A Nanotechnology Entrepreneur’s Journey: A Conversation with Landon Mertz

[LISA] Welcome to the Nano Entrepreneurship
Network podcast. I’m Lisa Friedersdorf, Director of the
National Nanotechnology Coordination Office. The purpose of this podcast
series is to share some of the lessons learned from entrepreneurs who have
transitioned an idea into the marketplace and to get insight into how
they navigated the technology development pathway. Today I’m joined
with Landon, Mertz, CEO of Cerion Nanomaterials in Rochester, New York.
Landon, thank you so much for joining us. Can you tell us a little bit about
yourself and your company? [LANDON] Yeah, absolutely. As for myself, I have spent
the better part of 20 years taking small ideas of companies, growing them, and
ultimately selling them. About 10 or 11 years ago, I joined Cerion Nanomaterials. As far as the history of the business, it’s a fairly interesting story.
We came out of Eastman Koda. And our team, our founding technical team, were
the people that were creating nanomaterials mostly for photographic
film emulsion. And because of that, early on the namesake of our business was
around precipitation based reactions. And then over the last 10 years or so we’ve
heavily invested into other synthesis pathways with this focus on design,
scale-up, and manufacturing. Today we have hydrothermal capabilities, solvo thermal
capability, carbo thermal capability,. And the reason why we’ve been so aggressive
in investing in these different pathways is to support our mission to
become the go-to place for nanomaterials when industry needs it. And
when we were looking at the business very early on, what we said to ourselves
was, we really need to focus on what we do and do best. And that is the design,
the scale, and the manufacturing. And because of this, our model is very unique
and different from most companies in that what we’re really selling is advanced
expertise that a customer can access around making and manufacturing those
nanomaterials. [LISA] So you mentioned that you work with small companies and then build
them and then sell them and then move on to another company. That might be what we
sometimes refer to as a serial entrepreneur. in the case of Cerion Nanomaterials, what made you interested in being a part of
this particular opportunity? [LANDON] What I saw when I initially came into the business
was that deep bench of experience. Typically with most startup companies,
the bench strength is not that significant, whereas most of our team had
been in the chemical industry or in the nanomaterial industry anywhere from 10
to 20 years. And then also a unique differentiation. When I surveyed the
marketplace and I looked at nanomaterial companies in general, I saw that
many of them are failing because they could not transition through scale up to
manufacturing. And here was a company at the time, I believe they were about two
years old, Cerion was scaling up all the time and manufacturing things all the
time. And so what that told me was that there was this unique capability that
Cerion had that wasn’t broadly available within the market. [LISA] So I want to talk a
little bit about your customer discovery. How do you go about finding your
customers? [LANDON] It’s a great question. A lot of shoe leather and also we have
invested fairly significantly into a marketing operation that leverages quite
a bit of social paid advertising and then truthfully because of our position
in the marketplace, we often have customers coming to us because they know
they have a problem that they need to solve. [LISA] Can you talk a little bit more
about the process that you have used to scale up these materials? [LANDON] So most of our
process for scale up is proprietary, but we use a program called Design for
Manufacture and Design for Manufacture is designed to ensure that materials we
make in the lab today can be manufactured tomorrow. That this often
starts with regular routine evaluation of what our researchers are making and
how they’re making it, to ensure that it fits within our manufacturing platform
system. It also allows us to discover early on if we find that our researchers
are deviating from known processes in our manufacturing plant. Then we can
start the engineering investigation to determine whether we can build that
capability into the plant or modify the process being used by the researcher. [LISA] So does that include things like avoiding toxic chemicals or looking at
sustainable operations? [LANDON] Not necessarily. Sometimes the needs of our customers
require that you use materials that are less than desirable, and so then there
are processes in place to do HSE operations to ensure that when we’re
handling it in the lab or in the development lab where ultimately we’re
working on scale-up or in the manufacturing plant it’s safe for use. [LISA] I wanted to get your perspective on working with the government. You’ve had a
number of different interactions with different agencies. Can you share your
thoughts on challenges from the small business perspective in working with
the government? [LANDON] Absolutely. So I would really frame it as both challenges and
opportunities. First I should say that our experience is almost exclusively
limited to the defense market, whether it be DoD or the defense industrial space.
