UP051: UbiQD // making low-hazard quantum dots

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Hunter McDaniel 0:00
We’re shifting colors of light within the sun to improve crop growth. And that’s what my pitch at South by Southwest was about. That’s what our first product is about. It’s called UB grow. It’s a film that sits over plants and improves the quality of sunlight. But there is another use case that goes a step further where you can tint windows with this and generate electricity with them.

Jay Clouse 0:21
The startup investment landscape is changing, and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to upside.

Eric Hornung 0:49
Hello, hello, hello, and welcome to the upside podcast. The first podcast finding upside outside of Silicon Valley. I’m Eric Hornung, and I’m accompanied by my co host, Mr. Chris Elliott himself, Jay Clouse. Jay, how’s it going?

Jay Clouse 1:05
That’s the, that’s where we’re starting this one off. You’re gonna antagonize me just in the first 15 seconds.

Eric Hornung 1:10
We’re just I mean, Yeah, I think I think that’s how we’re gonna start we’re gonna start with a derogatory doppelganger. Also an alliteration.

Jay Clouse 1:18
Chris Elliott, if you guys don’t know is an actor known for many things, not the least of which is the character in Scary Movie with the messed up hand. He is a father figure in How I Met Your Mother. Forget the name of the actress or her character in the show. She…he’s in There’s Something About Mary and he has like a bunch of boils or burns or something on his face. Bottom line, not an attractive dude and somebody that I am frequently told I look like.

Eric Hornung 1:45
But the nice thing is, and here’s here’s where this becomes, you know, a positive. I’m not saying you don’t look like Chris Elliott. I’m not saying that at all. But I am saying that your girlfriend in front of the podcast now has a Emma Stone-like quality, which is like saying that you are really battin’ out of your league man.

Jay Clouse 2:04
I am already aware that I’ve out kicked my coverage on that. I think that’s the phrase, right?

Eric Hornung 2:09
I think that’s the phrase. I think batting out of your league is not the phrase. I think I used the wrong phrase.

Jay Clouse 2:14
Uh, no, it’s, it’s similar. Fighting above your weight class, out of your league.

Eric Hornung 2:19
Lot of sports metaphors in the, in the dating realm. In life. There’s no there’s no like sunshine metaphors. There’s no just you know, something like that.

Jay Clouse 2:27
Speaking of sunshine metaphors, today, we’re getting hard science into a world that I know next to nothing about.

Eric Hornung 2:35
Hashtag hard science.

Jay Clouse 2:36
With our company, UBIQD. Hunter McDaniel is the founder and CEO of UBIQD, which is a clean tech materials company that manufactures low hazard quantum dots in nano composites. Eric, I did not even know what a quantum dot was. But I did pull up the description from Wikipedia. Before I read that, I would love to hear you try to describe what quantum dots are.

Eric Hornung 3:01
Jay, I’m going to be honest, I glazed over the minute you started sending science words. So this is going to be a tough interview for me.

Jay Clouse 3:07
Well, let’s hear from Wikipedia. Quantum dots are tiny semiconductor particles a few nanometers in size, having optical and electronic properties that differ from larger LED particles. They’re a central theme in nanotechnology. When the quantum dots are illuminated by UV light, some of the electrons receive enough energy to break free from the atoms. This capability allows them to move around the nano particle, creating a conductance band in which electrons are free to move through a material and conduct electricity. So Eric, UBIQD came on our radar at South by Southwest, because they’re a part of the pitch competition, which they end up winning the 2019 South by Southwest pitch competition in the hyper connected communities category. My understanding is that UBIQD is offering a technology for solar panels that is superior to what is out there today.

Eric Hornung 3:59
That’s my understanding as well, and man, that long definition. I actually kind of understood it.

Jay Clouse 4:07
They were founded in 2014, based in Los Alamos, New Mexico. They’ve raised about $2.7 million in investment so far, including multiple grants, angel investment, friends and family. I believe they had a $750,000 grant from the National Science Foundation. There’s actually a pretty great YouTube video that’s less than 90 seconds about UBIQD and their quantum dots inside of a solar panel, that if you’re interested, I would encourage you to Google. UBIQD is spelled UBIQD.

Eric Hornung 4:38
Jay, we can also put that in the show notes. Do you consider Texas the Southwest? Say no.

Jay Clouse 4:45
No. Texas has its own thing I consider Texas, Texas.

Eric Hornung 4:49
Yeah, so do I. So this is our first company from the Southwest. Pretty exciting stuff.

Jay Clouse 4:54
Well, guys, we’re going to get a definition from Hunter on quantum dots and hopefully a really good breakdown to make this even more accessible. As you’re going through his interview. If you would like to share your thoughts with us, you can tweet us @ upside FM, or email us hello@upside.fm. We’ll get into the interview right after this.

Eric Hornung 5:13
But before we do that, let’s bring in Scot Ganow, an attorney at Taft Stettinius and Hollister to teach us about data privacy and security. Taft is a full service law firm known for assisting entrepreneurs across the Heartland. As a reminder, the following remarks by Taft attorneys are for informational purposes only and are not legal advice. Its information is not intended to create and receipt of it does not constitute an attorney client relationship. No person or organization should act upon this information without first seeking professional counsel. Scot, we made it through the disclaimer, how are things going?

Scot Ganow 5:45
Things are going great. Thanks for having me.

Jay Clouse 5:47
Scot, thanks for coming on. Always appreciate you being here. If I’m a first time founder, are there any privacy or data security standards that I should know about?

Scot Ganow 5:56
Absolutely. But it can be a challenge, especially for US based companies because unlike a lot of countries around the world, we don’t have the universal privacy and security federal law in place that set standards clearly for all industries. Rather, we tend to handle it in sectors: healthcare sector, financial sector, consumer reporting sector that each have their individual standards for protecting information such as HIPAA in the healthcare space. Likewise, we also have the challenges of a global economy where data is not just coming from the United States anymore. There might be implications for individuals that live in the European Union, or Canada, or the Asia Pacific region. And as a result, those laws may have different requirements and standards that would govern the use of information. It’s for these reasons that regardless of sector in which you operate, I encourage clients of all sizes to think more broadly and holistically about the standards they seek to implement and look to things like ISO 27 001 series, or maybe the NIST information cyber security and privacy standards and framework that provide a roadmap for all the things you should be thinking about when it comes to privacy and data security. The benefit of taking such a holistic approach is many fold. Number one, these standards like ISO and NIST are even recommended by some of these federal regulations. So by following them, you may very well be checking all the boxes within applicable law. But they’re also helpful because they allow one standard across your enterprise that all employees can follow. And that’s very important here. It’s important to be legally compliant. But you’ve got to be able to operationalize that compliance. And if employees don’t understand the policy, get confused by it or can’t implement it universally the same way across the board for all types of data, the chances of compliance are reduced significantly, and the chances are increased they’re going to make a mistake. And when something bad happens, having such a program in place that is holistic with a commercially an industry standard, like ISO or NIST in place really puts you in the best position to defend your practices. I always say it’s not a sin to have a data breach or even have something bad happen. But it’s a sin not to have a plan in place that you at least anticipated the risk and had something in place. So following a universal standard that’s out there can definitely help you on many fronts. And I encourage organizations to look at that well before their product hits the market. So they’re ready to go, ready to grow and tackle the opportunities and not just the compliance requirements.

Eric Hornung 8:33
Awesome. Thanks for that, Scot. If people want to learn more about Taft or yourself, where should they go?

Scot Ganow 8:39
We make it easy Taftlaw.com or you can also find me on LinkedIn.

Jay Clouse 8:50
Hunter, welcome to the show.

Hunter McDaniel 8:51
Happy to be here and share UBIQD’s upside with Upside.

Eric Hornung 8:54
Oh, that was the best, that was the best response I think we’ve had on Upside today. Man, good. That was good.

Hunter McDaniel 9:01
I’ll take it. A little one liner.

Eric Hornung 9:02
We like to start on Upside with a background of the founders. So can you tell us about the history of Hunter?

Hunter McDaniel 9:09
Sure. So I have kind of an eclectic background. People often ask me if my dad was in the military, because we moved around a lot when I was growing up. I went to kindergarten in Kinshasa that year, moved back to the States after that, and lived all over. My dad was just in this position where they were moving him constantly to different places. And then they ended up, my parents ended up moving to Thailand when I was in high school. So I graduated from international school, Bangkok. And in between, there were all sorts of interesting places that we visited and lived. And then after that, my parents lived some, lived in some additional interesting places. But because I was in high school, we didn’t have in state tuition anywhere. So it wasn’t going to save my parents any money to choose like…kind of, we consider ourselves sort of a Texas family, because my parents both went to Texas a&m and grew up in Texas and a couple generations before. And so they were hoping that I would go to Texas A&M or stick in Texas, where they considered their home base. But we didn’t have in state tuition in Texas. And so they’re like, they felt really bad about dragging me to Thailand. And so I chose to go to the beach, basically Santa Barbara. So I studied physics and Electrical Engineering at UC Santa Barbara. You could call it a college and actually, it ranks pretty high. But the dorms are like right on the beach. And there’s like girls in bikinis everywhere, and lots of distractions. It was a fun place to go to school, but also a good place to get an education. And then I got, I got the bug there for materials because I worked in that group. I was an undergraduate researcher, where they were studying quantum computing and enabling those breakthroughs were advanced materials. And it was often the materials guy in this lab, a physicist, really smart guys working on these extremely complicated problems. But it was the guy that made the materials that was like, the most important person in the room. They’re always looking to him and like, Can you do it? You know, and like, you know, what do you need, like, we’ve got it, we got a big budget, here we can we can buy equipment and stuff. And I just convinced myself that I want to be that guy in the room of super smart people like the guy that they all depend on. And so that motivated me to get a PhD in material science and engineering. And I had the fortune of going to one of the top schools in the country for that – University of Illinois – which is quite a transition. And as you can imagine living on the beach to like being in the cornfields and Illinois, where it’s just like cold and dreary most of the year. But that really enabled me to focus. And I think it was a critical kind of inflection point for my career was that I had nothing else to do really, besides the research. And I got really passionate about the research. And I had an opportunity at that point to start working on nanomaterials. Previously it was kind of quantum. And there’s a little bit of nano in there. But my PhD was on nano crystals and a specific class in nano crystals is this material that we’re commercializing called quantum dots. But I had that opportunity because of a specific Professor Moon Sub Chen. So I have to give a shout out to him. He was very inspirational to me. And he had written a book with a famous guy in the field of quantum dots that was a staff member at Los Alamos National Laboratory. And so he was able to write a very strong letter of recommendation and get me in the door with this top tier research group at Los Alamos. So after I finished my PhD, I came to Los Alamos National Laboratory to work on quantum dots further. But in particular, we had a industrial collaborator that was pushing us in the direction of more environmentally friendly materials, lower costs, and things like that, and very applied and had a specific use case, and solar energy in mind. And that’s where I developed or I codeveloped the founding technology of the company. We had this portfolio of patents, and then these papers, and it was really, this, in my mind, miraculous material that we had developed. And that was the impetus behind starting the company. Unfortunately, that industrial collaborator was kind of having a difficult time in their markets. And they were pursuing work that they consider this exploratory r&d, they pulled back out of the United States. It’s a Japanese company. And so that left me with the opportunity…I was really frustrated. I was like, gosh, this is like really ready for prime time. And I put all this work into it. And the lab was kind of like, Well, you know, we’re open to you starting a company. And they would like to support, they would have liked to support me more maybe than they did, but they weren’t against it, per se. And so I was able to negotiate after I left the lab…it’s kind of a complicated story, a license to the technology. And that was the founder, founding moment of the company back in 2014.

Jay Clouse 13:26
Wow, super efficient story, getting us all the way through there, I want to back up a little bit and dig deeper on even the term materials. You know, you wanted to be the guy in the room where all these super smart guys, we’re looking at the guy who built and handled the materials. Can you explain more about what the word materials means in this context?

Hunter McDaniel 13:44
Yeah, I mean, it’s definitely evolved over time, it used to be the Materials Research Department at a university would be called metallurgy and mining, actually, so materials, traditionally, it was more about like metals, and like the stuff that we pull out of the ground. And then it got heavy in ceramics for a period of time, ceramics being like, you know, the materials that you make a coffee cup out of, or like a porcelain bowl or something. So that’s…those are different kinds of materials. And then, you know, polymers became big, you know, like the graduate that famous moment in the graduate where he takes Ben aside at his graduation party and it was like, I’ve got just one word for you one word for you. Plastics. And that was kind of that was like the 60s, right. So like plastics. And then I think it was also in, what’s that movie, the Christmas movie, kind of drawing a blank all of a sudden, but plastics, you know, we’re big like back in the 60s and 50s, and stuff. And then, you know, came like the semiconductor era where we had silicon chips developed and LEDs and stuff like that. And so all that stuff would be kind of in this world of materials, you have like some buckets that you can put it in polymers or soft materials, ceramics, which are like really, really hard materials, metals, semiconductors. And then over the last like maybe 10, 15 years, it’s evolved into like more quantum materials, nano scale materials, which lead to emergent phenomena. Like if you take a semiconductor like a chunk of semiconductor, it has certain properties like silicon, right, and you cut it in half, the two pieces have the same properties. It doesn’t really change. The size of the dimensions change, you keep cutting in half. But eventually you get down to a size regime where the properties really start to change in really funky ways. And if you spend enough time understanding the way that the properties change, you can tailor those properties. And so by changing the size or the shape, or you know, other features combined, maybe you can combine polymers with semiconductors or two different semiconductors, you can get pretty exotic fast. And that research group I was in in Santa Barbara, they were interested in materials for quantum computing, which means that you have these sort of states like the charges will be in the material in a certain configuration. And it’s very delicate. And those two states or multiple states would interfere with each other and create this continuum of different possibilities. So in a typical computer, you have a zero and one, but in a quantum computer, you have this full spectrum of different states. And in order to achieve that, you really have to have a perfect material like literally like no defects. Or sometimes the defects themselves are what give you the properties. You have to control, very precisely the positioning and the type of defects that you introduce. And then they also go to extremely low temperature in order to basically eliminate any thermal vibration or noise that can interfere with these states. And so you can imagine it’s very delicate system and requires extreme precision in the materials. And the guy that I’m thinking of was just an expert at making these perfect materials like layer by layer, single crystal, and then they can introduce defects and things. And my role in the lab at the time was that they understood that when they cooled down those materials in the presence of a magnetic field, like the Earth’s magnetic field, that introduced some sort of defects into the material that is little actually is kind of crazy. They’re called magnetic flux vortices. They’re like little tornadoes of magnetic flux in this material. That’s crazy, right? And it was like, they’re like, we want to understand these magnetic flux vertices better Hunter. Can you do some experiments for us? And so I was characterizing the loss basically, in the material when these are there like present and how that correlates into the result that they wanted. The thing that was kind of disappointing was like, well, even before I started the project, they figured out how to eliminate those flux vertices, because you can create a, basically a cage around the experiment that eliminates the magnetic field from the earth. So it was like, Well, we know how to get rid of it. But if it was there, what effect would it have? And so my role wasn’t as big of a deal as this other guy in the lab kind of emphasizes the importance of the material at that point.

Jay Clouse 17:37
When you, when you talk about the materials in the computer, I’m looking at a laptop right now. But when you say computer, you mean like the chips, and like the bits inside of it. We’re not talking about like the case. And can you, can you just explain more about like…

Hunter McDaniel 17:51
All of that actually, everything every, every, every physical component of the computer. A lot of stuff isn’t so sexy. So like, you won’t necessarily hear me be like bragging about it or, or like here, like there won’t be like a big headline about it, like the plastic in a computer like you take it, you know, it’s kind of for granted. But there’s a lot of technology that goes into just the casing and like to get the right kind of tactile response, haptic feedback, or whatever it is that your computer is doing. I’m kind of thinking more, because I’m a semiconductor guy, I’m thinking about the chip itself. And the chip itself is a semiconductor that’s quite complex. There’s regions that you have defects that are introduced. They’re called dopens, and those dopens in different regions react together to create, you know, the kind of electrical response. And then you have those in parallel, billions and billions and billions of these little devices, these transistors that work together, and that all needs to be encapsulated with some sort of cladding. And then you have to get and those those components get smaller and smaller and smaller, and you run up against like, the fundamental limits of like, now we have just a few atoms or something there and like, you can’t keep squeezing it down, but you have to get that information back out and get the charge back out, and you have to access it. So you have to translate the macro world to the micro world, it gets pretty complex, fast, as you can imagine. Pretty interesting stuff, though.

Jay Clouse 19:05
Yeah, a couple terms that you threw out. So you mentioned quantum technology. And nanotechnology nano, you know, is familiar to me as like, super small. What does quantum mean, in this context?

