SM: What happened when you came out to Silicon Valley to raise money?
XD: We were successful because we showed the venture capitalists that the company, for free, built a production line for the university using grant money. In essence, we had already proven our ability to succeed once, and I had the same team ready to do it again. Only after the venture capitalists saw that I had a team that knew how to build production lines did they get excited. The whole team of scientists and university support behind the company were additional bonuses that ultimately made my proposition attractive.
SM: How much money were you able to raise and from whom?
XD: In 2006 we had a lot of offers. It was all very sudden for me. Our company was courted by angel investors, venture capitalists, banks, and all sorts of groups. However, I never felt the terms offered were very good. We only took $500,000 from an angel because we already had a large number of grants. I figured if we kept working through the grants we would not have to dilute the company.
SM: You are absolutely correct.
XD: Usually at that stage if you take $10 million, then you have really diluted the company.
SM: How much equity did you give your angel investor in exchange for $500,000?
XD: A very small amount.
SM: If you had government grants, why did you pick this angel investor? Was it an opportunity to bring in expertise?
XD: No, it was just money. I had a team of advisors who were already helping me, including our lawyers and people from the business department. At that time I just needed $500,000 to demonstrate a machine. A few months later, in early 2007, we built the machine and it worked. Then we suddenly had four investment term sheets, which were all very favorable terms to us and gave us a favorable valuation. Emerald Technology Ventures led the round. We closed a $7 million round.
SM: How did they find you?
XD: In late 2006 I presented at three different venture forums. One was the CleanTech Venture Forum I mentioned earlier. I also presented at the Energy Venture Fair and the NREL Industry Growth Forum. Word got out about our company very quickly just off those three forums.
I started getting a lot of phone calls and had a lot of inquiries about people who wanted to come and visit me. Not a lot of people wanted to come to Toledo because it is a bit out of the way; however, people were taking two- to three-day trips out there to see us. That is when we started to see a lot of term sheets start coming in.
About the same time, we used the $500,000 from our angel investor to build a demo version of our machine and product. That changed everything. We had a machine, product and a team.
SM: Did you have customers?
XD: We had a lot of customer interest but we had not signed an agreement with anyone. We make flexible solar panels so our market is very broad. I knew the market was there. ECD had been sold out of some of their lines for many years.
When we introduced our product, we presented at a trade show. The result was our product was carried in several magazines that covered the industry. Flexible solar panels made big news. It was a hot product that people wanted.