Jeff Surma

An Engineer Builds a Business

August / September 2005 By: Eric Billingsley Volume 3 Number 4

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In the early 1990s, scientist Jeff Surma missed an opportunity. After nearly a decade of working as an engineer for Pacific Northwest National Laboratory in Washington State, he filed a couple of patents for an electrochemical technology to treat hazardous waste. A company by the name of EO Systems (now known as Cerox) came in and successfully commercialized the technology.

Watching his brainchild go from the labs to the marketplace was an ego boost for Surma on one hand. However, on the other he realized he had missed an opportunity to reap long-term rewards from the patent—€”such as owning his own company.

"At the time, I thought it was very interesting that a company such as EO Systems could build a business from technology developed in the labs, attract investment dollars and take it to commercialization," says Surma. "From that point forward it was always in the back of my mind that the next time I filed a patent, I would build a business myself."

And he has.

A few years later he filed another patent and founded a company, Integrated Environmental Technologies (IET), LLC. The company, based in Richland, Wash., commercialized a technology known as the Plasma Enhanced Melter (PEM). The device uses an electrically enhanced heat source to melt down hazardous waste. Gas emitted from the process is converted into usable hydrogen. The byproduct is a non-toxic glass material that can be recycled.

Launching IET was literally a dream come true for Surma, the fulfillment of a childhood fascination with both science and business. However, he says running his own company has involved not only embarking on a steep learning curve in business but sacrificing his love of developing new technologies in the lab.

As a child Surma, who is now 45, watched his father successfully run a road construction company. He worked summers, evenings and weekends with his dad, absorbing his every move. "Watching my father gave me first-hand experience working in the business world, and as a result I was always intrigued by business," says Surma.

But when it came time for the company to be passed on to the next generation, Surma took a different path. He left the road construction business and pursued another fascination: science. He obtained a B.S. in chemistry from the University of Minnesota, an M.S. in chemical engineering from Montana State University and joined PNNL in 1985. He worked on several design projects related to the treatment of high-level radioactive and hazardous waste and research related to vitrification technology.

Among a long list of credentials in these fields, Surma has received citations for his work including the Pacific Northwest Directors Award for Excellence and four R&D 100 awards. He has also presented 45 technical papers and is the named inventor 25 U.S. patents.

Despite leading what many would consider a pretty successful career in the lab, Surma was not completely satisfied. The thought of running his own business loomed heavy on his mind. "The blend of science and technology within business was the ultimate for me," he says. In 1995 he launched IET after filing a patent for the PEM and attracting a group of investors interested in the technology.

PNNL also offered an entrepreneurial leave of absence program at the time (since cancelled) that allowed him to remain a staff member and retain benefits such as insurance coverage and a savings plan. He was given the option of returning to full-time work at PNNL in three years."I had little to risk from my original career," says Surma.

Surma raised $28 million from private investors. The money was given to him in stages as the company reached certain performance benchmarks. The technology reached commercialization in 2001 when IET experienced its first year of significant revenue. The PEM is appealing to investors, according to Surma, because it serves a $500 billion worldwide market for the treatment of hazardous and industrial waste.

The PEM is also appealing because, unlike conventional waste disposal techniques such as incineration and landfill, it effectively recycles nearly 100 percent of the waste into usable hydrogen and glass. Surma says the technology can reduce the cost of processing waste, create secondary revenue streams from the by-products and minimize future liability for the waste.

Since 2001, IET has sold the PEM to big-name technology customers like Kawasaki, Hitachi and Boeing Aircraft. Most of these companies use the device to treat hazardous waste produced in their Asian Pacific operations.

The PEM sells for between $2 million and $10 million, depending on size. IET's annual revenue has fluctuated between $3 million and $9 million since 2001.

Despite experiencing considerable success raising capital and bringing his technology to the marketplace, Surma, like many entrepreneurs, has gone through a crash course in what it takes to launch and run a successful business. Upon first meeting with investors, he estimated the PEM could reach commercialization in three years and that he only needed $6 to 10 million to accomplish this task.
"The investors said it would take twice as long and twice as much money," says.
"They were absolutely right."

The technology itself required fine-tuning and the company was required to jump through more than a few hoops with PNNL. Through a series of negotiations, Battelle Memorial Insititute, which manages PNNL, secured a percentage stake in IET.

The technology reached commercialization six years after the company was founded.

Surma also realized that to run a successful business he needed to make a choice: Either stay in the lab 100 percent of the time doing technology development—€”and find a competent CEO—€”or leave the lab and run the business fulltime.

"If the CEO is bogged down in the technology, the business will fail," says Surma. "For a technology entrepreneur to be successful he often needs to let go of the technology, delegate downward and focus on business."

He says the role of CEO is to find money and to assure the product's success in the marketplace. Working in the lab is where, at least initially, he was most comfortable. But since 1995, running the business fulltime has been a welcome and necessary change. His transition into the business world has probably been easier than it would be for some scientists because he already had some business knowledge and a lot of curiosity. He says commercializing a technology developed in the national labs that recycles toxic waste is fulfilling because it's a positive for the environment. For example, hydrogen-rich gas produced from the treatment process can be used as a clean-burning fuel. This can potentially offset demand for natural gas.

And demand for the PEM technology continues to grow. IET completed the installation of a PEM at Global Plasma in Taipei, Taiwan, in March 2005. The plant will be used to treat medical waste from the region as well as car batteries. The unit has been operational for three months and has received very positive reviews.

The company has also shifted its business model from being solely a manufacturer/supplier to becoming owner operators of PEMs in the U.S. "We saw a strong customer pull toward this new business model because it is much easier for companies to outsource their waste treatment and it requires less capital from them upfront," says Surma. IET plans to open two PEM facilities per year for the next five years in the U.S. The company will continue to sell them outright overseas.

The first plant will open in the fourth quarter of 2005 in Northern California to treat medical waste. Another is scheduled to open in the Houston area in the first quarter of 2006 to treat chemical waste. The company also plans to open a hydrogen fueling station at the facility in California.

Eric Billingsley is a freelance writer based in Albuquerque.