Hunter McDaniel 19:19
That’s a great question. Kind of controversial. And I get asked this a lot, I’m on some panels and have advised some congressional committees and stuff on this. So people mean different things, if you ask me what quantum means, I would say that it’s a material that takes advantage of a quantum effect. And a quantum effect can be different things. And quantum dots, it’s basically that when you, when you squeeze down, when you cut the size of that semiconductor in half and half and eventually get down to a size, that smaller than the electron, electron actually has like a physical size, like you know, it’s like the electrons hanging out. And it’s comfortable. And most of the time, when you make the, make its box, called electron in a box, particle in a well or something, when you make that box, so small, eventually you squeeze the electron, and it starts to behave differently, and the quantum nature of it becomes more pronounced. And the quantum nature being that it has discrete energy levels, which means like the electron has, you’re certain that you’re excited right now, right. And you could be like, a little bit more excited or a lot more excited. But electron doesn’t work like that electrons like it has certain like ground state, but then it can only be like, a lot more excited. And then it can only be like, exactly like, you know, certain amount more excited than that. So those are like discrete quantized, as they say, energy levels. And that’s a quantum effect. And we take advantage of that with our particles at the company by changing the size the particles leads to changing of the states. But most people don’t mean that nowadays, like if you look at like Congress passing a bill recently that supporting quantum research in the United States, because it’s becoming very competitive globally. And they’re talking about quantum information, which is more about like quantum computing, or cryptography, or this whole notion of being able to do computational work with, with multiple, with beyond two states, beyond like a zero and one into the whole spectrum. Until they talk about like only a few bits being necessary to do the same sort of calculation is you have thousands or millions of these Boolean bits. And so it becomes very powerful in principle, because you need a lot less space, a lot less material to do way more. So you could go way faster in terms of the computations that you could do. But it’s also really difficult to apply that technology because it does have, the situation has to be really perfect. Like most of those quantum computers operate at less than one Kelvin. So we’re up here at 273. Kelvin, Kelvin, I guess we can do it Celsius minus 273 Celsius, which is like…my it’s like basically absolute zero. So it’s really expensive and hard to keep the materials that cold. And then make it practical.

Eric Hornung 21:51
You mentioned your dad had a position that moved around a lot, or a little vague about that position. Was that a three letter agency? Or was that a corporation?

Hunter McDaniel 21:58
No, it was he worked for Chevron for 30 years, roughly. Right. And after that, he went into the he went to a younger, like a startup Well, a gas startup at Texas before he retired. But no, it was just Chevron. People, because I tell the story about all the places I live, sometimes people think that he was in the military, because it sounds like and I often share similar stories to folks that were in the military or kids that grew up in a military family. But no, this is the oil and gas. So everyone going around the world trying to pump out that oil. Yes, not not too different than like, you know, the military. I feel like sometimes, you know, out there in global conflicts, because it can be very militaristic on the oil and gas side as well.

Jay Clouse 22:37
These quantum dots. Now we’ve gotten to the subject of quantum dots, which is what UBIQD is all about. Before we dive deeper into UBIQD itself, how do you guys physically handle such tiny particles? Like what does that look like how you’re manipulating things at that size?

Hunter McDaniel 22:56
Well, it’s a lot simpler than you’d expect, probably. They are super, super, tiny. And it’s hard to imagine how tiny they are. 10,000 times more than a human hair, if you stack them end on end 100 times, then 100 times again, you still wouldn’t expand your…and 100 times more, you still wouldn’t span your, your fingernail. You can’t see them with a normal microscope, but we don’t have to pick them up individually, we don’t have to, you know, access them one by one. In a quantum computing type application, you might need to do things like that. But in our case, we take advantage of the the nano scale. But on an ensemble level, meaning there’s billions in fact that like in a jar, there could be more dots, often than there are known stars in the universe. They’re that small, but we have big jars of them and containers of them. And that’s because we’re taking advantage of their, their properties, their properties ensemble with the aggregate effect, basically, there’s many of them together. But the properties that that aggregate has is driven by that nanoscale behavior. So they’re not, they don’t stick together and lose that nano feature, if you will, like when they’re in a powder form, they still maintain that, that net, at least that we spend a lot of time making sure that that happens that they maintain that nanoscale property, but then with a lot of it, because there’s just so many of those particles. And so we can easily put them into liquids, and they can be deposited, like, you know, like a paint like spray down or pour down and drop cast down, we can mix them into polymers. And then they behave very similar to like, like other pigments for plastic like color pigments, dyes or whatnot. So it’s actually relatively easy to handle them. But we, you know, it’s we take it for granted, maybe all the work that’s gone in over these 30, 35 years to develop the material to that point where they are very easy to handle.

Jay Clouse 24:38
So in your description, or in the description of the company that I found, suck clean tech materials, manufacturing low hazard quantum dots. What is it about UBIQD? And why clean tech and low hazard is unique to you versus other material companies?

Hunter McDaniel 24:57
Great question. So the cleantech aspect is more about the use cases that we focus on that we’re the most passionate about. And then the last hazard is, I think sometimes we’ll even go a bit further now we’re more confident to say non toxic is really a consequence of the alternatives that exist in the marketplace today. And that’s our differentiator, really, is there’s several but the key one is the composition of matter that we’re using avoids the toxic heavy metals, or q toxicity of other kinds of quantum dots. And it’s unfortunate, but this is often the case in materials that the material that works the best or is the easiest to make is the most expensive or the most toxic, just like that, that’s just a lot we have in life. And when it comes to quantum dots, it’s even more true because the original quantum dot was based on cadmium, which is highly regulated because it has acute and chronic toxicity. And then if you want to go into other regions of the spectrum, like if you want to make different colors beyond the original colors, they were often using a lead based material. Lead is a little bit less hazardous than cadmium, but it’s obviously not good stuff, right? The more current material that’s used in industry like in most of the TVs that you’d buy today from Samsung, for example, use what’s called indium phosphide, and it is cadmium free. And they tout that it’s cadmium free, but it’s a known carcinogen. And it has acute toxicity. So our differentiator is that we’ve developed this composition of matter that’s based off of copper and zinc, it’s a sulfide. And there’s no known carcinogenicity. And we’ve done some studies ourselves that show that essentially doesn’t have any acute toxicity. There’s more work to be done. Like we haven’t done human studies, these have been on like rats and mice. And then others have done studies on different kinds of things. But so we avoid this toxic elements. And that’s why we say low hazard. There is some concern sometimes about the small size being a hazard in and of itself, but we’re not aware of any data in our size regime that would make you particularly concerning. And we also put them into plastics almost all the time. So they become kind of a macro scale thing pretty quickly. On the cleantech. Yeah, we’ll get into it as you talk about the company. But it’s just the markets that we focused on are really about sustainability, about energy efficiency, and food production, really making, making food less expensively.

Jay Clouse 27:14
So something you just said, I think is important to drill down on. You mentioned the quantum dots currently used in things like a Samsung TV. So quantum dots are something that are already being leveraged and put into market. You guys are an innovation on a better or different quantum dot. What is the span of what quantum dots are used, in now?

Hunter McDaniel 27:35
Well, so I mentioned that they’ve been around for about 35 years, and that’s the original publication, it might be 36, or 34, or something, but it was a while ago, and it until about 20. Well, the first company started to come out in 20, 2003 or so but they were really early to market and they didn’t have any products or they may be made a few stumbled attempts to launch products that didn’t make it for some for some good reasons, mostly cost. The first real products, like where it was really starting to happen, was only 2013. So it took, you know, 30 years or so to incubate this technology in research institutions before it was ready for prime time. And throughout that time, people came up with all sorts of crazy ideas. And there were some niche markets developed, like they think the very first product might have been Christmas lights, like there’s a company that launched multicolored Christmas lights that were a different color quality. I mean, that’s kind of, you know, like, really? Is that really the killer application? And then there was another company that launched the light bulb, they could make a better quality of light, better spectrum, I guess I should say what they do, why quantum, why do people care about quantum dots? They’re really effective at converting color of light. So you can make blue light into red light or green light, and you can turn the color of light with the size of the particle, that’s the quantum effect. So this ability to change the color of light with nearly 100% efficiency is a platform, there’s tons of things you could use it for, but the always involving light, in one way or another. So Christmas lights, there was a light bulb. It was a $100 light bulb. It didn’t sell. People are using them in medicine to like you could put a quantum dot into a cell, like a green quantum dot in cell a and then a red quantum dot in cell b. And then you can watch the cells move around. And you can track their fates, because you know, that’s the one that had the, you know, whatever. And so they’re using medicine for bio labeling, as they call it. And then that first…but those were kind of niche applications. They didn’t really take off. Where it really took off was when they figured out how to use these these materials to make displays better, TVs, smartphones, tablets, things like that. And the first killer product really was by Sony, partnered with a company called QD vision. In Boston, they’ve since been bought by Samsung, but they launched a television that used quantum dots to make very color accurate display. So like the reds and greens were just like your image would look exactly like it would look in real life. And then it was also about 20% more energy efficient. So it’s a better TV, it’s more energy efficient. And it leveraged the existing capacity that had already been built up for LCD TVs. So when people talk about a quantum.tv today, like a Samsung TV, it’s actually just an LCD, or LED. There’s a lot of marketing jargon that goes into TVs, but it’s the same TV really, that’s been more or less the same stack of materials and stuff. And the basic working principle that’s been around for a while. The quantum dots just, it’s a film that slides into that TV, and just makes it way better. You can swipe to swap out one other component, but it’s cheaper components. So it saves money. But then the Amazon Kindle Fire had a quantum dot display in 2014. And then at CES this year, I believe there were like 11 brands talking about new quantum dot products on the market. And I think it was around 60 new models, which is like 20, twice as many as 2018. So it’s kind of like, you know, rapid growth now, but it started in 2013. And that was part of the motivation behind me starting the company, not that I wanted to go into the display industry, which I really don’t, and we don’t we’re not in display. But that was just like the aha moment that like quantum dots have finally made it. And I think last year, there were like two, two and a half million TVs with quantum dots sold. So and those are like $1,000 TVs or something. So there’s 10s of billions of dollars of quantum displays out there in the world now, which is it’s pretty cool like going from like a fundamental technology, materials technology that’s like, you know, really out there back 20 years ago to like, you can go to BestBuy and buy the product now.

