February 21, 2006 - WESTBROOK — The executives from a major Far East automobile company were politely interested with Biode Inc.'s local headquarters as they toured the company's manufacturing, research and development, and sales offices. It was clear the startup's modest local facilities didn't wow the executives, whose company was a potential customer for Biode's devices that measure a liquid's viscosity, which is how readily a liquid flows.
But that changed when Biode Chief Executive Officer Kerem Durdag took them on a 90-minute drive to the Hudson, N.H., headquarters of Vectron. Durdag was working last summer to finalize a partnership agreement with Vectron that was eventually signed on Jan. 31.
Vectron, with its 120,000 square feet of offices and manufacturing space, 200 employees in Hudson and another 1,000 at seven other global locations, suitably impressed the Far East executives.
In their eyes - and, potentially, in the eyes of many other customers, as well - that developing partnership elevated Biode from a small startup with an innovative technology to a company with a relationship in place that would allow them to play in the big leagues. The partnership increased the chance that the auto company could buy thousands of Biode's viscometers.
"It's absolutely stupendous for us," Durdag said of the partnership. "It allows us to scale, it's a partner with credibility. We have access to marketing, access to manufacturing, access to an 800-pound linebacker."
As Maine's business landscape becomes increasingly dotted with small, technology-based startups like Biode, similar partnerships are likely to become more common.
"It's very hard these days to be a single, do-it-all company without partnerships and collaborations. To the extent it happens in the state, it would be preferable," said Joe Migliaccio, program manager at the Maine Technology Institute, which has funded Biode over the years. "It's a global, competitive environment."
Biode remains a small company, but is growing. It has 10 employees today and had only one in 2002. It expects to hire at least two more employees this year, an electrical engineer and an assembly worker. The company hopes to hit the break-even point this year.
Biode had sales of $200,000 in 2005, which was a 60 percent increase over 2004. This year, with the new partnership, an Army project under way and added traction in the marketplace, Durdag thinks the company can hit $1 million in sales.
"We have a beachhead," said Durdag. "The product is there, we have happy customers."
The partnership with Vectron, in particular, is a major milestone for Biode. Biode was one of Vectron's customers. The New Hampshire company supplies the crystal sensor integral to Biode's viscometers.
A year ago, one of Vectron's vice presidents called Biode. Vectron, a division of Dover Corp., is a $200 million company with 1,200 employees in plants around the world. The company makes surface acoustic wave devices that are used to control frequencies and for timing applications in telecommunications, phones and clocks.
But the company has seen some big ups and downs in the market in the last five years, said Vectron's president.
"It was turbulent times. We grew like crazy, crashed, had to downsize, go through the contraction process," said Rick Hajec. "It just continues to point out the need to be a more diversified company."
Vectron wanted to forge partnerships with companies in the sensors business to open up different markets. Not only was Biode a customer, but the chief technical officers of both companies were old friends. And Vectron's surface acoustic wave technology is at the core of Biode's innovation.
"They've got great technology, a number of customers," said Hajec. "We've got great manufacturing capabilities, process technologies . . . from a selfish point of view, we're trying to diversify ourselves and this is a great way to do it."
Under the agreement, Vectron gains an equity stake in Biode and Hajec a seat on the Westbrook company's board of directors. Biode obtains access to Vectron's sales, marketing, research and development and processing expertise.
Each is important, said Durdag. For instance, now Biode's products will be marketed by Vectron's 27-person global sales force.
"We're very excited about this technology and the innovation it brings to the customer base and the value it potentially brings to a number of marketplaces," said Hajec. "We're working with them to bring business to Vectron; we've got ideas for today's product and tomorrow's, too."
Biode will continue to fill low-volume orders for its sensors and instruments; this year it has the capacity to make about 500 sensors and instruments.
"Excess capacity and order flow, defined as sensor volume in thousands to 100,000, and for instrumentation of 500 or more, is what Vectron will do, depending on customer and business conditions," said Durdag.
Biode will get royalty revenues from the sales, Durdag said, and customers will have the confidence that their sizable orders can be filled. Because of the partnership, Biode orders will be given a priority for manufacturing at any of Vectron's eight plants. That geographic reach was also an attraction, said Durdag.
The fact remains that Biode is a company that only had $200,000 in sales a year ago. A reasonable question might be whether it needs the ability to quickly produce thousands of sensors. The answer, Durdag said, is yes. Biode currently has seven potential customers who have expressed a demand for 10,000 sensors a year within the next three to five years, "pending testing, qualification (and) competitive field bidding."
Those customers are original equipment manufacturers who would design Biode's devices into their own technology. Biode has refined its focus on two main markets, coatings and oil condition monitoring. Companies interested in the coatings sector include Rohm and Haas, Sherwin Williams and St. Gobain. Interested companies in the oil condition space include Honeywell, General Electric and Halliburton, Durdag said.
In addition to the Vectron deal, Biode worked with U.S. Sens. Olympia Snowe and Susan Collins and U.S. Rep. Tom Allen to be involved in an Army-funded project. Biode will work with Boston-based Foster-Miller Inc., and the two companies will split $1.5 million this year from the Army.
The project combines Biode's viscometer with the ability to measure four other oil conditions, said Durdag.
It's a device that obviously has military interest, but there's also interest for the potential product in the commercial world, said Durdag. And by adding to the functionality of Biode's sensors, the company is erecting competitive barriers that keep other firms from taking market share, Durdag said.
All of these elements are positive for Biode, said Migliaccio, of MTI.
"I think these folks are very well-positioned to see their technology continue to be utilized in the marketplace," said Migliaccio. "If all goes well, you could see a very quick ramp-up in the applications of this technology, globally."
He noted that the Biode story reflected well on Maine
"This technology came from and is owned, to some extent, by the University of Maine," said Migliaccio. "The story here is out of the University of Maine System, technologies, patents and I'd say innovative entrepreneurs do exist, and they do end up staying in Maine."
Staff Writer Matt Wickenheiser can be contacted at 791-6316 or at:
