Exclusive interview for SPINOFF.COM with Mr. Ray Chiu about the technology of colorimetric sensors for accurate chemicals detection and quantіfіcatіon of natural gas

BіoІnspіra, led by the team from UC Berkeley, Lawrence Berkeley Natіonal Laboratory and Stanford Unіversіty, develops colorіmetrіc sensors for cost-effectіve, low-powered and hіghly sensіtіve detectіon and quantіfіcatіon of natural gas wіth real-tіme and remote monіtorіng. The system allows the natural gas іndustry to recoup the sіgnіfіcant portіon of the annual $5B value of natural gas leakіng from іts іnfrastructure.

S.O.C.: Dear Mr. Chiu, let me express the gratitude from Spinoff.com team that you agreed to spend time speaking to us and sharing the information about your natural gas leakіng technology. Mr. Chiu, you serve as a CEO at nspіra and, as we know, you are leadіng the effort to commercіalіze phage colorіmetrіc sensor for commercіal applіcatіon. So, our investors and we would like to learn more about your professional and scientific background, and of course, the team who supported you and the project, because it is a universal truth that team is a key to success in the formation of every scientific spinoff.

Ray Chiu: I and the other co-founder Benson [Benson Fan, CTO focused on developіng organіc electronіcs and mіcro-fabrіcatіon technіques, and brіngіng the phage colorіmetrіc sensor to market] both went to school at the Unіversіty of Calіfornіa, Berkeley and both were doing research at the Lawrence Berkeley Natіonal Laboratory for four years. During that period we were working at sensing technology. We were both pursuing a Ph.D. degree, and then we started a company and decided to drop off the program, because the time didn’t allow us to do two things at a time. My background is in Chemical Engineering and Bioengineering. Benson’s background is Material Science.

We have another co-founder, Jimmy [Jіmmy Leu, the VP of hardware of BіoІnspіra, and іs leadіng programmіng and hardware engіneerіng іn BіoІnspіra]. His background is in Mechanical Engineering and Electrical Engineering. He has more than 20 years’ experience in system level hardware design.

Another co-founder, Don [Don Hong Wang, a Chіef Scіentіst at BіoІnspіra], who has a Ph.D. degree. His background is in Protein Engineering. He has more than 15 years’ experience working in the gene industry.

Besides, we have seven full-time employees who came from huge companies and now working to support this company: a software engineer, two bioengineers, a mechanical engineer, an accountant, a firmware engineer.

S.O.C.: Do you plan to have more people joining the company in short term?

Ray Chiu: Yes, we do. We have a hiring plan. It has to go with the timeline. In the near future, we plan to hire an electric engineer, a software engineer, people who have experience in ERP software doing quality assurance and control, a plant manager, an automation engineer, a manufacture engineer.

S.O.C.: Great plans! So the project of phage colorіmetrіc sensor started at the Unіversіty of Calіfornіa, Berkeley at the Lawrence Berkeley Natіonal Laboratory and, I know, it was awarded the first price at Big Ideas Competition. Could you please elaborate more on the process of technology creation? What engіneerіng challenges did you overcome to transform the іnnovatіon from the laboratory іnto a product approprіate for іndustrіal applіcatіons?

Ray Chiu: This is a very harsh process. This technology research started eight years ago at Berkeley. I was involved in the project four years ago. So, I focus more on the applications, technology optimization side. But even when I worked on this technology at school, at the moment, it’s not mature yet. It has really high potential. With this sensing technology, we want to target industry customers, so that means it needs to have high accuracy, at the meantime, the durability also means a lot. You know, durability matters. It requires a lot of sophisticated calibrations.

Commercialization process of the sensing technology is a different path than its invention process. With the invention, you just need to make it work once – from 1% to 60% or 80%. But with the commercialization process, you need to make sure it works 100% all the time. You need to think about the manufacture ability, durability, any environmental factors that might affect your sensor, and how to eliminate them, how to miniaturize the device, etc. You start to think about a lot of things that aren't really required when you just need to publish a paper.

S.O.C.: Agree, it is not a secret that the commercialization of a new technology presupposes some problems to be solved.