Jay Clouse 31:28
Okay, so I think that gave me most of the context to piece this all together. Explain to me now, the UBIQD quantum dot and the difference between what is already on the market in things like these displays.

Hunter McDaniel 31:41
Yeah, I mean, they’re very similar in a lot of ways. We take advantage of the size effects. So they get down to whether it’s cadmium selenide, which is that old school one or indium phosphide, which is what’s in the Samsung TV, or in our case, it’s called copper indium sulfide, kind of getting into the weeds on these are different compositions, but the size of the particle is roughly the same, like on the order of maybe four nanometers five nanometers, which means that we’ll have like a few thousand atoms per particle. And then we can make those particles smaller, and the color becomes more towards the blue, like a green or blue or Cyan. And their particles can do the same thing. And they have very similar crystal structure. These are actually crystals like the atoms are in a periodic erasers like they’re called nano crystals, really tiny particles that have periodic arrangement of atoms in ours, or the crystal structure is almost the same as the cadmium based stuff. And when you, when you, if you look at the periodic table, maybe you guys don’t do that very often. But if you do, it would be like, Oh, I get it, because like when you look at the periodic table, you can see cadmium and selenium. That’s like the, the traditional quantum dot. Cadmium and selenium and the lattice has cadmium, selenium, cadmium selenium with our stuff, instead of cadmium, go to the left, and you have copper and you go to the right, and you have zinc. And if you have copper, or sorry, it’s indium. To the right, it’s indium, to the left, copper. So if you go copper, indium, copper, indium, it’s basically the same as just cadmium, cadmium, cadmium, cadmium. It has the same charge. It’s kind of a material science. I’m kind of nerding out for a second here. But that’s what the innovation is based on is that it has very similar properties to this toxic stuff, where we’ve pulled out cadmium, and we’ve swapped it with these benign elements that together act sort of like cadmium, and we got lucky that this material can be manufactured very inexpensively. And this is part of the innovation that I was part of at Los Alamos National Laboratory was we figured out a way to make this stuff at scale was really great properties. And then we got very lucky that it tends to be more stable. So the little one liner is we make materials that are safer, cheaper, and more stable than the alternatives on the marketplace. But with similar properties, and that when you realize, like how much cheaper it is to make our stuff and that it really is more stable and that it’s safe, it opens up all of these new applications that maybe some of those were, are envisioned before but not it couldn’t really access them because of a non starter like it degrades too fast. Or you could never put that in sunscreen, because it’s, you know, toxic. Or we could never expose plants to that because it could fall on the plant or something and someone could ingest it or whatever. And so you kind of like think wow, okay, like, okay, all bets are off, we can kind of do anything that is possible with these materials. And that’s good, in a sense, because it’s like, wow, it’s a platform. But it’s also challenging for an early stage company, because we have to focus, we don’t have the resources to be in all these markets, right.

Jay Clouse 34:30
So early on. And Eric, sorry, I’m just taking all the questions. Early on, you guys are still like pretty young as a company, you said that LED displays were kind of like or displays in general, kind of the first place, we’re quantum dots really found a market niche. Why? And you also said that you’re not interested in doing displays. Why not attack an existing consumer of quantum dot technology in the early stages to help fund some of these other areas?

Hunter McDaniel 34:58
Yeah, great question. I get that a lot. And probably number one, it’s just that the display industry is not a fun place to be. The, if you look at revenues over the last 8, 10 years is pretty flat. There’s been some market share taken like Samsung thought that they’re taking market share at the high end, but it’s at the expense of the lower end. And when they say high end, they actually just mean big TVs, which isn’t necessarily like a fancier TV, it’s just a bigger TV. So there’s like there’s all this competition, it’s very competitive, prices are falling rapidly. That’s actually one of the advantages of quantum dots is because they can impart new functionality and better features without a whole lot of cost. But it’s just a highly competitive space, there’s no hope for us to make an end product, like we’re not going to prototype a TV anytime ever. In fact, you know, it’s even difficult for us to make components of a TV. And so you really rely on like a big company that’s not really growing that business, they’re competing a lot, it’s not super high margin. So yeah, we can have a benefit there. And we’re talking to those guys, but it’s just, there’s other quantum dot companies that are serving that market with a solution that apparently is good enough, right? Because it’s in the marketplace, like even if we can improve on aspects of that, you know, it’s, it’s clearly good enough right now. Also, like with me personally, and my team, we are very passionate about sustainability, and having an impact. And we just see our potential as being much greater and other markets where we have less competition, growing markets, where the value proposition is stronger. And you do have to consider IP, right. So these other companies that are serving those markets are doing so with strong IP behind them. And they’re also selling to companies that have strong IP, like in display. And so we’re in a weaker position when it comes to attacking a more established market.

Eric Hornung 36:43
What does your IP look like?

Hunter McDaniel 36:45
So the founding IP actually came from MIT. MIT is notorious for like just filing patents on everything that they do. And that’s worked out very well for them. And back in 2008, they, they had this moment where they, they had they thought of this concept of composition, the matter was using some other applications. They said, maybe we can make quantum dots out of that. And they wrote a very short paper, it was like two pages, where they just proved the concept. And they had the foresight to file a patent. So they had that they got the very first patent, and we’re taking we took an exclusive license to that. Then when I came to Los Alamos, we developed all sorts of improvements, including some new comp related but new compositions of matter, manufacturing methods and use cases. And so we’re licensing those patents as well from Los Alamos National Laboratory, found some patents that were it looked very powerful, had really good claims that were allowed, and that we could use and, and we potentially could be infringing on eventually. So we decided to take a license to those as well from University of Washington, at Cologne, and actually with Western Washington University. And then since then, we’ve filed a whole bunch of patents ourselves. So our portfolio has roughly 20 or so patent families, I believe nine are granted so far in the United States. And then we have some that are getting close to allowance in Europe and China. So it’s a pretty robust portfolio spanning all the way from the composition of matter, to methods of manufacturing it to methods of sort of processing that and putting it into polymers or glass, and then using that like in a window or in a greenhouse. So we think we’ve got the full stack. That’s probably what drives the value of the company. More than anything else. and investor’s rip,

Eric Hornung 38:25
Take me through how this is actually manufactured. Do you guys have your own manufacturing facilities? Is…do you outsource to like a Toll House? How does this work?

Hunter McDaniel 38:34
Yeah, so the quantum dots themselves, manufacturing them is our core competency. It’s what I spent the last one before I started the company, 10 years or so really focused on was making these materials. And so that’s…it’s a highly lucrative because the value of the material is super high compared to our cost of manufacturing. And that’s part of our secret sauce. And we figured out some ways to make the material very inexpensively. But it’s a liquid reaction. I compare it to cooking a lot. So you’ve got a recipe, like you’re going to go into the kitchen and make pasta, and you’ve got to add, like, you know, whatever, your salt and sugar and pepper or whatever, and you have certain amounts of it, and you mix it all in there. And then you turn up the heat, right, and you stirring it and at the end…and so there’s not like a whole lot of chemical react, there are chemical reactions happening when you’re making your pasta but in this case, there’s significant transformation that’s happening as things are reacting together, others of things are changing, and some gases are evolving and stuff, but it’s in a liquid glass reactor, basically. It could be stainless steel, we’re using mostly glass currently, up to about 15 liter scale, we have our 50 liter reactor, I guess, but you just put your stuff in there, you follow a recipe more or less, you heat it up, you stir it and at the end, you cool it down. And our processes is roughly that simple. There’s some tweaks like you know, some extra steps in there. But at the end of it, you get this really high quality material, but it’s in like kind of a sludge, it’s like a crude reaction solution. And you have to do some processing to separate it out.

Jay Clouse 40:03
So you guys have a stated, I know at the SXSW pitch competition, for example, you guys talked about solar, and you just mentioned solar as well. What does this look like in a solar context, you know, if it’s, you know, has to do with light, but a lot of it is changing colors. is it helping to generate solar power?

