New Age Alliance : Large and Small Team for Technology

A couple of start-up companies in Orange County, along with giant Fluor Corp., are showing us new directions for business development.

At Fluor, Robert Muir, a vice president for technology, is setting up an alliance of large corporations that will reach out to help small companies and benefit from their new technologies.

The Prometheus Alliance, as Muir has dubbed the venture, so far includes Edison International, Hughes Aircraft--now in the process of being sold to Raytheon--Litton Industries, Monsanto and Texas Utilities. It will have 10 members ultimately.

The alliance’s scope will be nationwide, but Southern California will receive particular focus thanks to the local abundance of start-up companies.

Southern California today is alive with new companies, launched with family money or government research grants, that would welcome big-company partners if the terms were right.

It’s a new age. At one time, big-company research departments produced breakthroughs. “DuPont’s Experimental Station produced the fibers Kevlar, nylon and others. But the company recently dismantled it,” says Muir, an Australian-born chemical engineer.

Lately, rapid technological changes have confounded big-company attempts to keep up. Corporate development departments were too inward-looking and acquisitions of high-tech companies proved expensive disappointments.

So Fluor, which builds plants for the oil and chemical, food and electric utility industries, is trying technology partnerships in which the big companies offer distribution, marketing and some capital and the small companies offer ideas that make a difference.

The Prometheus Alliance, which began six months ago with a small, $150,000-earnest-money contribution from each member, hasn’t selected any small companies yet. But Muir is looking over prospects, including some near his Irvine headquarters, with major possibilities.

In a large room over his garage in Cypress, Jack Syage is building an advanced spectrometer to fulfill a $65,000 contract for IBM.

Spectrometers detect and measure the presence of different elements in compounds. The assignment for IBM’s semiconductor operations is to measure trace elements of ammonia in large quantities of water.

Syage, 42, a research scientist with a PhD in chemistry from Brown University, worked for Aerospace Corp., the El Segundo-based government research firm, until budget cuts in the early 1990s convinced him that his work on improved spectrometry would not get funded in the traditional way.

So he applied for and won a $100,000 Small Business Innovative Research grant from the Defense Department--under a new program to encourage dual-use commercial and military technology.

And last year he founded Syagen Technology in his home. His wife, Elizabeth, a research chemist with Allergan Pharmaceuticals, keeps Syagen’s books part time, and the company’s third employee, a fellow scientist, does lab work at UCLA.

Syage is negotiating with a high-tech investor for funds to move the company to a lab facility in the Irvine Spectrum and to hire a business manager and expand Syagen. He sees potential in his spectrometer’s ability to detect explosives hidden in airline luggage. And his company may win larger government grants.

Whatever happens, Syage would gladly share equity with a big business partner for the distribution know-how and access to a broader market that would bring. “Owning part of a larger business is better than owning all of a smaller one,” Syage remarks dryly.

In Irvine, Peter Elkin looks forward to expanding AutoService2000, a 3-year-old company that now employs nine people and garners $400,000 in revenues servicing vehicle fleets for the city of Anaheim, Lucent Technologies and other customers.

AutoService’s technology is a patented pump able to quickly exchange fluids, draining and refilling an oil tank with no spillage--an important environmental consideration. The pump, designed by Elkin’s engineer father, has caught the eye of fleet customers, who have asked to buy the pumps.

So Elkin, an accounting graduate of USC, wants to go into manufacturing, a move that would take a $3-million investment for capacity to produce 100 pumps a year.

He sees potential. “Disneyland changes thousands of gallons of hydraulic fluids annually, turbines must exchange fluids,” Elkin observes. So he would welcome a strategic partnership with one of the Prometheus Alliance companies.

Alliances offer a new model for development. In another time, Syage’s options would be limited to working in a big company or at a university to pursue his spectrometer research. “But it could be that your particular ideas would not fit the priorities of a large organization,” he says.

Elkin puts it another way: “Big companies gain technology inexpensively by alliances with small firms,” he says, “while small companies benefit from a partner with a vested interest in success.”

But the major reason for alliances today is that big companies have to grow again. “In recent years, they have produced earnings by cutting costs, but the time has come to grow the revenues,” says Muir, who has worked for Union Carbide, for research institutes and U.S. government agencies in a long career. “And to do that they need discoveries and new ideas to expand their lines of business.”

So experimentation thrives in Southern California. And a report issued in Washington on Tuesday states that “California has regained leadership in most of the nation’s growth industries.” That’s not coincidence; it’s cause and effect.