Ray Chiu: When we published the paper, we were using really low-end and cheap microscope camera, which we bought from Amazon for $20-30. We used that equipment to analyze our sensor, to interface with it. That’s why we could get some results from our sensor. That was basically an optical interface that we used before. And when we started the company, we got some money from the big idea. So, we bought $800 system, which is a high-end camera where you can control a lot of different factors. But that camera is too expensive, so it couldn’t be made into the device. What we wanted to do was a proof-of-concept testing on a sensor to make sure it really worked. Once we had this proof-of-concept testing finished, we needed to think about another way. We were thinking about using just photo dial and LED light, because we just needed to detect a color. Then we realized that it wouldn’t work. A photo dial has its program. We tried to use a color sensor, but it has its deviation problem. They are not very accurate, very consistent. Their application is to detect some color, that’s it. They don’t need to be highly accurate.

Then we assembled a color sensor to lie into a small box trying to use it as our sensor module. And then we figured out that the deviations between different modules are so huge, even though we calibrated our sensor. It’s like 15%-20%. We needed to figure out better optical interface. We have found one in the second module, which worked just fine. So, we’ve got the solution to that problem, but still, there is something we need to improve.

When people are building a company, it’s very difficult. You never are going to know, what you are going to need when you get to the step. The real case scenario is always different from what you’ve expected before. Each decision, each step that you make costs a lot of money. Once they’re wrong, your company could die. For the first version of the module, we spent $60.000 and we never got it back.

This is one of the challenges we met along the commercialization process. The other one that we have is the manufacturing process, because all of our sensors were made in the laboratory scale. We can make a handful of sensors in a lab, but we don’t have the ability to make a thousand per week. For that manufacturing process, we need to figure out, what kind of units we are going to use, what kind of equipment, how much it is going to cost. This is not easy, but achievable.

S.O.C.: Talking about commercialization, what stage is the product currently on?

Ray Chiu: Currently, we made our beta-prototype and now are improving its design. We can provide our customers the Sensor Evaluation Kit. If there are further interests, we can move into the phase II which is a bigger-scale pattern. So, they can deploy 50-100 sensors in the field. Right now, it’s still beta testing phase.

S.O.C.: Please elaborate more also about the grants that the company has received from the Natіonal Scіence Foundatіon.

Ray Chiu: When we started a company, we didn’t have any funding. We thought about Small Business grant from the Natіonal Scіence Foundatіon. We counted on it to survive, that was the money that kept us going. We got the Natіonal Scіence Foundatіon grant of $225.000 back in 2015. That was a Phase I grant. It made us decide to continue working on this project. In a year, we finalized our developmental progress and reported about that to UNSF committee members. In 2017, we got a Phase II grant, which is $1.2 billion. That was another evaluation of our progress, of our results. The committee members (either from the industry or academic science background) support us continuously.

Besides the National Science Foundation, we received a $100.000 grant from the EPA (Environment Protection Agency) in 2017.

S.O.C.: The problem of natural gas leakіng isn’t new, but very topical considering $5 bіllіon value of gas leakіng from іndustry structures. And this is in US only! There are a number of solutions the market offers. What are the USP of your technology and fundamental difference from other technologies that tried to solve this problem before you?

Ray Chiu: One of the main advantages of our product is specificity or selectivity. In lots of sensors, if you want to differentiate between chemicals, that’s really hard. For example, when you put into the environment a benzene sensor, you want to detect benzene only. But a lot of times when it has signals, it might be coming from methane or other gas chemicals. That’s really frustrating for the industry customers, because they don’t know what signal they are getting. But that is the only solution available right now. Otherwise, they have to use the higher end module, which is handheld detector or mobile surveyor. Most of the handheld detectors cost over $10.000, up to $30.000. Some of the mobile surveyors are even of higher cost, from $100.000 up to $250.000. Most of these are very accurate, but they are instrument devices. They can distinguish between gases, but the problem is they are too expensive to be mass-deployed in the field and equip each of the workers with this device.

Our sensor has its high selectivity by nature. CRISPR technology is really popular right now. Scientists, researchers are using virus particle to make impossible things possible. They use it to kill bacteria, treat genetic diseases, even to fix our vision. We are basically doing the same thing. We use virus particle to solve this problem. And one of the advantages of virus particle is its selectivity. You can tune your virus particle to be highly selective to a certain chemical, certain biomarkers or certain bacteria. With this advantage, it can also be made very low-cost, low-power and small. We can target some niche markets where industry players can use our sensors for the accurate reading.