Hunter McDaniel 40:22
Well, there’s sort of two angles, the the main focus of the business now in my pitch at Southwest SXSW. We call it passive solar for greenhouses, that and that that kind of misses part of the point of it, but it’s not a traditional solar and that it generates electricity. And that use case, what it’s doing is taking sunlight or material absorbs sunlight, and then improves the quality of it for plant growth, meaning that we shift colors that plants don’t like as much, they don’t absorb as strongly or doesn’t drive photosynthesis, or whatever, and we move those to colors that are absorbed the most strongly. And you can there’s hand wavy arguments like with a plant leaves are usually green. And that’s because they don’t absorb green light very strongly. They’re absorbing red light and blue light much more strongly than they are green. And so what you’re left with when when the light’s reflected back is green. And so it’s not as simple as we just take green light and convert it to red light. It’s a little bit more nuanced than that, because there’s certain ratio of colors that’s optimal. But we’re shifting colors of light within the sun to improve crop growth. And that’s what my pitch at South by Southwest was about. That’s what our first product is about. It’s called UB grow. It’s a film that sits over plants and improves the quality of sunlight. But there is another use case that goes a step further where you can tint to windows with this and generate electricity with them. And that’s about a third of the business is actually doing that. Solar windows, we’re going to power cities of the future. And that’s funded externally right now by grants. And we have a program with Wells Fargo. So I don’t talk about this little window stuff as much because we’re not, we don’t need outside resources at the moment to fund that work. And honestly, there is a strong aversion and investment community to the word solar, mostly due to the mal investments that were made back in 20, 2007, 2008, you know, everyone’s heard of Solyndra. And so we are very passionate about the solar the true solar, like electricity generating use cases for our material. But the first market for us and where we’re focused now is in agriculture.

Jay Clouse 42:19
Okay, agriculture specifically, I was going to ask, you know, you mentioned that this could be I mean, ubiquitous is part of the reason that the company’s name this, I think. If this can be ubiquitous, then you say you have a challenge of where to focus. How was agriculture chosen?

Hunter McDaniel 42:34
Yeah, great question. I mean, so we, we did go through this process of trying to evaluate the different markets and prioritize them starting about three, four years ago. And that led us to the window application solar windows. We said, this is really where our materials have no competition, more or less, there’s nothing that can even come close. We’re very excited about it. It’s a huge market, hundred billion dollars of glass sold every year. So there’s a huge market potential. You know, there’s climate, the climate change driver, lots of factors, why we want to do the window thing, solar windows, and we got this large grant from National Science Foundation, which is continuing today. And National Science Foundation is very savvy in that they push their small businesses that they fund with these kind of grants to do customer discovery, and lean startup method, go out there and figure out who your first customer is. And so with that solar window product in mind, we started talking to as many folks as we could, it could be useful in an automotive, for example, you could put this technology into your sunroof to help charge up the battery or something while your car’s parked or power your stereo. Obviously, architectural windows is a big one, you can power cities and stuff. And we thought of greenhouses. Maybe you could power all the electricity needs in a greenhouse with this technology if you apply it to the roof. And so we start talking to a lot of greenhouse operators. And they kept coming back to us with the same concern, which was that, you know, that, yes, electricity is one of my biggest if not my biggest expense can be $30,000 a month in some for some cases, but we’re not willing to compromise our yield. That’s just what drives everything. How is this going to affect my crop yields? Because if we’re taking light away from the plants, right, that that worries you that you’re going to hurt your crop yield. But so we went back to the drawing board a little bit, we said, well, maybe we can tune the color to not hurt the crops. We’ll have a certain color that lets the light that they liked the most passed right through the window, and then will only convert the colors that they’re not using. And then and so we were like, yeah, we could actually do that. And then we had this kind of aha moment, one day we were sitting around, like, maybe we can just guide that light down to the plants and convert the light that they’re not using the most into the colors that they do use better. And it was much simpler products. Without getting into the weeds on how it all works. You don’t have to have wires, you don’t have to have little small solar cells, which is the way the window works around the edge of the glass. Greenhouses are much faster sales cycle like in the construction industry, construction materials industry is just such a hard market. So we started testing about two years ago, putting our stuff into film and hanging that over plants. And we were shocked by the results that we saw. And so since then it’s been just increasing the bar. Increasingly, every time we we do a trial, larger scale, at a higher baseline yield in a commercial setting as many plants as we can get under the film and so on to really validate that it actually works in like what use cases, is there a specific climate? Is there a specific culture bar like to meet a certain type of tomato like cherry tomatoes, or heirloom tomatoes? Or, hey, look, it’d be great if it works on cannabis. Let’s try that out. You know, that seems like a good market to target that sort of thing. And so we’ve drilled down on some target markets, we still have work to do. But we figured out that that was really a great market to be a first market for us in general agriculture in greenhouses.

Eric Hornung 45:44
How do you price that?

Hunter McDaniel 45:46
I mean, we have a price now you can buy the film, like you guys can go to our web store and buy the film now. It’s a relatively high price compared to other you know, construction materials, but it imparts…it has significant functionality in that it boosts crop yields, in some cases, crop quality, and speeds up cycle time., I’m kind of dodging the question a little bit. But if you go to the website, you could see you could buy for about eight bucks a square foot. But we’re aiming to launch a second generation product less than $1 per square foot by the end of 2020. So it’s a question of kind of like, How bad do you…how much do you value that yield increase in the quality benefits that we can offer? And for some crops, it’s challenging at the $8 a square foot. For it to makes sense, the payback time would be too long. But there are some crops where even $8 a square foot is a really good price. You can probably guess like the highest value crop per pound. You know, it depends on what state you’re in is cannabis. And so for cannabis cultivators, even the $8, if that yield improvement that we’ve seen is reproducible in their specific situation, it’s a less than six months payback time. But there’s a challenge there because they’re used to paying, you know, a lot less for a film that is their roof, which really doesn’t do anything else other than keep the elements out, versus our plastic, which is not just a roof, it’s actually improving your operational efficiency.

Eric Hornung 47:04
Like what are the ranges of yield improvements? I know you guys have a ton of different things that are being grown, but like, what are the ranges? Like how much of an improvement is this?

Hunter McDaniel 47:15
In a commercial setting? It’s fair to expect 10 to 15%. And that’s basically because, yeah, so we seen higher, significantly higher and more like research settings. And we think that’s primarily due to the fact that in a commercial setting, everything is really optimized, they have to be in order for those guys to make a profit. So the baseline yield is already quite high. So let’s say for example, we’re adding like a pound per plant, which could…is very reasonable. So we do sometimes multiple pounds per plant. In some, some situations, if your baseline yield is only a few pounds per plant, then you’ve like doubled your yield, right? So that, that, that, that would be a pretty bad situation if you’re only producing a couple pounds per plant per year. But that might be the case in a research setting because it’s just much smaller scale, less optimized less dialed in. But in a commercial setting, it’s more. We’ve seen as high as 50% in some of the research experiments with cucumbers and tomatoes. We haven’t had the opportunity to do kind of research scale test on cannabis because we don’t touch the plant, we have to go to the cultivator. But the first pilot that we did with the cannabis cultivator was up in Oregon, they saw a 13% yield improvement. But they also saw higher potency and higher turkey ins which is kind of associated with the flavor or the aroma of the flower. So there’s some some qualitative benefits that we’re working on trying to understand how valuable is that now. Until now, we’ve mostly articulated that this is about yield improvement, or possibly faster cycle time, which is sort of equivalent to yield improvement. There may be like an attrition, nutritional benefit for tomatoes. We’re doing a study in the Netherlands now, that will measure sugar content every week with the harvest. And so we’ll be getting more sophisticated data on the other benefits.

Jay Clouse 48:55
How do you guys evaluate your market opportunities, you know, you agriculture that you’re attacking now, but it seems like there are other markets? I assume you have to have this conversation when you’re talking to investors. So how are you guys articulating the market opportunity in front of UBIQD?

