March 1, 2004
Broadening the base | A Blue Hill company tries to bring its high-tech product to the everyday consumer
By Alan Elliott
Miles Maiden built a better mousetrap. Not a mousetrap, really, but something about the size and shape of a small electric toothbrush that slips neatly into a bottle, canteen or cup of water. Flip a switch, and ultraviolet light zaps microorganisms, rendering biologically contaminated water harmless.
Maiden calls it a Steri-Pen, and it is as effective as ˆ and far more convenient than ˆ many traditional pump filters and purifiers. Developed in Maiden's Blue Hill workshop in 1998, the device is gradually finding an audience among backpackers and travelers, and has even caught the interest of the U.S. military. But the world has not beat a path to Maiden's door.
Rich Gurin, however, lives just down the road. A neighbor introduced the pair last year: Maiden, the talented inventor and developer, and Gurin, the retired chief executive of Pennsylvania-based Binney & Smith, known to most as the home of Crayola Crayons. They joined forces a year ago, with Gurin acting as chief operating officer of Maiden's company, Hydro-Photon. And now Maiden's six-year battle with technology snags, production challenges, funding battles and the other hurdles of bringing a brave new technology to market appears to be about to pay off.
Still, it will be an uphill climb. After two years on the market, Steri-Pen's total unit sales are in the "low thousands," according to Maiden. The product, which currently retails for $200, is available in national catalogs like Recreational Equipment Inc., Cabella's and Early Winters, as well as in some local retail shops, like Cadillac Mountain Sports.
In both channels, it competes with an established group of products. Competitors in the outdoor market include gravity and pump-type filters, priced between $70 and $200, that strain out the usual microbes like Giardia and Cryptosporidium. Purifiers that handle those pathogens, plus a broader range of nasties including protozoan cysts and viruses like Hepatitis B, begin at around $50 and range to high-quantity devices priced at more than $500.
Most of Steri-Pen's sales so far have been through Seattle-based REI, which appreciates the device's forward-thinking technology. "It's not a big seller, but it's a cool, innovative product," said REI spokesperson Jennifer Lind. "And we always like to have new and innovative things."
For Maiden and Gurin, though, it's clear that while being new and innovative may attract early adopters to Steri-Pen, it isn't enough to ensure Hydro-Photon's long-term success. To achieve that goal, the duo rounded up six seasoned corporate mentors to serve as a board of directors. The directors, who began work at the end of last year, are also angel investors, committed to channeling more than a half million dollars into the project.
The ink is not yet dry on the outfit's business plan ˆ which forecasts two years to break even and five years to reach $10 million in sales ˆ and a redesigned product and a less costly offshore manufacturing agreement are in the offing. "I've always felt pretty optimistic about this technology, because I think it addresses an important need," Maiden said. "But now we have arrayed around us quite a depth of business experience, and I think we're pretty well poised."
The venture capital crunch
Hydro-Photon implemented its new ˆ really, its first ˆ business plan in January. The plan hinges on $500,000 in investment capital, most of it from checks written by the company's newly formed board. But the board members and their funding did not magically appear.
Maiden and Gurin spent an arduous year in 2003 crafting a mission and a vision for the company, as well as a funding strategy and operating principles to lead them to profitability. They then took their case to venture capitalists throughout New England.
In the previous six years, the company had run through $60,000 in seed and development grants arranged through the Maine Technology Institute. In addition, Maiden spent $350,000 out of his own pocket. The first funds had bankrolled the painstaking development and testing of prototypes. The next stage was a costly, two-year process to establish domestic manufacturing.
But the decision to move to offshore production and the need to push for broader product exposure and prepare for steadily increasing sales all demanded more money. "To gear up to produce this all over again overseas and to really give it a good marketing push and to make a serious effort out of it, it required that we raise some funds," Maiden said.
Fresh from a three-year project to resurrect the old Sperry & Hutchinson (S&H Greenstamp) company with the family who had founded it in Massachusetts a century ago, Gurin was partial to the idea of raising funds from family, friends and local angel investors.