S.O.C.: As far as I understand, your technology can be applied to the arrays of sensors wіth hіgh accuracy toward almost all chemical compounds and can be developed іn less than 3 months. Is it true?

Ray Chiu:  What I’ve just mentioned to you is just one sensor per one chemical. But they are really small, 2 by 2 mm, so you can put them together into an array and detect multiple chemicals at once. We can find new receptors for a new chemical within less than four months. Once we have that done, we need to further validate that receptor and then incorporate that into our existing platform. We are thinking the overall process is going to be 6-7 months at the minimum.

S.O.C.: We wonder what is the actual addressable market for your invention and what are the current competitors there? Could you please share with us the results of the market studies, if there are any? What might be the barriers to entry?

Ray Chiu:  We are targeting the industry of gas sensing market. Overall, it’s going to be $5.5 billion market. This market is highly fragmented. There is no dominant player which owns the market share more than 30%. From the marketing report, we have found 20-30 players in this market right now. There are lots of mergers and acquisitions happening. Within last 5 years, more than eight mergers and acquisitions already happened. As there is no dominant player, so the barrier of entry is definitely lower. There is no really good technology at the moment. If your technology has its competitive advantages, you can definitely find your supporter in this sector. This is the market that we first target and we focus more on several sectors right now: the natural gas industry, commercial building.

S.O.C.: Could you tell us all current industries and fields of your technology/product application and where do you think it could be successfully applied in the future?

Ray Chiu: Other markets that we can tap into and we plan to go after the gas sensing industry market are some niche markets, including homeland security for the bioweapon detection, for airports to detect explosives. We can even go into consumer health to provide some preliminary breath analysis for the general public for certain diseases, like cancer diagnosis or tuberculosis diagnosis. That’s what we are really interested right now in. This is the applications further downline. Right now, we focus more on the industry sectors, and some addressable market that we are interested in is coal mining industry. Sometimes the mine itself leaks some methane gas, which might cause the explosion. That is why it requires better sensing technology that can be used in the industry.

S.O.C.: We always need to paint a clear picture to the potential investors of the market the opportunity of the spinoff that is meaningfully large and growing. Why in your opinion your company might have a high growth potential?

Ray Chiu:  We’ve done more than 100 interviews with industry experts, financial consumers. Even well-known experienced industry people working at huge main players of this market served us as advisors. We talked to these people to understand what is the need right now. So, if we can make to this progress, address this problem, we are going to sell thousands or even millions of our sensors into the market. And that is just the starting point. Once we have that first revenue in, we can further expand our business, grow our team, provide more features, more sensors to the market. We definitely see the high potential of growth by talking to these experienced industry people and customers, but it takes effort and time.

S.O.C.: In order to understand the peculiarities of a spinoff our investors always ask what is the investment structure of the company? Who owns the controlling stake in your spinoff?

Ray Chiu: The four co-founders own the majority share of the company.

S.O.C.: The potential investors will be curious whether you already have the first clients and signed contracts?

Ray Chiu: We have three pre-pilot right now, which is signed contract paper by our customers.

S.O.C.: Dear Mr. Chiu, we both know that for you and the investor it is crucial to reach positive cash flow as soon as possible. Certainly, the market scaling cannot be achieved without proper distributors network and clients. Please tell us about your criteria of partners selection and which markets are open for spinoff activity.

Ray Chiu: A lot of companies across different industries, sectors, countries are very interested in what we are doing. But the problem is that you need to evaluate how much interest they have. We carefully selected our pilot customers based on the market behind, what kind of applications they are going to use it. So, we can estimate how many volumes they are going to need, how many sensors they would need. And then also we evaluate with selected customers whether it is a viral need, whether it is tight to have or nice to have, if they really need it or not. The last one is the customer interest. If they are unwilling to pay for the pilot, it means that is not necessary to have at this moment. We work with the customers who will be willing to pay for the pilot, even to evaluate our technology. We proceed from there.

Our customers are very diverse and a lot of them coming outside of the US. We have two major customers from the United States, but also we have customers from Europe and Asia. The next step is to go internationally. It doesn’t really matter if it is Asia, Europe. Once we have a really good pilot and also the sensor reports from our existing customers, we are going reach out internationally to expand our market share.

S.O.C.: It is very important to understand your particular vision about unique features of your company. Why do you consider the major market players might be interested in investing into a promotion of the product on the addressable market?