Hunter McDaniel 49:09
Yeah, I mean, it’s a complicated question to answer at our stage, really, we have to be driven by cash flow. It’s just the nature of the beast, you know, like, we have to make it through payroll, and we gotta get to next year. We have really big vision and big problems that we want to solve. But if we don’t make it to, you know, through the, to the year or the next year, we’ll never even get there and have the opportunity to solve those problems. So we do have to be driven at the moment by, you know, like, who’s pulling out their cash box, who’s the most excited that their checkbooks and who’s the most excited about this. And so, we do have some, some application areas where we’re really only working in that space, because there’s a really big partner, good partner there that’s driving the work. But as far as like when we think longer term, or we think about like the first the best first markets using investor dollars when there’s not like a partner there. What led us to agriculture, in some ways, is the simple math on how much value does this bring to the customer. So like a gram of quantum dots, we can make a gram of quantum dots, we know how much it costs to make a gram of quantum dots. How much, when we put that into a product, how much value per gram is that bringing to the customer. So like, for example, in a film, we’ve got about point three grams per square foot, and then you can do the math on like, okay, so that square foot of film is boosting the yield of a tomato plant by about 15%. And then we can go look up, you know, what’s, what’s the price of a typical pound of tomatoes? And then we can look up what’s the aerial density of tomato plants in a greenhouse. And you just multiply that out. And you say, Okay, well, that means that a gram of quantum dots in tomato farm is worth so many dollars to that grower, and then you can do the same calculation for a strawberry grower or a cannabis farmer. But you can also do the same thing for a solar window. Solar window, the value proposition is generating kilowatt hours. Electricity, right, that’s, that’s it. And so we know what the efficiency is. And then we can model like, you know, for building in Miami, the electricity price in Miami, and then and then in the winter, like the sun, you know, shines more strongly on the south facing side. But then you also maybe have the north facing side cover. So we could take all that into account and you get to a value per gram. And that’s true with any of the applications really, is that there’s the value that it brings. And obviously, like where that number is the highest, that’s a pretty good place to start. But that’s not it, right? Because if that market, like for example, the highest market and agriculture, the biggest value market in agriculture, we estimate would be space lettuce, we kind of joking, we have a grant with NASA to work on using this technology on long duration space missions. And we’re like, okay, we kind of fun if we can add space lettuce to our stack of like value, the payback times? And it’s like, well, what is it worth what is a pound of lettuce worth in space? Well, it might be worth the amount of energy or the rocket fuel that you have to consume to put that much weight of lettuce up into space. And then is that that’s maybe a first guess at what the value of space lettuce would be was the cost it would be to send a head of lettuce up into space. And then that gives you a payback time of like minutes or something. It’s like, Okay, well, we should definitely target space lettuce, it’s like, that’s not the only factor, right? How big is the space lettuce market? Well, it doesn’t even exist. And even if it did, it would be a pretty small opportunity. So you have to think about like the size of the market, how easy it is going to be to access it. Like, I don’t think I can even sell space lettuce, who’s gonna buy, like, I set up a shop, like on the moon or something? And then like, you know, does it have the revenue potential that a VC is going to get excited about? Because some of these markets might be really high value, very accessible, but our revenue potential for whatever reason, like, we’re just like a display market, like we’re not going to sell TVs, like I mentioned billions of dollars of TVs in the market, that would never be our addressable market, right? Because we’re not going to ever sell TV, we’re going to sell this component. What is the revenue potential of that? VCs want to see a path to, you know, unicorn in order for the numbers for them to work out? So there’s there are there’s an Oculus, I think where we always start with is what is the value proposition? Where’s the value proposition the strongest, but make this material for a cost? We already know, like, where is it the most valuable? And for us anyway, I think agriculture checks a lot of the boxes.

Eric Hornung 53:28
What do you guys look at internally as kind of your KPIs or how you’re performing?

Hunter McDaniel 53:33
Lately, one of the biggest ones is our ability to produce and I guess I didn’t fully answer the question earlier about like our manufacturing process. We make the material that goes into film, but we use a contract manufacturer to actually make the film. We don’t want to be in the business of making windows, building window factories, or there’s already capacity built up to make windows and agriculture film. So we want to leverage that. One of our key performance indicators is our ability to produce the enabling material that goes into film. But then also, how successful have we been with our contract manufacturing partner to actually produce out the other side like actual product, currently, we are selling that product direct, it’s just a consequence of the early stage of this technology. Longer term, we want to be in partnerships where our partners mostly doing the selling. So one of our key performance indicators is how much film are we producing. So if you look at like a quarter over quarter growth on our production of film, it’s about 200% quarter recorder. So for example, this quarter, we did about 600 square meters or so of film. We’re gearing up now for our next production run in June, which would be about 2000 square meters or 20,000 square feet of film pretty soon that one production run. And then previously, it was around 200. So it’s roughly doubling to tripling quarter over quarter, which is critical, because we’re trying to access a big market, and we’re trying to get larger plant trials. We have to be able to supply our material, the quantum dots at that scale. And then we have to have our contract manufacturers be set up and ready to go make the film. And then all the logistics back and forth of getting things moved around. And this is actually happening contract manufacturers actually overseas. And so there’s a lot of shipping involved. We also have a queue of pilots and a queue of customers that’s growing. So we want to see that continue to expand. We’re about to do our first pilot in Northern California in about a week. Also not in terms of numbers of states, but also countries where we just installed in the Netherlands, we have a pilot in Spain, we’re talking about doing a trial in Thailand, and other parts of Europe. So those are pretty critical. I like to…most people don’t think it’s super critical. But maybe employees, number of employees or revenue can be really important to investors or 12 full time employees. And last year, we did about $950,000 in revenue. So and all that stuff has to be going you know, up into the right, you know, but in a healthy way, not getting out of our skis pretty standard stuff, I think production capacity, revenue, employee count, IP, granted patents. Those are key,

Eric Hornung 56:02
Are there any obstacles to producing the enabling material like in larger quantities?

Hunter McDaniel 56:07
We are headquartered here in Los Alamos about 10,000 square feet, only about two thirds of it is finished in productive. So we have about 3000 square feet or so 3200 square feet of potential manufacturing space that’s just not completed. So that’s actually one of the reasons why we, we purchased the building is because I have that potential. But there’s just a long time scale for those renovation projects, and then dollar amounts, and we can get it financed. But that’s a critical need is resources for funding capital investments. It’s a very lean manufacturing process, though. So in that 3000 square feet, we think we can supply millions of square feet of film. Well, material that can go into film, we’re not making the film, but we can make enough material like in a, for example, a 15 liter reactor, we can produce enough material for about 6000 square feet or so of film in a reactor about this big, right? So you can have bigger reactors, we have space for that. Or we can just have more of the same scale react, maybe a little bit of both over the near future gets us to a huge amount of production capacity. And it’s enabled by the fact we don’t make the film ourselves. If we actually wanted to build a film factory, that’s a whole nother 10s of millions of callbacks.

Eric Hornung 57:14
Have you guys evaluated the idea of bank debt instead of equity? Because you kind of have this old school business model. I’m not saying the technology is old school. But materials, as a business, you said has been around for forever, since we were pulling metal out of the ground. So I feel like banks could wrap their head around it. Is is that a way you’ve ever looked from a manufacturing perspective?

Hunter McDaniel 57:35
Yeah, to some degree, and we do have a mortgage in the building. So we were able to get some debt that way. Some of our financing has been convertible debt, but it’s not traditional, like a bank loan debt, in that sense, that converts into equity at some point. Yeah, I think, you know, banks are very risk averse, and a company at our stage, it’s very difficult to access that kind of capital. But as our revenue grows, and as it becomes de risk, basically, that there’s a market, because it’s a new, it’s a new concept. You know, it’s not like we’re making some sort of product that’s already out there. Right? It’s, it’s a new concept. And so the best and in some cases, maybe the only way to convince a bank that this concept this technology has demand is revenue. And so like, the question becomes like, what level of revenue is going to be compelling enough to get a million dollar loan at a bank? Or maybe you don’t start with a million dollar loan to kind of get the advice like, just develop relationship with your bank, just take a like a $5,000 loan is that’s all they’ll give you and then pay it back. And then they’ll give you a $10,000 loan, then pay it back. And like you tap that line of credit and be a good customer. And then they’ll develop some really, so maybe some of that we should do some of that sort of stuff we have we do have some debt, you have access a little to some extent that kind of a financial.

Jay Clouse 58:51
Last question for me Hunter. You know, you mentioned your dad was working for Chevron, you have a PhD in, in this hard science realm, but now you’re running a company? How are you learning how to do some of the more, you know, strictly entrepreneurial challenges?

Hunter McDaniel 59:04
That’s a great question, I’d say I got my MBA in the school of hard knocks. Because really everything I’ve learned about business, I’ve learned by just trying to do it and then failing, a lot of times, my investors probably would like to hear that. And that’s why investors are very averse to funding first time CEOs or technical founders is because they rightly know that the those folks like myself, have to make a lot of mistakes to learn. But I think the key to entrepreneurial success is embracing failure. And learning from those mistakes, you know, embracing this mistakes is key learning experiences. Now, you have to be careful not to learn the wrong lessons, right. Like, if you’re working on the wrong problem, you might learn some sort of key insight, but it’s about the wrong problem. It’s not the right insight. So it is challenging, but I’d say that, you know, I learned most of what I know now by like, you know, at the beginning, like how do you start a company, you know, like, I went to Sony go to the corporation, com or something like and you could just fill out a you know, now I would just do it myself because I, I realized like, then they start charging you like monthly fees and stuff, stuff like that. And like, you got to figure it out sooner or later yourself, you know, you can hire like cheaper attorneys to help with stuff. And then you realize, actually, it’s better to spend the money on like a more expensive attorney and things like that. But you know, like figuring out how to use QuickBooks and how to set up like, employee handbook and like HR processes, and like, how do you actually receive money, like when a investor wants to write you a check? And like, how do you negotiate a partnership? And like, how do you pay taxes on like, everything, it’s like, everything is taxed. It’s just like, you know, you get a nasty letter from someone that says, like, you missed, blah, blah, blah, blah, blah, or like you need better ship up, shape up or ship out or whatever. And you just kind of learn over time that way. And I also was always very passionate about markets, even before I got into materials, some of my first jobs is because I wanted to mess around with stocks and get involved in investing. And so I sat in on a lot of or listened in on a lot of conference calls, and I had a lot of experiences that way too, like, you know, you think that the…some company or whatever is a great investment. And then, like they have good earnings, and then the stock tanks or something you’re like, well, that’s interesting, you know, like, what happened there. And then another actually, the way you learn how to make money in the stock market is by losing a lot. I actually had a great year last year. But the first, you know, terms of my investment portfolio, but the previously, you know, I had a lot of really bad years. And I think that’s that’s the The secret is, is that, you know, as long as you’re willing to roll up your sleeves and do the work, and accept and learn from your mistakes, I think you can pretty much figure anything out whether it’s starting a business or you know, starting a podcast or whatever it might be like, you know, you guys probably stumbled at the beginning too, and that’s what made your program the great one that it is today. Right? It’s like those those lessons that you learned early on.

