Is it possible to make money from science in New Zealand?
“As I sail my boat in Auckland harbour and look at the skyline of the central business district I don’t see any businesses based on science,” said entrepreneur Dr Brett Wells at the recent MacDiarmid symposium. “What I see are mostly service industries. Without the big technology companies or venture capitalists, like they have overseas, you begin to wonder if it is possible to make money from science in New Zealand at all.”
But, Brett’s own experience is proof that you can. He is the founding director of Aeroqual Ltd, a successful Auckland based company which sells high-tech sensors for air quality measurement to customers around the world. At the recent MacDiarmid student and post-doc symposium, which centred on the theme ‘How to Make Money from your $cience’, Brett told the company’s inspiring story.
“The Aeroqual story particularly fascinated me,” said Paul Callaghan former director of the MacDiarmid Institute. “It seems to be a model for the way we can turn science into technology in New Zealand and it’s very different from overseas models which rely on large investment. Aeroqual had a product from day one and took small steps at a time, earning the right to grow. They don’t worry too much about patenting but focus on making products that customers actually need. This is a model that many successful New Zealand businesses have followed and it’s rather different to one that might apply in Silicon Valley or Boston or somewhere like that.”
The chemistry on which Aeroqual’s sensors are based has been developed by MacDiarmid Principal Investigator and Auckland University Professor David Williams. The work began more than thirty years ago at the Atomic Energy Authority in the UK, where David was leading a programme investigating the measurement of oxygen in vehicle exhaust pipes. His team discovered a group of materials (semiconductor oxides) that change their properties when exposed to different gases in the air – ozone, nitrogen dioxide and other common pollutants. Seeing a clear market opportunity they secured venture capital funding to develop sensors for specific applications.
It was at the Atomic Energy Authority that David met fellow New Zealander, Brett Wells, who was doing his PhD. Years later, back in New Zealand, the two reunited and hatched a plan to start a company.
“We saw an opportunity,” said Brett. “We identified there was a gas monitor market and a gas analyser market and saw a definite gap in between.”
Analysers were accurate but expensive; Monitors cheaper but less accurate, giving only basic information. With a little investigation they discovered a whole range of markets around the world where people want to answer more sophisticated questions about air quality but don’t want to pay the price.
When Aeroqual went to market in 2003 they specialised in ozone sensors selling a lot of equipment to cold store companies managing the shelf life of foods.
“As a small company you’re not going to get 100 million dollar contracts immediately,” Brett told the Symposium. “Our objective was to build multiple niche markets and become cash-flow positive as quickly as possible. Basically if you’ve got enough to feed yourself you can go from there. We also found quite a few people who were prepared to invest on a drip feed basis. We demonstrated that we’d done what we said we were going to do – we made the money we said we would and in this way earned the right to grow.”
By 2006 Aeroqual became cash-flow positive and moved into a phase of expansion. Then came the challenge of finding new markets.
“There are endless opportunities out there,” said Brett. “It’s just a question of chasing them. We want to go to places where there is unmet market demand and few competitors because fundamentally we want the margin.”
Aeroqual’s Business Management Team has people working at different times of the day and night talking to customers in Europe, America and Asia. Each customer brings unique needs.
In India, for example, the air is full of dust and smoke from fires. Customers there wanted low cost sensors to measure particles, ozone and other pollutants. At Sequoia National Park in the US, they were looking for low maintenance, low power units to measure the environmental ozone damage to trees.
“Ultimately customers are interested in what they’re doing,” Brett explained, “If you want to sell air quality sensors to tunnel guys you have to find the tunnel conferences and learn tunnel speak. It’s a case of working out where you fit, where the opportunity is and how to speak their language.”
Meeting customer’s needs requires continuous innovation. The MacDiarmid Institute is a constant source of ideas for Aeroqual and the two have developed a symbiotic relationship enriching and supporting each other. Aeroqual’s sensors, for example, are processed in the MacDiarmid Nanofabrication Laboratory at Canterbury University. This provides income for MacDiarmid researchers and specialised equipment and expertise for Aeroqual.
Often Aeroqual comes across market opportunities that they can’t fulfil with their current technology.
“I go to David and say ‘gee, we’d really like to sell something in this area,” says Brett, “but we don’t have any technology to leverage off. Can you go away and think about what we could do?”
This provides exciting challenges and employment for David’s group at Auckland University.
“Four of my post docs and two research assistants have gone into the company,” says David, “and several students have done summer projects – it’s been very successful!”
David has been involved in the development of instruments to measure nitrogen dioxide and ozone – both significant urban pollutants. He is currently working on a simple device to measure volatile organic compounds (VOCs) which form the ‘rich organic soup’ in typical urban air. VOCs are some of the most unpleasant and potentially toxic pollutants, but because they are so difficult and expensive to measure researchers have been unable to find out where they come from, how they form and how they affect our health. Aeroqual aims to produce an affordable hydrocarbon sensor to enable researchers to tackle these unanswered questions.
Although Aeroqual started by focussing on small niche markets they have had a long term vision from day one – to enable an accurate air quality sensor to be installed on every city street. With each sensor linked to a GPS device you could look at a computerised map and see real time data of pollutants being released and carried on the wind around the city. As David explains, success in this endeavour would have very large commercial, scientific and societal consequences.
“It would provide the public with real-time data on the quality of the air they are breathing wherever they are in the city,” he says. “It will show the immediate results of collective transport choices and thus drive both public awareness and public travel and transport decisions. It would also inform local authorities in their policy-making and traffic and transport planning in relation to health and the environment. These plans are made at the level of individual city blocks so a high-density air quality network is needed to provide critical data at the resolution demanded. High-density data on pollutants such as VOCs are essential for researchers studying the health effects of pollution. Such data would also advance studies of atmospheric chemistry as well as pollutant formation and dispersion – particularly the way a city and its surrounding farmland, sea and forest interact.”
Step by step Aeroqual has come a long way on the journey towards their vision. Today they employ twenty to thirty staff, most of whom have shares in the company. They are 99% export, have grown between 40% and 80% a year and currently have revenues of around 3 million dollars per annum.
“One of the key things is the people you work with and the diversity of skills and experience,” said Brett.
Together with the MacDiarmid Institute, Aeroqual has proven that it is possible to make money from science in New Zealand. With continuous innovation, meticulous attention to their customers’ needs and a constant eye on their vision, they have successfully made the transition from science to product to the international market place.
“It’s a lot of hard work, it takes a lot of time, but it’s a lot of fun,” said Brett. “This is what we enjoy! My question to you is – What can you conceive and build in terms of business opportunity from your science?”