at the AIAA Western Office. She speaks from an extensive background with technology in its early stages, working closely with schools, universities, institutes, startups, and government R&D agencies. She is Director of Business Development of QWIP Technologies, Inc. and sits on the Board of Directors and Advisory Boards of other companies. Following the general discussion on technology enterprises, she presented information about a specific product line offered by QWIP Technologies, Inc.

To be successful, the entrepreneur must possess a particular set of personal characteristics: innovation, vision, long-term commitment, a strong work ethic, stamina, flexibility, ability to make prompt decisions, and optimism. He also needs family support and resources to draw upon. He must be able to live on the edge: i.e., to deal with risk and adversity, sharing ideas with other people in a creative and constructive way, and fixing problems. Once he sets off on his journey, there is no turning back.

Business expertise is required as well as technical expertise. In starting a company, it is also important to find people who you enjoy working with and who you personally trust. Choosing the wrong partner can lead to failure even if everything else is in place. Careful vetting of new hires is also very important during the startup of new enterprises, and a carefully selected scientific advisory board can be very helpful.

The foundations of a successful enterprise include a unique proprietary idea or technology applicable to several products, excellent execution of product development and business plans, being first in the market, and carving out a niche in which small size and agility provide a distinct advantage. Finally, the products and services of the firm must be in harmony with the core values of the entrepreneur.

For innovative technical products, market research cannot rely on existing users but must anticipate new uses. In order to do so, the entrepreneur should establish contacts with knowledgeable engineers, scientists, and professors, and seek feedback from DARPA and other innovative agencies. These people are generally very forthcoming when asked. Patent searches bring perspective to the state-of-the-art and eliminate blind alleys, and early accumulation of research patents helps the entrepreneur maintain a firm foothold in his market niche. When dealing with a new technology, it is helpful when the technology can applied to several new products. The entrepreneur must believe in his product/service and must be enthusiastically persistent in selling it, using all forms of contact: personal letters, calls, ads, business cards, technical conferences, etc.

Raising the necessary financial resources is a paramount concern. The amount is driven by the initial size of the enterprise and its growth rate. The principals in small companies often invest their own capital. This approach gives them more freedom of action than if outside investors are involved. Government contracting requires less capital than commercial business, especially if cost-plus contracts are involved. If the company grows beyond the support available from these initial investments and available SBA and bank loans, however, new investors are needed. The screening process to obtain venture capital can be quite demanding and lengthy. Venture capitalists (VC) often drive a hard bargain, because not all their investments are successful and because they desire a quick return. It is important to establish a fair value of the company before the VC investment, and care must be taken to establish the proper degree of management involvement by the VC. Rewards for success and penalties for failure on the part of the VC and the original investors, respectively, must be properly understood when the deal is made.

Regardless of the amount of capital raised, disciplined financial stewardship is a must, especially in the early days, when the cost structure of the operation is not well known. Hard work and long hours are needed. Fixed costs and overhead must be kept low. Cash flow is king! Frugality trumps luxury. Keep legal fees low. Reinvest in the company.

Numerous lessons learned by McQuiston in recent years were mentioned. One key lesson is the necessity for flexibility, the capability to expect the unexpected. Without a market, the company will not prosper. Once a marketing niche has been identified, it is necessary to build up expectations, but it is also necessary to meet those expectations by building enough of a quality product to meet demand. Reward early customers and make sure the proper tension between marketing and manufacturing departments is maintained: not over-promising on product performance or producing more than the market can absorb. Watch cash flow carefully, but don’t shortchange resources in crucial areas. The most important commodity is time, and it must be used wisely. Do your homework before talking with investors and, before accepting new investors, be aware of how private and public investments differ in their impact on the operations of the company. Know how much risk and leveraging you are willing to assume. Finally, remember that people are the hardest resource to manage, potentially the most valuable or the most destructive.

McQuiston went on to describe her experiences with QWIP Technologies, Inc. This company is a wholly owned subsidiary of the Rainbow Group of Companies based out of Edmonton, Canada. It specializes on focal plane arrays (FPA’s) consisting of QWIP’s (Quantum Well Infrared Photodetectors). By sandwiching a material between materials with higher energy bandwidths, a "well" is formed which, when approaching angstrom dimensions, permits only a certain number of "carriers" (e.g. electrons) to occupy it. Using a bias voltage, the carriers can be collected at electrodes to generate signals. Originally individual photodetectors were developed at Bell Labs to find objects in outer space, but they have many other potential applications, such as: non-destructive testing, process control, maintenance inspection, thermography, security, search and rescue, scientific, and medical uses.

The original developers of this technology moved from the Bell Labs to the Jet Propulsion Laboratory (JPL), and work as subcontractors to QWIP Technologies. Thus the company can tap this valuable source of knowledge and JPL can leverage its research into practical commercial applications, a win-win for both organizations. Originally geared to one frequency band (color), there is an increasing need for multi-colored QWIP’s. A particularly interesting military application at present is the use of multispectral FPA’s for mine detection. Surface soil and soil below the surface vary in grain size because weather washes off the smaller grains in the surface soil while the larger ones remain. When mines are planted, the soils become mixed so that many smaller grains are brought to the surface. Multispectral QWIP’s detect the disturbed areas from the undisturbed, thus pinpointing the location of a mine or an improvised explosive device. These areas can be detected at large distances. DARPA is evaluating these devices and they may become operational in a relatively short time.

For more details of Barbara McQuiston’s presentation, including pictures of these devices and their visual outputs, see the AIAA Los Angeles Section Enterprise Network web site, www.aiaaenterprise.org, click on Archive of Speaker Presentations at Chapter Meetings, and then clicking on the Download Slides package next to her name.

Guido Frassinelli