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Fueled by local connections

2014-01-13 11.11.52

Fueling a vehicle with natural gas is not currently convenient or cost effective. But Onboard Dynamics is hoping to change all of that. And that could be a billion-dollar idea that changes the future of transportation fuel.

“The idea is natural gas compression onboard vehicles,” said Rita Hansen, CEO of Bend-based Onboard Dynamics, Inc.

“We are only four months into really launching the company, working through our milestones, doing the technology development, and making sure that we come up with a commercially viable product in 18 months.”

The spark

Chris Hagen, an assistant professor at Oregon State University-Cascades and the chief technical officer of Onboard Dynamics, has developed a natural-gas refueling system for vehicles. An internal combustion engine is modified so one of the cylinders is dual purpose: It can power the vehicle and also compress natural gas coming from a low-pressure supply line at a home or business and send it to the fuel tank to be stored for later use.

Hagen, who previously lived in Colorado, developed his idea as a response to a funding announcement from the U.S. Department of Energy/Advanced Research Projects Agency-Energy (ARPA-E). ARPA-E was looking for technology that would move the needle on transportation fuel, reducing the dependency on gasoline and diesel. He submitted his idea and received $700,000 in funding, which ultimately grew to $1 million, to build a proof of concept to show natural gas compression onboard a vehicle could work.

About a month later, OSU-Cascades hired Hagen.

Finding a natural fit

Natural gas, a clean-burning alternative fuel made predominantly from methane, has a number of advantages as a transportation fuel including its domestic availability, widespread distribution infrastructure and low cost, the U.S. Department of Energy’s website states.

Only about one-tenth of one percent of natural gas is used for transportation fuel, according to data from the U.S. Department of Energy. Roughly 150,000 vehicles are powered by natural gas in the United States and there are just over 800 public natural gas refueling stations.

The issue was not Hagen’s technology. It was the ability to commercialize that technology.

“Hagen was hitting the ball out of the park on the technology side, but he needed help commercializing it,” Hansen said. “ARPA-E does not want to fund science projects. They actually want to see if there’s a way to get it into the marketplace.”

Because Hagen was new to Bend, Deschutes County Commissioner Tony DeBone suggested Hagen reach out to Economic Development for Central Oregon for help. Jim Coonan, the EDCO venture catalyst manager at the time, gave Hagen a list of names from his stable of experts in energy and engineering and Hagen started making calls.

Hansen and Jeff Witwer met with Hagen to help bring his concept to life.

“Our number one goal in the beginning was to help Chris get back on track in the commercialization effort,” she said. “At the time we weren’t thinking about starting a company.”

Gaining momentum

In June 2013, Hansen, Witwer and Hagen gathered with a number of experts in the industry to hold a business strategy planning session. Using the lean startup model, they brainstormed to determine the right business model, who the target market would be, how to launch the technology, and what resources they would need.

Onboard DynamicsIt was after that meeting Hansen and Witwer fully realized the potential of Hagen’s idea. In August they formed a team, named the company Onboard Dynamics, and applied to the Bend Venture Conference – which is now one of the largest angel-investment conferences in the Pacific Northwest.

The ARPA-E program director met with the team the day before Thanksgiving 2013, outlining a path to more potential funding to help take Onboard Dynamics to the next level.

“I thought he was talking like hundreds of thousands of dollars and he was talking millions of dollars,” she said.

Pouring fuel in the tank

At that point, Hansen said Onboard Dynamics realized it had potential access to significant funds through the ARPA-E program to really launch the company based on the success of Hagen’s work. The funds would allow Onboard Dynamics to create a commercially viable product.

“What they realized is that we were still not fundable. We couldn’t go out and raise traditional capital because there were still so many risks. All we had was a proof of concept,” she said. “We weren’t looking for seed money, we were looking for significant funds for continued technology development. Traditional capital funding sources are conservative and don’t typically fund at that stage.”

Over the next five months, Onboard Dynamics/OSU worked on the next generation of the technology and the presentation pitch for the additional funding from ARPA-E. And on April 8, the company received a phone call from ARPA-E announcing Onboard Dynamics had been selected for a new award of $3.6 million total.