Ray Chiu: First of all, you need to make sure your solution works. That is based on assumption and also confidence in our own solution. This is not the competing industry. All the natural gas companies are monopolies, they are not competing each other. They have their own regional sales. For example, the utilities at your city do not compete with the utility in the US, because that’s the original monopoly things. They don’t have any competitors. So, if they found out there is the technology that can actually help their operations, help them to avoid a lot of hassles, they would be willing to recommend this to other peer companies.

S.O.C.: Now we would like to refer to the next very crucial and we would even say essential aspect for spinoff companies’ as the strategy of R&D, production, distribution, and marketing processes. Do you have your own unique strategy? Which of these processes do you consider your spinoff is strong at?  

Ray Chiu: Our team is really good at research and product development. We have the strong background in science and device building, manufacturing.

S.O.C.: As a rule, the majority of spinoffs outgrow into exits. How do you determine the market for the company and estimate its volume and dynamics? What is your potential share on the market?

Ray Chiu:  This is hard to say, but I can give you a sense that in the next 3 to 5 years we expect to have $15 million in revenue by then. As for market share, I would say, as much as possible, as much as we can.

S.O.C.: For spinoff companies, their intellectual property is a key to success. The investors pay particular attention to it. What key intellectual property does your company have (patents, patents pending, copyrights, trade secrets, trademarks, domain names)? It is also interesting to know the perspectives and protection plan of your technological advancement and leadership in a medium- and long-term prospectives.

Ray Chiu: Our core technology is patented. Our company has the global exclusive license right for it. For the rest IP that was developed along the line, we plan to keep them as a trade secret and don’t want to publish it. Nobody else is working on this technology. A lot of times people publish their IP and fill in patents, because their competitor is close, so they want to protect them to come into this space. Sooner or later they will come, so that’s why they want to file it as soon as possible. But in our case, we don’t have other competitors in the space, especially using this technology. That’s why we tend to just keep it a trade secret, so nobody would ever know. This is the way a lot of companies do if they think that this is a really advanced technology that nobody can do.

S.O.C.: The fact that nobody else is developing the technology your company is already using is another strong point. The investors will want to get a clear picture of how many rounds of investments have you completed?

Ray Chiu: Just one round. Overall, around one million dollars from two institutional investors.

S.O.C.: Are you seeking for the investments at the moment? What is the volume and time limits?

Ray Chiu:  We are looking to raise $3 million right now. We plan to close a round by the end of this year.

S.O.C.: What do you plan to use the invested funds for?

Ray Chiu:  So, basically, to pay for the recurring engineering costs to our audio and EOM automation planners. We’ll use it to build the scalable sensor manufacturing process, so we’ll be ready to mass produces, once we’ll get a contract from customers. We need to just make sure that manufacturing process is not a bottle neck for the whole process. We are going to use the money to expand our engineering team, to build the service team who can help us to grow our market.

S.O.C.: Could you please describe your ideal investor? What aspects are important for you, for instance, is it experience, country, the amount of own private capital or maybe some personal qualities?

Ray Chiu: For the institutional investor, the ticket side needs to be more than $300.000. Otherwise, there would be too much hassles for us to collect all this money together. If each one provides, for example, only $50.000, it means we need to have a lot of investors to fill the round. So, we do have a minimum ticket size requirement. We prefer strategic investors, but sometimes it takes longer time. We are also open to any financial institution, venture capital, institutional investors, as they may be faster in terms of the expertise and experience.

I believe we are looking for investors whose vision is in line with our vision. I think that is the most important thing. They believe in what we are doing, believe in the team. We don’t have any specific expertise and experience that we are looking for in the investor. We can definitely say that we want investors to have experience in IT space or biotechnology space, but if our visions are not lined well, it wouldn’t be a good fit for us. It’s more about passion. If they are excited about our company, I would like to work with these investors.

S.O.C.: And finally, could you specify the most convenient way you would like to receive inquiries from potential investors? Should it be by e-mail or personal phone call?

Ray Chiu: E-mail address is the best option.

S.O.C.: Dear Mr.Chiu, it was a really interesting conversation. My pleasure. Thanks for your time dedicated. SPINOFF.COM will be honored to support the development of your spinoff. We would be much obliged for all the materials your team can provide to support the interview and forward them to the investors interested.