And the challenges are challenges that I think just about every company
experiences quite honestly. The first is the procurement process. This process
typically on average will take 9 to 12 months. There is quite a bit of red tape
that you have to navigate through and a lot of compliance. Everything from the
way that your accounting systems are set up to safety requirements and security
requirements. Another challenge working in the defense
space is definitely timelines for transition. And when I talk about
transition, what I’m saying is the point from invention to the time that it actually
gets to the warfighter in his field. And that can take as little as five years,
but oftentimes up to ten years And so, for companies that are thinking about
operating in this space, this is not a short game. This is a long tail strategy,
where you need to have the right resources, financial and otherwise, to
support that entire lifecycle to get it to the warfighter. When it comes to
opportunities, the thing that I love about defense truthfully is the
researchers inside, whether it’s the Army, the Navy, the Air Force, are really
working at the leading edge of technology development and doing things
that, quite honestly, the industrial base would never invest
to do themselves. And that creates an opportunity for dual use. So provided a
material you make on behalf of the defense community doesn’t become
classified, you do have an opportunity to consider where that material may fit
within the industrial base for non-defense purposes. And this creates an
economic advantage for certain firms. [LISA] So, we recently hosted a webinar for the
Entrepreneurship Network, where our guests were the US PTO, Patent and
Trademark Office. I know that Cerion holds a number of US patents. Can you
share a little bit about your patent strategy? [LANDON] Absolutely so you’ll have to
think of our IP strategy within two buckets. The first is our relationship
with our customer. So the way we work with customers is any material that we
design on their behalf, they’re retaining the composition of matter so that they
can take that intellectual property. patent it and create real durable
economic value for themselves. And then Cerion often retains what we call the
method to make, which is really a process intellectual property. And it’s in
recognition of the tens of millions of dollars that we’ve spent to build this
advanced expertise so that our customers can create new disruptive products. So
that’s the kind of customer facing side. And then we have our own internal
strategy. So the company today holds about 60 patents worldwide, but
truthfully every year we tend to be holding more and more of our
intellectual property as trade secret. And the reason for that is there are
some inherent weaknesses related to process patents, that for a manufacturer
of nanomaterials can make them vulnerable. So first once you put a process patent out into the USPTO or abroad, you’ve now
telegraphed to your competitors how you’re making this material and it gives
them an opportunity to evaluate what works and try and figure out what
workarounds there may be. And that’s a big risk. The next point is it’s very
difficult to detect infringement from a competitor. If they’re making a material
that is substantially similar to yours, how do you know that it was made with
your process or not? And then of course enforcement is
very difficult. And because there is a little bit of a black art to how you
make nanomaterials, how you scale them, how you manufacture them, we are tending
to err more on the side of trade secret today than patents. [LISA] So you mentioned the
deep bench that you’ve had and the diversity of your workforce and the
experience that they had coming from Kodak. Can you talk a little bit about
your workforce strategy? How do you find employees? It’s something that certainly
our students listening will be curious about, but also small companies who are
trying to build a team. [LANDON] We had obviously the benefit of that deep bench
of experience which we were able to get out of Kodak and that really propelled
us forward in the early days. As Kodak has continued to downsize and get
smaller, we have not been able to pull from Kodak in order to service our own
internal needs and the needs of the customers. We have fairly aggressively
started making connections with universities and building a farm team if
you will, where we bring younger people in and we start to train them in the way
that we think and look at things and our own internal processes. And then
bring them up through the ranks over time. We’ve also found that in order to
recruit the best talent, we need to pull them from markets far outside of
Rochester. And because of that, we’ve brought people from places like Texas in
order to get the type of expertise that’s required. [LISA] And when you bring in
students in order to teach them your culture, really, do you do that through
internships or through research programs with universities? What types of
arrangements do you make with universities? [LANDON] So our strategic approach
has been to hire students as they’re finishing up their degrees, three to five
months out, and then bring them through the induction process on how we operate. [LISA] So Landon, I want to thank you for taking the time to talk with us today. I think
this is really helpful to people. As a parting question, do you have any advice
that you would give to somebody who is interested in starting a company or
students who are interested in being an entrepreneur? [LANDON] Absolutely. I could write a
novel. As leaders of early-stage businesses,
there are some things that we have to recognize, especially as it relates to
what we do today and how we think about the future really can make a big impact
on whether we’re successful or not. And I tend to put that into three buckets. The
first would be business planning, so what I see in the materials science community
in startups is there is a strong focus on the technology development and the
technology roadmap, but there isn’t much planning from the business end. And what
I’m talking about specifically is the strategy and the cost to penetrate a
market and what’s your strategy and what do you think the costs are gonna be to
actually scale your business if you’re successful. I would argue over the full
life of a business, probably 20% is technology development. The other 80%
is how am I actually going to make money, provide durable returns to my investors,
and ultimately sell the business. So much more business planning needs to happen
and happen early and it shouldn’t be a one-time exercise, it should be a fluid
process that is ongoing every year whether you’re in you year one, year
three, five, seven. The second bucket I would tend to look at would be financial
planning. In most startups, this is not specific to materials science, 30 to 50
percent of companies fail because they just ran out of cash prematurely. And
what I see again because there’s such a strong focus on the technology
development that there’s no financial planning happening internally and/or the
resources for financial planning are not there. And I always tell people, this is
my personal perspective, in materials science, especially in the beginning,
whatever you think it’s going to take in time and take in cost, multiply it by
two, because especially when you’re in the inventive step you just don’t know.
The other thing from a financial perspective that I see quite often is
that you will raise money to reach a certain inflection point and then
attempt to go on and raise your next round. And people actually don’t plan for
the six, nine, twelve months of burn that are required. And so sometimes
they have to completely halt operations and a hundred percent focus on raising
money, which is disruptive to the business and puts it at risk. The third
bucket for me would be professionalizing the business. And this really has to do
with building great teams. So when you have a founder or founding
leadership, it tends to be a small group. That small group is heavily involved in
all the detail, all the decision making, all the minutiae. And as an organization
naturally needs to grow because naturally it is becoming successful, what
happens a lot of times is this founding leadership or the founder can’t get out
of this mode of being involved in every detail and they become choke points. And I
think it’s incumbent on all leaders, myself included, to take a strong
evaluation of not only what your strengths are, but what your weaknesses
are. Plug those weaknesses with the best team that you can afford to bring
in-house and then really empower them to make the decisions that are going to
carry the business forward. And unfortunately a lot of times especially
for founders, this doesn’t happen. And an interesting statistic that I always
point back to is 80% of founders are forced out by their investors within
five years. So now you’re left with 20%. That 20% only a small fraction actually
make it all the way to the exit of the business. And it’s incumbent on the
founder, not only for the investors, but him or herself and their economic
interest, to do what’s best for the business. And so you should never lose
sight of that. you

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