ARPA-E agreed to put in 80 percent, $2.88 million, but Onboard Dynamics had to come up with the other 20 percent of the award.

“At this point … I knew I needed to go out and find $720,000,” she said. “And that’s where Oregon comes in.”

Weathering the storm

Hansen said she had been discouraged every day by rejections because the company wasn’t developed enough. But she knew in order to fully launch Onboard Dynamics and its technology, she needed more capital.

“We’d already been pitching and had gotten no’s, no’s, no’s from other private sources,” she said. “I don’t know how many rejections I’ve gotten … too many to count.”

RefuelingHansen kept going with $3.6 million on the line. She reached out to Oregon BEST, which has a gap funding program up to $150,000, and Oregon Nanoscience and Microtechnologies Institute (ONAMI), which has a $250,000 gap funding program.

“I was being very selfish, thinking I could go after both of those; and I did,” she said. “It was the first time that they actually came together at the exact same time to invest in a company.”

But Hansen had to go through a few hoops to be able to accept both investments. The rules, established by the Oregon Innovation Council, prevented ONAMI and Oregon BEST from collaborating on their funding. Hansen called up Senator Betsy Johnson. Senator Johnson listened to Hansen’s story and the obstacles Onboard Dynamics was facing and revised the way the rules were written in 48 hours so Onboard could receive funds from both organizations.

“If these two programs didn’t exist I would have never been able to execute on the ARPA-E award,” Hansen said.

Continuing the journey

In the history of ARPA-E, she said this is the second largest award given to the state of Oregon.

“I needed to feel like Oregon wanted this. It would have been easy to walk away,” she said. “I guess I was driven by a sense of accomplishment and having this legacy to say we got this $3.6 million dollar award for the state of Oregon, in Central Oregon no less.”

Hansen said her formula to success has been her tenacity, her ability to pivot, and her network of support throughout the state.

“I always use mountaineering analogies because I’m a climber. You don’t lose sight of the summit, but you may have to change your route when you come up against an obstacle,” she said. “You may have to figure out other ways to get around or overcome those obstacles, but [you can’t] lose sight of what the end goal is and you [have to] stay clear about that and stay focused.”

Tapping every resource

Hansen said her summit was to execute on the ARPA-E award, but she couldn’t have reached that summit without team work.

“I’m a 50-something-year-old entrepreneur, but I still needed help. You have to not be afraid to ask for help and leverage your network and leverage your rolodex,” she said. “Obviously I am very, very proud to have made this happen, but there’s no way I could say I did this alone. I have to credit our entire team for complementing my weaknesses.”

Onboard Dynamics is projected to become a $25 million company in five years, Hansen said. But there are still challenges the startup company is facing.

On the roadLike most startups, Onboard Dynamics is still fundraising and will continue to be as the company progresses. But a bigger hurdle is the company’s loss of its vice president of engineering, Witwer. Due to health reasons he is no longer able to be a full-time member of the team.

“I’m trying to recruit somebody to be his replacement, which is a huge challenge,” she said. “Jeff was in this boat with us for the last 18 months. I talked to this person every day, multiple times a day, and to now not have that person in the boat is a little scary.”

Over the next few years Onboard Dynamics anticipates being able to double its workforce. To date, there are 14 paid employees, contractors, postdoctoral scholars and students working on the Onboard project.

Consistent improvement

Part of Hansen’s goal is to help develop an energy cluster in Central Oregon with Onboard Dynamics serving as one of the anchor companies.

“We have a whole energy engineering department that’s teaching students to do this work,” she said, referring to a program at OSU-Cascades, of which Hagen is an integral part. “Right now [students] have to leave the area after they graduate to go find jobs. That’s not what we want. We want to create an industry here.”

As the region develops its energy engineering industry, she said it will attract more funding and other companies. This will in turn fuel the sector’s growth and place Bend, as well as Oregon, on the map.

“We already have this reputation with the [U.S. Department of Energy] for getting stuff done; coming up with innovation and new ideas and actually seeing them through,” she said. “I was at the right place at the right time for this opportunity. It is a success story. The story is not done yet, but this whole community came together to make this happen.”

For more information, visit http://www.onboarddynamics.com/.