When entrepreneur Bruce G. Montgomery decided he wanted to build a new company, he went idea shopping at one of the hottest idea factories in the world, the Johns Hopkins University's Applied Physics Laboratory.
Lucky for Montgomery, the lab was looking for an entrepreneur.
The result is Syntonics LLC, the first for-profit company ever spun out of the super-secret Applied Physics Laboratory (APL), a university-owned research and development center that since World War II has labored over complex technological challenges, primarily at the behest of the Department of Defense.
Today's official announcement of the Syntonics venture is a milestone in the life of APL, which until recently had often been referred to as the "Stealth Lab," because of the quiet work it performs on its 365-acre campus in Laurel.
APL has been slow to turn commercial, a process most defense research labs began in the 1980s, transferring technology to the private sector and spinning off companies into their surrounding communities. The main impetus for this was a change in the law that allowed such university labs to own their intellectual property.
Because APL was even more heavily entrenched in government-sponsored work, primarily for the Navy, it took a long time--and some new blood--for the lab to start focusing on opportunities outside of the government.
"Before, if you came here with anything other than government money, they sent it away," said Montgomery, a career technology executive who is chief executive of Syntonics.
APL has licensed technology to the private sector, but it hasn't been proactive in making money from it, said Wayne E. Swann, the head of APL's new technology transfer office and the man charged with leading the lab's new commercialization efforts.
Swann had previously worked at the University of Maryland, running its office of technology liaison, which he created 13 years ago. Johns Hopkins will hold a minority ownership stake in Syntonics, which will sell highly specialized quartz oscillators--ultra-precise timekeepers used in spacecraft. However, the university will not put any money into the company. Montgomery will fund the venture using his own money and money raised privately. He would not specify the exact amount of start-up, or seed, money, but said it is several hundred thousand dollars.
Syntonics is the most visible example of APL's push into the commercial world.
"We're changing the culture here," Swann said. Just a couple of weeks ago, for example, the lab held the first ever "Pizza and Patents" seminar, an informal gathering where 100 of the lab's tinkerers gathered to receive kudos on their breakthrough inventions. Several were presented with plaques bearing a reproduction of the first page of their patent registration.
Of course, fancy plaques are one thing, cash is another. APL has also restructured its agreement with its inventors, allowing them to share more of the revenue derived from their patents.
"That change has helped generate a renewed interest," Swann said. Indeed, the number of developments "disclosed"--the step before patenting--is now double what it was before Swann's arrival. In the first three months of his tenure, there were 21 new inventions disclosed. A typical three-month period would generate about 10.
The lab has also started offering other support to its scientists and engineers, such as a new program that offers them small grants should they need a new piece of equipment to perfect a product for the commercial market, or should they need more money to build a prototype. In addition, the lab will offer help as scientists discover commercial viability for their inventions. Scientists, Swann said, "are not always the best people to write a business plan."
To be sure, the lab's primary focus will be on work for its government sponsors, and 90 percent of the lab's research will never be considered for commercial applications, Swann said.
In the early 1980s, APL was one of Montgomery's clients when he worked for Fairchild Space and Defense (now part of Orbital Sciences Corp.). Montgomery considered the APL space department "the entrepreneurs of the lab," scrappier because they did not have the steady stream of revenue from the Navy that the rest of the lab had, forcing them to work a bit harder to secure funding from other places.
Montgomery was familiar with the work being done on oscillators and thought he could build a business out of it, serving what he calls a "niche of a niche of a niche." The market for the oscillators is made up of about 500 commercial space companies and government entities such as the Naval Research Laboratory.
When Montgomery approached APL early this year, there was already a mental shift taking place within the lab, driven in part by the university's president, William R. Brody, who took that post in 1996 and formerly helped start three medical device companies. In January the lab gets a new director, Richard T. Roca, a vice president of AT&T Labs, the telecom giant's research and development arm.
Montgomery first discussed his plan to market the oscillator with Larry J. Crawford, who helps runs the business side of APL's space department, who liked the idea and set the negotiations in motion. When Swann arrived, the final planning sessions began. In fact, during his interviewing process at APL, people he talked to picked Swann's brain about the new venture, asking for his advice.
Syntonics's relationship with APL will give it an edge over most start-ups. It will be able to use APL's labs for testing, and can tap into the engineering brains at the lab who have been perfecting the oscillators--making them smaller, lighter and more tolerant of extreme temperatures--for 40 years.
Montgomery is hoping to locate his new baby in what will be the first technology business incubator in Howard County. Chances are good he will be accepted, said Richard W. Story, head of the Howard County Economic Development Authority.
The authority has worked closely with APL, the county's largest private employer, since the lab's inception, and Story said the lab's latest push to spin off new companies will make a significant impact on the area's economy. Swann, who is on the technology incubator's advisory committee, said he hopes to see spin-off companies locate in the community.
APL has suffered one casualty as the result of its new spin-off. Recently, one of the lab's top experts in radio frequency electronics approached Montgomery, asking to serve as the head technologist for Syntonics.
"I simultaneously got really excited, and really horrified," Montgomery said. But after talking to Swann, Montgomery hired the scientist.
Swann diplomatically played down the loss, but added, "certainly it is not our goal to start up technology [companies] and spin off people."
Syntonics will sell highly specialized quartz oscillators:
What an oscillator is:
A device used in spacecraft that keeps highly accurate timing, which is critical to determining position in navigation.
How the oscillator works: A quartz crystal, stimulated by an electrical current, creates another current that is amplified. That current is channeled into the command and control electronics of the spacecraft to provide a very stable reference signal so the spacecraft can "listen" to faint radio signals carrying commands to the spacecraft. The current also serves as a very accurate clock, similar to a quartz wristwatch, so that the spacecraft knows when to execute preprogrammed commands.
Number of oscillators to be built: In first year, about 24; in subsequent years, 50 to 100 annually.
Price: Ranges from $25,000 for a simple model to $500,000 for a complex one.
SOURCE: APL Space Department
Business: Supplies time and frequency electronics for demanding space applications
Heritage: A spin-off from the Applied Physics Laboratory.
Location: Clarksville, Md.; plans to move to Columbia next year.
President: Bruce G. Montgomery
Employees: 10 within one year; 75 within five years
Web address: www.syntonicscorp.com
CAPTION: Wayne E. Swann, left, and Bruce G. Montgomery are leading APL's commercialization efforts.