But Hydro-Photon had seen a rash of interest from investors and venture capital firms following a 1998 Newsweek article on the device. Maiden had turned down various corporate offers to buy out the company. And although he had thus far avoided parceling out equity to venture capitalists, his inclination was to first pursue that avenue of funding.
But six months of haggling on aggressive offers last year soured Maiden on that approach. He now describes venture capital as geared solely for quick turnaround, maximum profit and aligning a startup up for acquisition. Most of the offers also included performance stipulations which, if not met, would deliver an increasing share of company ownership to the venture capital firms.
Despite nearly reaching a deal with the state's Small Enterprise Growth Fund, which Maiden says describes itself as "kinder and gentler" venture capital, Gurin last November coaxed Maiden to try a little closer to home. "It's a much better circumstance to be invested in by friends, family and people who care about Blue Hill and the long-term opportunities for employment and economic development here," Gurin said.
A single phone call ˆ to a person Maiden won't identify, but who eventually became a member of the company's board of directors ˆ opened the door to a flurry of discussions, which resulted in the recruitment of five other directors, who committed to fully funding the company. Gurin came aboard, and Hydro-Photon enlisted a part-time team of talent including a sales and marketing director and a chief financial officer. "In three weeks we had what we wanted and more in the bag in terms of investment committed," Maiden said.
The offshore bet
Perhaps the most grueling decision so far in the Maiden/Gurin partnership has been to abandon the struggle to manufacture in Maine. Component suppliers in the state had managed to deliver on quality, Maiden said, but production costs kept the final price of the Steri-Pens above what the market would bear.
Steri-Pens operate on four AA batteries and look relatively simple, but are deceptively complex. They include a custom-designed mercury vapor lamp inside a quartz sleeve. Proprietary electronics convert low voltage battery DC power to high voltage AC juice potent enough to power the lamp. Each unit also contains a microprocessor that monitors various sensors gauging temperature, voltage and moisture.
Maiden spent years shrinking that plumbing down to pack it into an eight-ounce device. Working through various in-state manufacturers, Maiden was unable to drive the final retail price tag below a hefty $199 per unit. "While people are very enthusiastic about the technology and like it a lot, $200 is a real market barrier for us," he said.
However, the cost of domestic manufacturing meant that even with a retail price of $200, Steri-Pen's margins were ultimately too thin to support the company.
So at the end of last summer, Hydro-Photon turned to Feeco HK Ltd., an offshore sourcing agent with offices in Portsmouth, N.H. and Hong Kong. Victor Templeton, the company's vice president, worked with Maiden to sketch out blueprints for a revised Steri-Pen design. Feeco's three Mandarin- and Cantonese-speaking employees in Hong Kong then identified and inspected Chinese contractors who were able to produce and assemble components in Shenzhen, about an hour from Hong Kong.
The manufacturers were able to meet Maiden's specifications on everything except the UV lamps, according to Templeton. Although Chinese manufacturers can make the bulbs at a fraction of the cost incurred by U.S. manufacturers, they have not yet met Maiden's quality standards ˆ a crucial point for a mercury-filled component. For now, Hydro-Photon plans to continue making the bulbs in the United States, shipping them to China for assembly, then delivering the final product back to the U.S. "We are losing a margin point or two in the whole process, so it is not a very good solution," Gurin said.
But it is the only solution, for now. And despite the inefficiencies, the new arrangement should drop the final retail price of the pens to $149. The first Chinese-made units are scheduled to arrive in Blue Hill later this spring.
Moving beyond early adopters
Another challenge the Hydro-Photon team faces is explaining to wary consumers that Steri-Pen actually works. The product has undergone rigorous testing by the University of Maine's Department of Microbiology and Biochemistry that went beyond the safety levels required by law. "We've tagged every base we can tag in terms of testing and certifying this product," Maiden said.
But consumer faith is an odd substance. And trusting that swamp water has been swept clean by invisible UV light rays, rather than by tried and true filters, iodine or chlorine pills, demands a substantive leap.
Hydro-Photon has mapped out a marketing strategy to bridge that gap, based on Geoffrey Moore's book Crossing the Chasm. Moore asserts that all new technology faces two ranks of consumers: small numbers of early adopters and a broader, more conservative audience of pragmatists.
