Aerospace Technology Boosts Business
One day in the early 1990s, aerospace consultants David Haberman and David Walker were contemplating their futures over a hot dog lunch.
The local aerospace industry was heading into a tailspin. The two men batted around business ideas, trying to figure out how to capitalize on their aerospace savvy and the knowledge that was available through government research labs.
“We started with the concept that the products and knowledge that had been developed in the aerospace industry could have broader, commercial applications,” said Haberman, who has a background in electrical engineering. “We thought that aerospace investments hadn’t been fully commercialized. We wanted to take the aerospace technology into the commercial world.
“We found hydrogen.”
The result was DCH Technology, which makes fuel cells and other hydrogen-related products, including a hand-held sensor called the Robust Wide Range Sensor that can detect hydrogen leaks.
Founded in 1994, the company went public in 1997 at about $1 a share. It is now based in Valencia and has about 30 full-time employees.
The company is still struggling financially. In its most recent filing with the Securities and Exchange Commission, DCH Technology reported losses of $763,593 on revenue of $218,811 for the third quarter ended Sept. 30, compared with a loss of $1,012,967 on $14,377 in revenue for the same quarter in 1998.
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With few sales so far, the company is funding operations primarily by issuing additional shares of stock and with loans from company offices and major shareholders, DCH Technology said in its Nov. 15 filing with the SEC.
On Sept. 30, for example, DCH Technology issued 446,951 shares of stock to three investors, raising $180,000.
The value of DCH Technology stock, however, has risen sharply along with the growing interest in hydrogen fuel cell technology. After trading under $1 for much of last year, DCH Technology shares rose above $4 in December after positive reports on fuel cell technology in Business Week and other publications.
DCH Technology and other fuel-cell companies got another boost last week after disclosures that Microsoft Corp. Chairman Bill Gates had taken a 5.01% stake in Avista Corp., which develops fuel cell technology. The stock closed Monday at $8.63, up $1.06.
Why all the fuss about hydrogen? Many believe hydrogen fuel cells will be the energy source of the future, providing an environmentally friendly power supply for everything from cars and trucks to home appliances.
According to Larry Caretto, dean of the College of Engineering and Computer Science at Cal State Northridge, hydrogen fuel cells have been used successfully in the space program, but currently are too costly for more widespread application.
However, he said, the technology is promising, especially because auto makers such as DaimlerChrysler are willing to invest in fuel cell possibilities.
“There’s no question that there’s promise [in fuel cell energy], but there’s a question of getting the cost down in terms of the consumer applications,” Caretto said.
Haberman said the original concept for DCH Technology, however, was not for fuel cells but for safety devices.
Hydrogen “is used in almost every modern American industry. It is a major industrial gas. But the technology of handling its safety is old,” he said.
What if, Haberman and Walker wondered, they took a technology that could sense the environment and linked that technology to a computer chip?
“That was the innovation,” Haberman said.
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Working out of 100 square feet of office space in Sherman Oaks, the duo financed the venture from their personal bank accounts.
The company faced three major start-up challenges, Haberman said. First was “the technical problem of how to evolve quickly from patents into hardware with very little resources.”
“Earning credit-worthiness as a small business is very difficult, especially if you can’t explain to bankers what you do,” he said. “David and I used every nickel we had.”
They licensed technology developed at government-sponsored labs, such as Sandia National Laboratories, Simon Frasier University and Los Alamos National Laboratory, and aggressively marketed the sensor by looking at a broad sales base besides aerospace.
Once they created the hardware for the hydrogen sniffer, he said, “We had a product to hold and to see,” which helped in promotions.
Also, he noted, “We were willing to place devices [in test areas] on speculation. That is very aggressive marketing. We were saying, ‘Let us prove it to you with hardware.’ ”
The second challenge, he said, was “brutal competition from the old guard defending its turf, from big companies still selling World War II-era equipment that we were proposing to replace. That was hard to overcome.”
DCH Technology had to do a lot of educating, he said, to prove why its product was better.
The third major challenge was, “How do we survive as a small business during that confidence-building phase?”
One of the secrets to the company’s survival, he said, was in “teaming with others who are experts at what they do. You can’t go it alone and you can’t be greedy.”
For example, DCH teamed with Allied Signal [now Honeywell International] to build the chips needed to create the sensor and to sell the sensor to the aerospace industry.
Allied, Haberman said, “had the credibility in aerospace. They provide equipment for aircraft, military, etc. It’s a perfect example of teaming to win.”
Today, DCH has a larger office and a plant in Valencia and two facilities in Wisconsin. The company employs about 30 full-time workers, plus another 10 or so consultants, with most of the employees coming from aerospace.
“We like to say, ‘Hydrogen is the future--we can sense it.’ ”
