transducer, has been picked up by the U.S. Navy and other industrial concerns, and completed products are to be shipped to these clients starting in early 2005.

Airak was originally conceived as a company that would focus on water quality monitoring innovations. In fact, their first SBIR award, a Phase I grant, was for a fiber optic remote monitoring system intended to measure dissolved oxygen levels in aquatic environments. Paul Duncan, the founder and owner, was working on his master’s thesis at Virginia Polytechnic Institute at the time he developed the fiber optic dissolved oxygen sensor. He was familiar with the SBIR program through previous employment, and sought a Phase I award in order to get his company up and running. A Phase I award was granted by the DoE, and Airak was quickly formulated to take advantage of the opportunity. Without SBIR, the interviewee doubted that Airak would have been established.

While Airak’s original concentration was intended to be water quality monitoring, the commercialization possibilities turned out to be insufficient to maintain the firm. Potential buyers were found, but never for more than a few of the dissolved oxygen sensors at one time. As the sensors are relatively inexpensive, a profit margin that would sustain the company could not be maintained. However, the inherent nature of fiber optics, most importantly the insulating effects of the glass inner structure, are well suited to electrical applications. The company began to develop several patents in the area of fiber optic electrical sensors and monitors. In the process, the firm has grown from only having one employee (the interviewee) to five at this point in time.

The company now focuses primarily on the electrical end of fiber optic sensing and monitoring solutions as there are a wider range of commercial possibilities in this area. While water quality monitoring innovations are not currently at the fore, the company goal is to one day be able to innovate and commercially develop their original product types.

FUNDING AND COMMERCIALIZATION

SBIR grants have been vital to Airak. Not only would the company most likely not have started had the grants not been awarded, but Airak has continued to use Phase I and Phase II awards to keep the company moving forward. Currently, SBIR awards make up 95 percent of Airak’s revenue, totaling $3.7 million. The management, however, is well aware of the problems inherent in long-term reliance on SBIR funding: The successful transfer of products to the marketplace is perceived as the only way for an innovation company to survive and grow in the long term. To that end, Airak is expected to probably seek, at most, two more SBIR grants in the next year. Besides these, the company will focus all of its energies on the commercialization of the core products.

Prior to founding Airak, Paul Duncan was employed at another innovation firm. The business model for his previous employer was to rely almost exclusively on SBIR grants for long-term growth. At first, the model worked well.



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