Maiden believes Steri-Pen has spent the last two years making its way through the first phase of that process in the outdoor market. The plan now is to help speed the product's adoption in the broader market of more conservative outdoor consumers. If Moore's theory holds, acceptance by more conservative audiences in other markets should follow, bypassing the need to face the early adopter gauntlet on a market-by-market basis.
Simply getting the product in front of more consumers is critical, according to Gurin. To do so, Hydro-Photon's sales and marketing manager, Nancy White, has enlisted commissioned sales reps, who cover six outdoor market regions across the country. White said she plans to gradually add reps in other sectors as acceptance of the technology takes hold.
However, the Hydro-Photon team's view of who, exactly, is their customer may not be accurate. Product managers at REI report that Steri-Pen sells better to the customer planning to travel abroad than it does to backpackers and campers. "You have to use it in clear water, so it can't be muddied or have a lot of sediment in it," Lind said. "It's more targeted toward the traveler who doesn't trust their water source."
A Steri-Pen companion product due out this spring addresses that issue. A small filter device that threads onto the mouth of Nalgene-type water bottles, it will allow packers to strain out the visible flotsam in most pond and stream water.
Another variation, a plug-in Steri-Pen, is in the early design stages and could make its way to market later this year. This higher-power, higher-output purifier likely will be even smaller than the original; the company plans to target travelers as well as users in homes, motor homes or cottages.
Hydro-Photon's five-year, $10 million goal banks on the eventual development of low cost LED transmitters that would drive Steri-Pen's per unit retail price below $30 (see "The military opportunity," page 23). The plan does not, however, assume any Army or Navy contracts down the line. If a military order did come through, Gurin said the company's offshore suppliers could potentially deliver as many as 100,000 units over a 12-month period.
An order like that, of course, would be icing on the cake. Maiden and Gurin are both invested in what is likely to be a more gradual process, one they believe will eventually create sales, marketing and accounting positions, as well as other clean, front-office jobs, in Blue Hill.
The move to get beyond Maiden's wallet was a big step. Now, the company's ability to manage production, sales support and new product development will determine how quickly it learns to stand on its own. "If we do exactly what we say we're going to do, we don't need any additional funding," Gurin said. "But I've never seen a straight line in the business world yet."
Maiden calls it a Steri-Pen, and it is as effective as ˆ and far more convenient than ˆ many traditional pump filters and purifiers. Developed in Maiden's Blue Hill workshop in 1998, the device is gradually finding an audience among backpackers and travelers, and has even caught the interest of the U.S. military. But the world has not beat a path to Maiden's door.
Rich Gurin, however, lives just down the road. A neighbor introduced the pair last year: Maiden, the talented inventor and developer, and Gurin, the retired chief executive of Pennsylvania-based Binney & Smith, known to most as the home of Crayola Crayons. They joined forces a year ago, with Gurin acting as chief operating officer of Maiden's company, Hydro-Photon. And now Maiden's six-year battle with technology snags, production challenges, funding battles and the other hurdles of bringing a brave new technology to market appears to be about to pay off.
Still, it will be an uphill climb. After two years on the market, Steri-Pen's total unit sales are in the "low thousands," according to Maiden. The product, which currently retails for $200, is available in national catalogs like Recreational Equipment Inc., Cabella's and Early Winters, as well as in some local retail shops, like Cadillac Mountain Sports.
In both channels, it competes with an established group of products. Competitors in the outdoor market include gravity and pump-type filters, priced between $70 and $200, that strain out the usual microbes like Giardia and Cryptosporidium. Purifiers that handle those pathogens, plus a broader range of nasties including protozoan cysts and viruses like Hepatitis B, begin at around $50 and range to high-quantity devices priced at more than $500.
Most of Steri-Pen's sales so far have been through Seattle-based REI, which appreciates the device's forward-thinking technology. "It's not a big seller, but it's a cool, innovative product," said REI spokesperson Jennifer Lind. "And we always like to have new and innovative things."
