How We Got the Money
December 2009 / January 2010
Volume 7 Number 6
Hyperion Power is a Los Alamos National Laboratory spinout, commercializing the world's first small, self contained, inherently safe, civilian nuclear power reactor. Generating approximately 25 megawatts of power (enough to power about 20,000 U.S.-style homes), the Hyperion Power Module is ideal for remote communities, military facilities, heavy industry, mining operations, and oil and gas recovery. I'm Hyperion's chief executive officer so you'll have to excuse my enthusiasm.
When asked "How'd you get the money?," my first inclination is to answer "we're not done getting" the money. Leading the world's first independent nuclear power reactor firm has many challenges, not the least of which is securing sufficient capital to go to market. Although Hyperion Power is leveraging untold research dollars in our technology transfer license from LANL, and many hundreds of millions of dollars in facilities and expert personnel through our CRADA there, our firm will still require between $60 and $70 million to get our first reactor design into production.
The first key difference between Hyperion and other technology startups is that our seed and Series A investors were also company founders. This structure is pretty unusual in the Department of Energy and has many advantages in creating a sustainable and healthy company based on laboratory-generated technology.
Altira Group is the leading North American venture capital fund focused exclusively on funding enabling technology for the global energy markets. Based in Denver, Altira is lead by its founder and managing partner, Dirk McDermott.
Dirk is a former business owner and geophysicist who got his start in the oil sands of Alberta, Canada. He started Altira Group in 1996 and has some $300 million under management. Having grown up in Santa Fe, Dirk was familiar with Los Alamos and turned to the New Mexico technology corridor when seeking innovations that could have a major impact on an efficient, sustainable energy market.
In 2005 McDermott was briefed by LANL technology transfer people on a wide variety of disclosed innovations. Although interesting, many innovations at LANL and throughout DOE are either incremental technical improvements or very specific technical advances that have a narrow market potential. When briefed on Otis (Pete) Peterson's design concept for small, safe nuclear power reactor, McDermott immediately recognized the potential.
Rather than waiting for a startup to coalesce around Dr. Peterson's design, Altira applied for, and received, an option on the disclosure patent. The one-year license option for LANL required specific deliverables as a form of payment, including a complex market study to determine the viability of using small nuclear reactors to generate electricity.
Although there exists several proposals at universities and within DOE itself for small power reactor designs, Altira determined that none had any real commercial value nor potential. This was due in large part to the fact that most smaller reactor designs are merely refinements of traditional (and gigantic) designs that generate 1,000 megawatts or more. In talking to hundreds of potential users, Altira determined that real innovation was required to gain broader market acceptance for small nuclear power reactors, for use in hundreds of different applications, in tens of thousands of sites.
As a result of this early market and product analysis, Altira was able to confidentially provide seed capital for Hyperion, recruit the founding management team and then step aside so that the team could go about the difficult work of building the company. Since its founding in 2007, Altira has also led the Series A round and has committed capital to the Series B and Series C rounds. Dirk McDermott has been widely quoted as saying that Hyperion Power is the "Google of clean energy," meaning that Altira firmly believes its returns will be in the range of early investors in that company.
Hyperion has broadened its capital structure in the last year by recruiting customers, strategic partners and members of its supply chain as investors. This approach requires enormous patience as many of those kinds of investors are not skilled at investing in early stage firms, and don't have existing resources to perform proper diligence on the firm. Hyperion Power's executive team is compromised of both industry experts and folks that have been commercializing DOE technology for decades. This provides the necessary balance and comfort required by non-traditional industry investors.
Hyperion Power established a six-year commercialization plan in May of 2007. The firm is some ten weeks ahead in that plan, and continues its march toward commercial release of the Hyperion Power Module.
John R. (Grizz) Deal is CEO of Hyperion Power and has spent the last 20 years taking products to market based on DOE innovations.
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