Eric Hornung 1:01:51
I still stumble through most interviews. So you know, we’re doing great.

Hunter McDaniel 1:01:57
You guys did great. Like I said, Don’t sell yourself short, you doing a really good, great job here.

Eric Hornung 1:02:00
You’re probably one of the few investors who had an amazing 2018. So congrats on that. I have one last question. Is the company going to stay headquartered and centered in Los Alamos for the foreseeable future?

Hunter McDaniel 1:02:17
As long as I have my way, yes. That was kind of my vision from the beginning was to keep the company here. I get a lot of pushback on that or questions about it. Because people think it’d be a hard place to recruit people. It’s a really small town, like 15,000 people. We have one grocery store, maybe a couple bars. So it’s really small town lifestyle. And I was here kind of as a consequence of coming out of the National Lab initially, but it’s paradise for me. We’re up in the mountains, we’ve got a ski area about 20 minutes away. Santa Fe, if you want really great restaurants, Santa Fe is like a foodie destination, about 45 minutes away from here, hiking, mountain biking, 300 plus days of sunshine, it’s just perfect weather, extremely safe. You can imagine what the National Lab there millions of dollars of budget is a huge tax base. And so the schools are extremely good. Not to mention, all the students are basically children of PhDs. 40% of the population has PhD here. It’s a very special place. I love it here. And that was one of the reasons why I started the company is because my only option to live here was you know, working at the National Lab, you know, for the man buried in red tape, which is, you know, it’s fine. I don’t want to be critical of people that like that. But for me, it just wasn’t where I wanted to go with my career. But at the same time, there’s no other jobs around here. Very few. And so starting the company gave me that, that out. But I think it’s also very low cost of living here. There’s all sorts of great state incentives, tax incentives, r&d, incentives, hiring incentives, because it’s a poor state, and they’re trying to boost, you know, prop up the economy. And so there’s a lot of good reasons to be here. But it’s true that there are no investors here, there really are no customers here, a lot of the kinds of help that we need, like especially marketing, more executive leadership roles, rather than, there’s a lot of technical folks like cuz the lab supplies a lot of those sort of skill sets. So there are challenges to it. But I think there’s, that there’s also just as many benefits, like there’s a lot of people that would never live in this place, like they’re going to be in Boston or New York, they’re going to want to urban lifestyle. But there’s also a lot of people that have young families that want to live in a safe place with good schools and nice outdoors. So but the reality is that every time I you know, raise capital, a portion of the company is you know, is going into the hands of someone who doesn’t live here, and maybe doesn’t appreciate how nice, you know, or didn’t get any of the benefits per se of living here. And so, you know, that’s the kind of something that I that I struggle with a little bit that over time, eventually, it may just be out of my hands, and within the company may get acquired. But as long as I have my way, we’re going to stay wherever we are. And we have our we own our building here.

Jay Clouse 1:04:49
Awesome. Hunter, this has been great. If people want to learn more about you, or UBIQD, where should they go?

Hunter McDaniel 1:04:54
They can find us online. We’re active on social media, if you’re interested in the greenhouse technology, the agriculture stuff, go to ub grow. That’s the name of the brand that we’re selling under and promoting that technology through. So at UB grow on Instagram, Facebook, Twitter, and then we have the company accounts at UBIQD, on the same platforms. We have a website, there’s a way to email or connect with us through the website, or you can send an email to me, Hunter@UBIQD.com. Pretty responsive to inquiries and always looking for partners, especially if you’re a cultivator or grower, we’d love to talk to you about your greenhouse and your crop varieties. And if our product can help with that, and potentially you get into a pilot project with us where we can do some research together. Yeah, this has been a lot of fun. Really appreciate it Jay and Eric, keep up the good work.

Jay Clouse 1:05:46
All right, Eric, we just spoke with Hunter McDaniel, the co founder and CEO of UBIQD, lot of hard science here, a lot of terminology that is new to us. But I feel like we broke it down and got it to a place where we could understand it. How do you want to break down and understand this deal memo?

Eric Hornung 1:06:02
I think we should mix it up a little bit. Let’s not start with the founder. Let’s get to the founder eventually. Jay, What are you seeing in terms of the opportunity? Because I’m a little hazy?

Jay Clouse 1:06:12
Well, here’s a few things that came to mind as we’re going through this. One, the company’s name UBIQD, because Hunter is seeing that there are ubiquitous uses for this type of technology. You mentioned in the interview that focus and finding use cases they wanted to start with is one of the biggest challenges for the company, and they landed in agriculture. This would not have been the opportunity I would have guessed, but they seem fairly confident in it. We spent a lot of time talking about current quantum dots and the use cases for them. I’m a little surprised that that’s not the path forward that UBIQD is trying to go after. But they also seem like a pretty mission driven company. So agriculture comes in not only as a use case that they think will be lucrative and beneficial from business standpoint, but also something that is, you know, doing good in the world and furthering sustainability.

Eric Hornung 1:07:06
When we look at these hard sciences companies, I feel like we see this great technology got pulled out of a university or somewhere, right. And it has applications across a lot of things. So it’s almost like a portfolio that you’re valuing. And whatever they choose first is kind of that first value. And if that hits, they have the r&d or whatever you want to call the budget to go out and explore different verticals. So valuing that is tough, because it’s all predicated on this first market that they pick being successful. And then you can expand into other markets. How do you think about the total size of the market when we look at this from any with our investors, head on?

Jay Clouse 1:07:53
Well, let me back up real quick and give you another story that I think is relevant to think about here. I had a close friend of mine, who was working with the innovations, innovation department at Ohio State, and he got to look at a lot of the technologies they were trying to commercialize there. And something he said to me stands out every time we talk to a university based technology or hard science technology. And his point was, you know, you look at all these technologies and innovations we find within a university setting. They have patents on this technology. And what you find are a lot of them have incremental value over what is already existing and commercialized. But if it’s not a 10X improvement, it’s really hard to take that incremental value and actually commercialize it and make it worthwhile. So I think a lot of the hard science companies come up against that, because they’re saying, okay, we know this is objectively a better technology. But how much of a better technology is it? And to whom? And how do we commercialize it to them? You know, and I think that plays into the question of use cases and where to go to first. Hunter talks about UBIQD and their quantum dots being low hazard, cheaper to manufacture and safer. So those are two really good standpoints to get us towards a 10X improvement in a market. But again, this is why I’m looking at Okay, well, where are they already use because the people who are going to understand the incremental value best are people who are already purchasing and using quantum dots. In the agricultural space, those users are gonna have to look at this and say, okay, for us to change our system, we’re gonna have to be really compelled to see that our yield is increasing, much higher, or our opportunity to increase our yield has to much outweigh the risk of a new technology coming in and maybe decreasing the yield if it’s not done carefully. The thing that is encouraging to me is that Hunter mentioned they had almost a million dollars in revenue last year, $950,000 in revenue. That’s a really good metric and stake in the ground for technology at this stage, I think.

Eric Hornung 1:09:54
Yeah, I would agree with that. I think this 10X problem is interesting, because Hunter told us that you have this tomato plant, and it’s producing two pounds of tomatoes. With the UBIQD, I’ll call them windows in the greenhouse, you’re getting three pounds of tomatoes instead of two. That’s not quite 10X, but to a greenhouse that’s producing 200,000 tons of tomatoes in a year. That’s a lot of tomatoes, I don’t know making up a number, but producing 300,000 tons. That seems like a pretty significant improvement.

Jay Clouse 1:10:28
Yeah, and I mean, the 10X idea, I forget who kind of coined that as saying like, innovation is going to be 10X better than what exists previously. That idea was from a consumer standpoint, and from a user experience standpoint, I’m pretty, pretty certain. In a setting like agriculture, where they can measure their yield quantities so specifically, if you can prove mathematically and with data that you have an incremental improvement, and you can equate that to something to your bottom line, I’m sure that there’s a big, a much bigger difference in a commercial setting like that. To another point that Hunter made, he said, at this point, they are producing 200% more film quarter over quarter. I think that’s a really great metric, too. So from an investor standpoint, to your original question, I’m going to Okay, what is the overall market size and opportunity here? Because I’m getting some good indications of product market fit within that segment. How big is that overall market opportunity for that segment? And then what are the other segments that UBIQD is going to go into?

Eric Hornung 1:11:29
Do you have any numbers on that?

Jay Clouse 1:11:30
I didn’t get anything from the interview of a market size. But did you find anything in your research?

