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Nanotech on Spec

Gamma Alloys was notified last month that Boeing HorizonX Ventures, the venture investment arm of Boeing Co., would make an investment in the company and its composite material that Chief Executive Mark Sommer believes could one day replace regular structural aluminum in aircraft. Sommer would not disclose the amount his Valencia company received from the Chicago-based aerospace and defense giant, but he said that investments of this sort range from the single digit millions to low double-digit millions. The investment is what Sommer called “smart money” in that it has a strategic purpose and is not simply a check to keep the nine-year-old company afloat. “It has veracity beyond the number of zeros behind the first digit,” he added. Gamma is developing a new composite material that consists of aluminum mixed with ceramic nanoparticles to create a stronger and lighter metal for aerospace and automotive parts. The company’s plans include machining parts and selling the raw aluminum to companies to make their own parts. Brian Schettler, managing director of Boeing HorizonX Ventures, said that Gamma is one of seven startups receiving investments since the fund was created in April and the first money put toward the development of advanced materials. The aerospace company does not put any limits or restriction on how the money is spent, Schettler said, although it does work with the startups to understand what the priorities are for the funds. “They know best what the key problems they are trying to solve,” Schettler said. “We leave those decisions up to them and their board.” Helena Yli-Renko, director of the Greif Center for Entrepreneurial Studies at the USC Marshall School of Business, serves on the Gamma advisory board. What attracted her to the company were three factors – cutting-edge science based on patented nanotechnology; an experienced management team; and a pressing need in a growing market, Yli-Renko wrote in an email to the Business Journal. She added that the market for high-performance lightweight alloys is forecast to reach $10 billion by 2020. “Having Boeing invest in Gamma Alloys provides exactly the kind of funding, legitimacy and market access that an entrepreneurial company needs in order to quickly scale up and grow,” Yli-Renko wrote. “Rapid growth, gaining the required scale in terms of production, will be critical for reaching profitability and will facilitate continued technological innovation in a wide range of application areas.” Proven nanotechnology Gamma Alloys currently takes space at Del West Engineering Inc., a manufacturer of parts for the aerospace and automotive industries. Sommer is a vice president with Del West, and his father, Al, is the chief executive. Some of the Boeing money will be used for a new 6,000-square-foot headquarters and research lab for Gamma up the street from Del West. Most of it, however, will go into the production facilities in Ash Grove, Mo. The company has two buildings there plus an extra 5 acres of land for expansion. “We are installing the major equipment right now,” Sommer said. Gamma Alloys was founded in 2008, right as the Great Recession began to turn down. The economy brought two challenges – first, the high-end racing market the company wanted to supply imploded; and second, Del West was in financial trouble and could only provide limited funding to the startup. “It was a low energy effort for a couple of years while Del West tried to stay alive and the marketplace didn’t want anything new,” Sommer said. It was Bill Harrigan, now the chief technology officer at Gamma, who came up with the idea of mixing ceramic with aluminum. This is a special type of ceramic that is a spherical non-reactive alumina that makes the metal easy to machine, forge or roll, Sommer said. Early contracts for Gamma included the U.S. Navy and Sikorsky Aircraft Corp., the helicopter manufacturer owned by Lockheed Martin Corp., to make parts for the S97 Raider, a new attack chopper still in the testing stage. Gamma has also supplied its material to California Nanotechnologies in Cerritos to produce sports equipment. These contracts and others have brought in revenue for the company that is expected to be about $1 million this year. Gamma Alloys, however, is still not turning a profit. Additionally, the company has won three Small Business Innovation Research grants from the Pentagon that have totaled about $300,000. Harrigan’s original recipe for the composite material used micron-sized ceramic. Using nanoparticles of ceramic came about when a company approached Gamma with a sheet of specifications in strength-to-weight ratio and other properties that Gamma, or any company for that matter, would not have been able to reach. This company, however, was willing to fund work to come up with a process to meet its specifications, Sommer said. Harrigan and a few others at Gamma explored the idea of mixing ceramic nanoparticles – 1,000 times smaller than a micron – with aluminum. “It is like handling fairy dust,” Sommer said. The timing of the idea was just right. Nanotechnology had progressed to the point where the raw materials were becoming available. Chemists that Gamma hired came up with a way of handling the tiny ceramic particles, Sommer said. “It is that combination that now has us produce results that when I go into a meeting with the right people I have this ‘Wow’ impression right out of the gate,” he added. After the nanoparticles are mixed with the metal powder, they are placed in a press that is heated and turns them into cylindrical ingots. Those ingots are then formed into bars or plates that eventually become the final finished composite part or component. A new 75-ton press was recently installed in a workspace used Gamma at Del West. In Ash Grove, there is a 1,500-ton press. Sommer envisions this composite material as one day replacing aluminum not for everyday items, but for parts used in cars, airplanes, helicopters and perhaps even cell phones. “We look at this as a disruptor for a very large multi-billion-dollar industry,” Sommer explaineed. “This is going to scale up; the technology is real.” High-priced metal The Boeing deal came together from a chance meeting between a rep from the company and Sommer at a pitchfest organized by aerospace accelerator Starburst earlier this year. The rep told Sommer to call, he did and talks between the companies started. Boeing represented the perfect investor for two reasons, Sommer said. The first is that they are a good name and people tend to pay attention to what the company does. The other is that they would become a user of Gamma’s composite material. “Boeing, by their own definition, they do investments on some level to create a good supplier base for themselves,” he said. From Boeing’s perspective, Gamma was a good investment target because of its approach in getting the right dispersion of nanoparticles throughout its alloy and that it had demonstrated to some success its material on existing aerospace programs, said Schettler, HorizonX Ventures managing director. “This was not a laboratory concept that had not seen any proof in the real world yet,” he added. “It was already seeing success on some rotorcraft programs where it was being used in an aerospace grade type environment.” Even with a production facility in the Midwest, Sommer is adamant about keeping Gamma’s headquarters and research and development in the Santa Clarita Valley. One benefit is that Sommer can easily find the highly trained employees the company needs in the Los Angeles area. Of the company’s 10 employees in Valencia and Missouri, four have PhDs. Sommer said he likes that he can hire from aerospace industry or have his pick of recent graduates from the area’s universities. “Between UCLA, USC, Cal Tech, the Pomona schools and Cal State Northridge, we have this unending reservoir of technical talent to choose from,” he noted. Also in the company’s future is locking down additional funding. As Gamma signs more contracts to sell its aluminum there will come a point when it will need to automate the production process. Making the aluminum manually is an expensive process. Garden variety metal used in, say, an aluminum can, costs less than $1 a pound. Aluminum used in structural components for an airplane or high-end car can go for $10 to $20 a pound, with Gamma’s alloys bringing a price of two times to five times those amounts right now, Sommer said. But he expects the price will come down once the company is making millions of pounds of the metal. “Until we automate and get our economies of scale to something reasonable, we will never compete,” Sommer said. “Our whole proposition is that we ultimately will not be that more expensive than what good structural aluminum costs today.”

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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