The Innovation Institute welcomes Matt Bootman, CEO of Crystalplex Corporation to the blog.
Matt’s professional career is best described as a life of pivots:
- Biology major to wine chemist;
- Chemist to one of the first ever biomedical engineers;
- Engineer to developing a major innovation in magazine fragrance inserts with Alex Trebek's ex-wife. (More on that later)
Steve Blank, mastermind of the Lean Launchpad startup method, defines pivoting as “when you change a fundamental part of the business model. It can be as simple as recognizing that your product was priced incorrectly. It can be more complex if you find [that] your target customer or users need to change or the feature set is wrong or you need to “repackage” a monolithic product into a family of products.”
In this Q&A Matt takes us through some of his pivots and why they were necessary.
Briefly, what was your path into entrepreneurship?
I joined my first start up in 1984, Vitaphore Corporation, and helped develop two products that provided infection control technology for medical devices. Five years later and with $8 million invested, the company was acquired by Union Carbide for $40 million.
The next step could be best described as intrapreneurial. I followed my wife and her new job to Boston where I joined the Thermedics division of Thermo Electron Corporation (now Thermo Fisher Scientific Inc.) My initial focus was on developing medical polymers for catheters and remained for ten years.
So what was the startup story at Thermedics?
I had moved into transdermal drug delivery and this experience fit well with a chance event that had captured the interest of a senior executive. This was the mid-90s and many magazines, as they do today, contained fragrance samples. At that time, though, the perfume was encapsulated in a polymer. The perfumes would leach out and begin to smell very strongly. Americans were not too troubled by the smell, but many Europeans found it very offensive.
I gave some thought to the problem and my work then on drug delivery patches. What if we could reverse these patches and have the fragrance go up from the magazine insert rather than the drug go down into the user’s skin. So I volunteered. I Started to partner with a label manufacturer to try this new delivery approach. I realized I didn’t know the magazine business at all. Enter Elaine Trebek. At the time, she was a remnant buyer in the magazine industry (consolidating partial page ads into full pages for magazines).
From this partnership Scent Seal Inc. was developed. Now the magazine reader could open a strip to access the fragrance that was truer to the real smell of the bottled perfume and didn’t leak sitting on newsstands. Sales began – the Giorgio fragrance launched with Scent Seal.
Elaine pushed the new technology on Madison Avenue and sales took off and began to affect the market leader in magazine inserts. This company, Arcade Marketing (now Arcade Beauty) bought us out for $25 million to shut us down in North America. You can still find ScentSeal® on their website. I went to Arcade with the technology and initially they only made hand cream and makeup samples and no longer offered perfume samples. I left when Arcade began sales in Europe and my non-compete contract ended.
So how did you find Crystalplex?Through networking I met the founders of LaunchCyte, Tom Petzinger and (the Innovation Institute’s own) Babs Carryer. I wanted to be part of something rather than a hired gun. Tom and Babs brought me in as the Interim CEO of Crystalplex.
For the first time in my career, I executed a pivot in a company as compared to my own personal path.
What was the pivot?
We Went from using quantum dots for biological research and diagnostics to optoelectronics in lighting displays.
What factored into the pivot?
We were just starting to look at the potential applications for quantum dots (emit very specific color from the spectrum based on their size). There were three primary uses:
- Photoluminescence (light emission from absorbed photons) utilized in lighting and displays;
- Electroluminescence (light derived from injected electrons) in OLEDs (Organic Light Emitting Diodes); and
- Photovoltaics (absorb photons and release energy or basically an OLED in reverse) for solar panels.
Why pivot?
A company called Invitrogen (that Crystalplex eyed as a potential acquirer for a time and is now also part of Thermo Fisher Scientific) owned a division called Molecular Probes that made fluorescent dyes. They bought Quantum Dot Corporation in 2008 along with their patents.
Another quantum dots company in Troy, NY, called Evident Technologies needed to sell their product in kits for their business model to be successful. Crystalplex had the same business model as Evident. Relying on the patents acquired from Quantum Dot Corporation, Invitrogen sued Evident into bankruptcy by winning treble damages and an injunction. [Note: It appears that a company called Evident Thermoelectrics has risen from the ashes of this company.] At this point Crystalplex realized that it could no longer sell its kits or would risk a similar suit from Invitrogen. This severely limited the market to just researchers. The market forces and narrowed exit alternatives demanded a reaction from Crystalplex. That reaction was a pivot. Another Pittsburgh company, Plextronics, was already very actively pursuing the OLED space. I felt that we needed to pivot to the growing LED lighting and display market.
Pivots are rarely easy to execute, even in a small company. What was your experience at Crystalplex?
I can sum it up in one word – REVOLT! I had to convince both the existing investors that the pivot made sense and we needed new investors to support the pivot and they had to believe in the new model as well. When I started making the pitch to both groups for more funding. I got responses like, “Death is a better option,” “I invested because this was life sciences, I don’t understand lighting,” and “What did the prior business plan mean then?” Many were doctors and didn’t understand this new market.
I did get support from Crystalplex’s CTO, Larry Qu. He is a physics guy and was very comfortable with the shift.
You are here, so you clearly survived the pivot. Tell us what happened next.
Six months after the pivot we had raised $750,000 in convertible debt from individual angels, Innovation Works (IW), Pittsburgh Life Sciences Greenhouse (PLSG), Pitt and UPMC.
By 2010 there was just too much debt in the company, so we converted to 100% equity. Well we wanted to convert to 100% equity. UPMC and IW converted. PLSG didn’t like the pivot out of the life sciences area, so we accommodated that by doing a stock swap of Crystalplex shares for LaunchCyte shares which still had life sciences companies in its portfolio. Pitt’s debt was paid off with cash. All subsequent raises have been through sales of shares.
So what were the biggest challenges associated with the pivot?
Not having a personal expertise in the new market and hesitancy to make the pivot among the investor group.
I had to go back to doing market research. I gained my market understanding organically. I didn’t hire someone to do it. Basically implemented through hard work and research. Found through the market research that lighting was the lowest hanging fruit among the three options.
Any advice for others contemplating a pivot?
I wish I had just hired a professional to do the market research in lighting before I decided to pivot. The investment of $50,000 to $80,000 at that time would have saved me so much time later on. I talked to several potential individuals/firms at that time, but just never wound up pulling the trigger. Hire a pro and get it done!
If you are a Pitt innovator considering a pivot for your idea, contact one of our entrepreneurs in residence to schedule an appointment.