For Maiden and Gurin, though, it's clear that while being new and innovative may attract early adopters to Steri-Pen, it isn't enough to ensure Hydro-Photon's long-term success. To achieve that goal, the duo rounded up six seasoned corporate mentors to serve as a board of directors. The directors, who began work at the end of last year, are also angel investors, committed to channeling more than a half million dollars into the project.
The ink is not yet dry on the outfit's business plan ˆ which forecasts two years to break even and five years to reach $10 million in sales ˆ and a redesigned product and a less costly offshore manufacturing agreement are in the offing. "I've always felt pretty optimistic about this technology, because I think it addresses an important need," Maiden said. "But now we have arrayed around us quite a depth of business experience, and I think we're pretty well poised."
The venture capital crunch
Hydro-Photon implemented its new ˆ really, its first ˆ business plan in January. The plan hinges on $500,000 in investment capital, most of it from checks written by the company's newly formed board. But the board members and their funding did not magically appear.
Maiden and Gurin spent an arduous year in 2003 crafting a mission and a vision for the company, as well as a funding strategy and operating principles to lead them to profitability. They then took their case to venture capitalists throughout New England.
In the previous six years, the company had run through $60,000 in seed and development grants arranged through the Maine Technology Institute. In addition, Maiden spent $350,000 out of his own pocket. The first funds had bankrolled the painstaking development and testing of prototypes. The next stage was a costly, two-year process to establish domestic manufacturing.
But the decision to move to offshore production and the need to push for broader product exposure and prepare for steadily increasing sales all demanded more money. "To gear up to produce this all over again overseas and to really give it a good marketing push and to make a serious effort out of it, it required that we raise some funds," Maiden said.
Fresh from a three-year project to resurrect the old Sperry & Hutchinson (S&H Greenstamp) company with the family who had founded it in Massachusetts a century ago, Gurin was partial to the idea of raising funds from family, friends and local angel investors.
But Hydro-Photon had seen a rash of interest from investors and venture capital firms following a 1998 Newsweek article on the device. Maiden had turned down various corporate offers to buy out the company. And although he had thus far avoided parceling out equity to venture capitalists, his inclination was to first pursue that avenue of funding.
But six months of haggling on aggressive offers last year soured Maiden on that approach. He now describes venture capital as geared solely for quick turnaround, maximum profit and aligning a startup up for acquisition. Most of the offers also included performance stipulations which, if not met, would deliver an increasing share of company ownership to the venture capital firms.
Despite nearly reaching a deal with the state's Small Enterprise Growth Fund, which Maiden says describes itself as "kinder and gentler" venture capital, Gurin last November coaxed Maiden to try a little closer to home. "It's a much better circumstance to be invested in by friends, family and people who care about Blue Hill and the long-term opportunities for employment and economic development here," Gurin said.
A single phone call ˆ to a person Maiden won't identify, but who eventually became a member of the company's board of directors ˆ opened the door to a flurry of discussions, which resulted in the recruitment of five other directors, who committed to fully funding the company. Gurin came aboard, and Hydro-Photon enlisted a part-time team of talent including a sales and marketing director and a chief financial officer. "In three weeks we had what we wanted and more in the bag in terms of investment committed," Maiden said.
The offshore bet
Perhaps the most grueling decision so far in the Maiden/Gurin partnership has been to abandon the struggle to manufacture in Maine. Component suppliers in the state had managed to deliver on quality, Maiden said, but production costs kept the final price of the Steri-Pens above what the market would bear.
Steri-Pens operate on four AA batteries and look relatively simple, but are deceptively complex. They include a custom-designed mercury vapor lamp inside a quartz sleeve. Proprietary electronics convert low voltage battery DC power to high voltage AC juice potent enough to power the lamp. Each unit also contains a microprocessor that monitors various sensors gauging temperature, voltage and moisture.
Maiden spent years shrinking that plumbing down to pack it into an eight-ounce device. Working through various in-state manufacturers, Maiden was unable to drive the final retail price tag below a hefty $199 per unit. "While people are very enthusiastic about the technology and like it a lot, $200 is a real market barrier for us," he said.
However, the cost of domestic manufacturing meant that even with a retail price of $200, Steri-Pen's margins were ultimately too thin to support the company.