Eric Hornung 1:11:36
You know, it’s a tough thing to kind of nail down. So I think I have some flag posts that we can play with. Okay, what is the size of this market? The tempered glass market, which is, I’m guessing where this kind of fits, serves the automotive, greenhouse and construction industries and expected to hit 40 billion by 2024. In the US, it’s about 7.5 billion. Now to stretch this out a bit more. And I know we’re not in the ballpark, we’re just planning fly posts. The tempered glass market for automotive, which is one of three key areas is about a lot, they’re expecting it to be about 11 billion in 2024. So that leaves us with, I don’t know, something around 30 billion in potential market size by 2024. If we pull that back to just the United States and take the same proportions, we’re looking at between construction and agriculture, somewhere around $6 billion dollars, that’s going to be using tempered glass. So that’s one flag post and another flag post, we see that the North American commercial greenhouse market was worth 9.5 billion in 2018. So you know, this is somewhere in the ballpark of a one to $3 billion market, I don’t have a great number for you, Jay. I really just had would have to kind of ballpark that and estimate and make some assumptions. But that would be my kind of guess is greenhouse space glasses are somewhere in the 1 to 3 billion dollar market.

Jay Clouse 1:13:15
Right. And that’s, that’s their current use case. That’s a pretty big market for that one use case. You know, if I’m an investor, and I’m looking at this, I’m really looking at the value I think of the 20 patent families that Hunter mentioned they had. To me, those patents can be really, really big. Because from where I’m sitting, it seems like this quantum dot technology is something that is already in use. It’s going to become more in use, and to have a lower hazard, cheaper way to manufacture that is going to be in demand to probably more people than Hunter even realizes.

Eric Hornung 1:13:51
So let’s pivot to Hunter. We’ve talked about him a bit. What were your takes as a founder? Actually, you know what, I’m going to start here? How about that? I’m gonna ask your question, and then just pull it right back.

Jay Clouse 1:14:01
I was ready to respond. But I will wait my turn.

Eric Hornung 1:14:04
My biggest take is that Hunter is really smart. You know what, I’m just going to jump out there and say it, man, he is smart. And he is passionate, and he knew his stuff cold. I think that is that’s the biggest takeaway I have is that, you know, when someone knows something when they can just go and go and go, and when you ask them a question, they can go deeper. And I think that’s, that’s something Hunter definitely has.

Jay Clouse 1:14:26
Real hot take the founder of a quantum dot company is really smart.

Eric Hornung 1:14:30
There are founders of tech companies that are in the hard sciences that don’t have the same depth of knowledge as Hunter. We just interviewed Haley from Mito, and she would tell you that she doesn’t have a PhD in epoxy resin additives. She doesn’t know all the detailed chemistry. That’s why she has an engineer. So I think that there is a difference there when you have a founder who knows his stuff. So deeply. I’m not saying it’s better or worse is different based on the company. But it is of note that hunter really, really understands this stuff

Jay Clouse 1:15:08
I’m going to play off of that and draw a little bit of a trend line. One of the reasons I love talking to these hard science companies that we’ve had the pleasure of talking to between Mobius and UBIQD and mito materials, the founders of those companies have two traits thus far that I’ve really enjoyed. One being that they are some of the most resourceful founders that we’ve spoken to, because they have very capital intensive businesses that take a long time to test and prove out. Second, they talked to us with more candor than probably any of the other founders that we talked to, they give us just full behind the scenes details and how things are going, what they’ve tried, what’s worked, what’s failed, where they feel like their shortcomings are, and they’re working on them actively, you know, but there’s less of a paint a shiny picture, fake it till you make it type of mentality that I can get from these folks. They just give us a lot more honest insight than all the founders we speak to.

Eric Hornung 1:16:06
Do you think that’s due to the grant writing process and the academic background nature?

Jay Clouse 1:16:12
I do? I think that part of it is they come into entrepreneurship from a different angle. You know, I think most people who come into a business setting or who are starting a company, somehow get trained with this pretty common way of approaching things of like, cell division, tell the story, make everything look great. Fake it till you make it. And a lot of these engineers and chemists or scientists, they come at it from like a data background and like verifiable numbers. And here’s what I can tell you for sure. And here’s what we don’t know, you know, and I think that could be from like an academic setting of writing about what is true, what is false, because it has to stand up to scrutiny and be replicated.

Eric Hornung 1:17:06
That reminds me of our interview with Sherry from Gino palette, when we asked her a question about numbers. And she’s like, Well, we’ve only we tested it on like 100 different use cases. So we can’t give you like, good numbers. I’m like 100 customers like that is, that’s better than most startups have, like, you know, beta tests and all this stuff. And she’s like, Yeah, but it’s just, you know, it’s, it’s not significant. I’m like, Wow, that is a whole different mindset, you’re completely right. One thing I want to mention is about geography. It seems like there is just all these research institutes in the southwest, that up until probably a year and a half ago, I knew nothing about but now we have, swerry, with the Southwest Research Institute, which we learned about three plus one robotics, we have the Los Alamos Research Institute, which we heard about in this interview, and then through another podcast that I listened to, Invest Like the Best with Patrick O’Shaughnessy, our good friend, who we don’t actually know, Josh Wolf is very involved with the Santa Fe Research Institute. So a lot of stuff going on in the southwest with a lot of intellectuals, Jay.

Jay Clouse 1:18:01
A good friend that we don’t know.

Eric Hornung 1:18:03
Well, you know,

Jay Clouse 1:18:04
Something that you aren’t going to hear from a lot of investors and people who are bullish on areas inside the coasts are that there are a lot of research institutions and a lot of intellectual property and capital in between the coasts because of those institutions, so I think it’s just us getting out of our Ohio bubble and exploring more of the Southwest that’s naturally cropping those up. But Eric, I want to get back to our question at hand, which is Hunter, as a founder, we mentioned you smart, we mentioned that you gave us a lot of detail, a lot of numbers, a lot of transparency. It seems to me that he’s very resourceful. I think he’s going to find some level of success, this business, how big of success is to be determined. I think it really depends on can and will they choose the right use cases and really double down on them and find success to the point where they can fund success in other areas? I think the real strength in this opportunity right now is the IP and the technology itself. It’s just a question of where can we apply it? Where can we find success with it now and get kind of our, our beachhead? So what are you looking for six to 18 months from now, from UBIQD?

Eric Hornung 1:19:09
You know, there are so many potential applications for this. And as an academic, and someone who’s very smart, the intellectual puzzle of solving all of those potential use cases is probably extremely rewarding to say, Oh, we could do it here. And here’s how we could do it. And this is interesting. And here’s a unique problem. And that’s fun. But in the next six to 18 months, I’m looking for something that’s not quantitative, which might be one of the only like three or four times on this podcast, I haven’t given a quantitative answer. And what I’m looking for is focus, I want to see them focus on this greenhouse segment and see if they can just crush it. They have almost a million in revenue. Now, if they can focus and turn this into a pipeline and attack this market, that we’re guestimating at a billion to 3 billion, I think that it could be a huge stepping stool to them to be able to expand to all those other use cases. What are you looking for in six to 18 months?

Jay Clouse 1:20:10
I’m with you on that in terms of looking to see, okay, how is that revenue growth going, you know, classic me revenue, if they generated almost a million dollars in revenue last year? What’s that growth look like? And is the segment mostly in agriculture? Or are they going into other places like solar windows for cities, you know, they won the SXSW pitch competition with the pitch of the new way to power cities with solar solar power in those windows. So I want to stand, understand, I guess, similar to you, if they are staying focused if they’ve branched into other use cases. And if they have branched into other use cases, what does that meant for the business? Has it slowed down overall growth because they’ve diluted their focus? Or have they just run some experiments and found that, okay, these, this segment is really taking off, maybe we wind down this one over here.

Eric Hornung 1:20:55
Did you just copy me a little bit? Well, if you guys want to copy Jay or I or disagree with us, since we’re both on the same side, at the end of this deal memo, you can interact with us on Twitter, @ upside, FM, that’s our preferred place to interact. But if you have something a little longer form or you want to write something out, you can send us an email at hello@upside.fm. Look forward to hearing from you.

Interview begins: 08:48
Debrief begins: 1:05:44

Hunter McDaniel is the founder and CEO of UbiQD.

UbiQD is a cleantech materials company that manufactures low-hazard quantum dots (QDs) and nanocomposites. The company focuses on applications that utilize its nanomaterials to manipulate sunlight, enabling solar windows and spectrum-controlled greenhouses.

Spun out of technology developed at Los Alamos National Laboratory, Massachusetts Institute of Technology, the University of Washington, and Western Washington University, UbiQD envisions a future where quantum dots are ubiquitous in a wide spectrum of applications.

UbiQD was founded in 2014 and based in Los Alamos, New Mexico.

Learn more about UbiQD: https://ubiqd.com/

This episode is sponsored by Taft, Stettinius & Hollister, a full-service law firm known for assisting entrepreneurs across the Heartland.

Learn more about or get in touch with Taft: https://www.taftlaw.com/
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