So at the end of last summer, Hydro-Photon turned to Feeco HK Ltd., an offshore sourcing agent with offices in Portsmouth, N.H. and Hong Kong. Victor Templeton, the company's vice president, worked with Maiden to sketch out blueprints for a revised Steri-Pen design. Feeco's three Mandarin- and Cantonese-speaking employees in Hong Kong then identified and inspected Chinese contractors who were able to produce and assemble components in Shenzhen, about an hour from Hong Kong.
The manufacturers were able to meet Maiden's specifications on everything except the UV lamps, according to Templeton. Although Chinese manufacturers can make the bulbs at a fraction of the cost incurred by U.S. manufacturers, they have not yet met Maiden's quality standards ˆ a crucial point for a mercury-filled component. For now, Hydro-Photon plans to continue making the bulbs in the United States, shipping them to China for assembly, then delivering the final product back to the U.S. "We are losing a margin point or two in the whole process, so it is not a very good solution," Gurin said.
But it is the only solution, for now. And despite the inefficiencies, the new arrangement should drop the final retail price of the pens to $149. The first Chinese-made units are scheduled to arrive in Blue Hill later this spring.
Moving beyond early adopters
Another challenge the Hydro-Photon team faces is explaining to wary consumers that Steri-Pen actually works. The product has undergone rigorous testing by the University of Maine's Department of Microbiology and Biochemistry that went beyond the safety levels required by law. "We've tagged every base we can tag in terms of testing and certifying this product," Maiden said.
But consumer faith is an odd substance. And trusting that swamp water has been swept clean by invisible UV light rays, rather than by tried and true filters, iodine or chlorine pills, demands a substantive leap.
Hydro-Photon has mapped out a marketing strategy to bridge that gap, based on Geoffrey Moore's book Crossing the Chasm. Moore asserts that all new technology faces two ranks of consumers: small numbers of early adopters and a broader, more conservative audience of pragmatists.
Maiden believes Steri-Pen has spent the last two years making its way through the first phase of that process in the outdoor market. The plan now is to help speed the product's adoption in the broader market of more conservative outdoor consumers. If Moore's theory holds, acceptance by more conservative audiences in other markets should follow, bypassing the need to face the early adopter gauntlet on a market-by-market basis.
Simply getting the product in front of more consumers is critical, according to Gurin. To do so, Hydro-Photon's sales and marketing manager, Nancy White, has enlisted commissioned sales reps, who cover six outdoor market regions across the country. White said she plans to gradually add reps in other sectors as acceptance of the technology takes hold.
However, the Hydro-Photon team's view of who, exactly, is their customer may not be accurate. Product managers at REI report that Steri-Pen sells better to the customer planning to travel abroad than it does to backpackers and campers. "You have to use it in clear water, so it can't be muddied or have a lot of sediment in it," Lind said. "It's more targeted toward the traveler who doesn't trust their water source."
A Steri-Pen companion product due out this spring addresses that issue. A small filter device that threads onto the mouth of Nalgene-type water bottles, it will allow packers to strain out the visible flotsam in most pond and stream water.
Another variation, a plug-in Steri-Pen, is in the early design stages and could make its way to market later this year. This higher-power, higher-output purifier likely will be even smaller than the original; the company plans to target travelers as well as users in homes, motor homes or cottages.
Hydro-Photon's five-year, $10 million goal banks on the eventual development of low cost LED transmitters that would drive Steri-Pen's per unit retail price below $30 (see "The military opportunity," page 23). The plan does not, however, assume any Army or Navy contracts down the line. If a military order did come through, Gurin said the company's offshore suppliers could potentially deliver as many as 100,000 units over a 12-month period.
An order like that, of course, would be icing on the cake. Maiden and Gurin are both invested in what is likely to be a more gradual process, one they believe will eventually create sales, marketing and accounting positions, as well as other clean, front-office jobs, in Blue Hill.
The move to get beyond Maiden's wallet was a big step. Now, the company's ability to manage production, sales support and new product development will determine how quickly it learns to stand on its own. "If we do exactly what we say we're going to do, we don't need any additional funding," Gurin said. "But I've never seen a straight line in the business world yet."
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