TECHNOLOGY COMMERCIALIZATION IN UKRAINE

1
TECHNOLOGY COMMERCIALIZATION IN UKRAINE

• October 2006

2
PRESENTATION OVERVIEW

• Technology Commercialization Challenges
• Global IPP/USIC Model
• Initiatives for Proliferation Prevention Projects
  in Ukraine

3
COMMERCIALIZATION Of Science and
TechnologyCHALLENGES AT A GLANCE

• The process is high-risk, long-term, multi-stage,
  and complex.
• You have to deal with a funding gap at the early
  engineering and commercialization stage
• In the U.S., the amount of venture capital
  available for investments has declined since 2000
  bubble
• Commercialization investment portfolio
• Only a few Hits will generate high revenues
• A number of others will generate smaller revenues
• Most endeavors do not attract outside investment

4
The Process of Commercialization

• Research and Development
• Engineering to a prototype
• Raising capital
• Manufacturing
• Marketing

5
Research and Development

• There is a large number of scientists and
  engineers in Ukraine doing research that they
  believe is marketable
• The Science and Technology Center in Ukraine
  (STCU) supports a number of research projects,
  focusing on those with practical applications
• Partner projects such as IPP focus on efforts
  likely to lead to commercialization

6
Engineering to aPrototype

• It is necessary to take the results of RD and
  engineer it into a product that can be mass
  produced. This takes investment.
• It is important to attract a company and/or an
  investor at this stage so that someone familiar
  with the market is involved
• For example, the focus of the IPP program is on
  this phase

7
Raising Capital

• This is not an easy task
• Large amounts of investment are required before a
  product hits the market
• The amount of investment money invested in
  science has decreased over the past 5 or so years
  (at least in the U.S.)

8
VALLEY OF DEATH

• Valley of Death funding gap at survival stage

Technology Creation
Biz. and Product Development
Commercialization
Distribution Sales
Cash flow or sales
Idea, RD
Product Dev. Production
Sales
Valley of Death
Time
Cash flow
Stock owners
Entrepreneur, angel investors
Venture capitalists
RD grants, Public sector
Ideation
Survival
Growth
9
VENTURE CAPITAL INVESTMENTS (US) Source
Pricewaterhouse Coopers National Venture
Capital Association
10
GLOBAL PRIVATE EQUITY 2004Source
Pricewaterhouse Coopers National Venture
Capital Association
11
Top 20 Countries Based on High-Tech Investment
(2003)

• North America
• 1. USA (19.54)
• 2. Canada (0.81)
• Western Europe
• 2. UK (4.76)
• 4. France (1.75)
• 5. Italy (1.53)
• 8. Sweden (0.82)
• 11. Germany (0.76)
• 12. Ireland (0.29)
• 13. Finland (0.21)
• 14. Norway (0.21)
• 15. Netherlands (0.19)
• 16. Denmark (0.16)
• 17. Switzerland (0.16)
• 19. Spain (0.15)

• Asia Pacific
• 3. Japan (2.51)
• 6. Korea (1.11)
• 7. China (1.06)
• 18. Singapore (0.16)
• Middle East Africa
• 10. Israel (0.77)
• 20. South Africa (0.13)

12
How does the United States help with the Start-up
of new Technology Businesses?

• Small Business Innovative Research Program (SBIR)
• Advanced Technology Program (ATP) of the National
  Institute of Standards and Technology (NIST)
• University technology transfer offices
• Technology licensing to businesses
• Business incubators
• Angel investors, venture capitalists, stock
  owners

13
CHALLENGES IN UKRAINE

• Lack of public resources
• RD stage
• Commercialization/survival stage (valley of
  death is deeper)
• Lack of venture/private investment resources
• Ukraine is below the radar of global private
  equity investment in high-tech
• Domestic high-tech market limited
• Most customers were military in the past
• Lack of tech commercialization expertise and
  infrastructure in research institutes (unlike in
  Western universities)

14
US NONPROLIFERATION PROGRAMSSUPPORTING
UKRAINIAN SCIENTISTS

• STCU
• RD grants/civilian engagement since early 1990s
• Compensating for lack of public RD funds in
  Ukraine
• STCU Commercialization program
• CRDF
• RD grants/civilian engagement
• Next Steps to Market

15
DOEs Global IPP PROGRAM INDUSTRY PARTNERSHIPS

• Commercialization industry partnerships focus
• Critical element US company participates as
  industry partner in each project
• Industry partner matches 100 of federal funds
• Industry partner provides business expertise/
  direction and brings technology to the market
• US Company provides access to Western investment
  resources (80 of global private equity)

16
Projects Model

• Three-way partnerships
• Ukrainian institute, U.S. company, and DOE
  national laboratory
• IPP funds FSU scientists work
• U.S. companies cost-share government funds by
  cash and/or in-kind resources
• National laboratories funded by IPP to validate
  the Ukrainian science and technology technology
  validation and to help manage the project

17
Benefits for Ukrainian scientists

• Access to U.S. business expertise and investment
  resources
• Invaluable lessons to learn
• Partnerships created with U.S. companies
• Combining Ukrainian technological resources with
  U.S. entrepreneurial expertise
• Development of technologies, products and
  services for U.S. and global markets
• Ukrainian high-tech market is limited
• U.S. companies provide access to their markets
  and customers
• Working with top U.S. national laboratories in
  joint tech development
• JOBS, REVENUES, INVESTMENT, NEW JOINT AND OWN
  BUSINESSES CREATION

18
United States Industry Coalition (USIC)

• Association of 150 U.S. companies
• Multinational corporations General Electric,
  Boeing, DuPont, Halliburton, IBM, Westinghouse,
  GNF, Nukem, Brush Wellman
• Small innovative businesses
• Advisor to NNSA/DOEs Initiatives for
  Proliferation Prevention Program (IPP)
• IPP project review/monitoring
• Facilitation of technology commercialization
• Public/Congress outreach
• Provides an industry outreach for IPP
• Member companies are industry partners of IPP
  projects
• Over ten year experience in technology
  commercialization and partnerships in the FSU
  region

19
COMMERCIALIZATION SUCCESS

• Sustainable civilian occupations steadily grow
• 2,800 civilian FSU jobs created/sustained
• 16,000 scientists engaged by IPP since 1994
• USFSU Revenues surpassed IPP budget since 2003
• 30M vs. 22.5M IPP budget in FY03
• 53M vs. 23.8M IPP budget in FY05

20
COMMERCIALIZATION SUCCESS

• Outside investments demonstrate high
  competitiveness of technologies
• 137M invested by the end of 2005
• FSU institutes catching on commercial culture
• 30 FSU and FSU-US businesses created/sustained
• Negotiations with customers investors FDA and
  FSU certifications establishing manufacturing
  int. patents etc.
• 30 of projects generate revenues to date
• Many more resulted in other successful
  developments

21
Ukrainian Projects Supported by IPP

• 19 Ongoing Completed Projects in Ukraine
• Examples of Successful Ukrainian Projects
  Supported by IPP
• Welding Brazing Technologies for Repair of
  Turbine Engine Airfoils
• Advanced Grinding Technology for Bio-source
  Materials
• Advanced Welding Fabrication Techniques for
  Al-li Alloys
• Next Generation EB-PVD Apparatus
• Flash-butt Fusion

22
Welding Brazing Technologies for Repair of
Turbine Engine Airfoils

• Repair of worn or defective turbine components
  made of nickel-base superalloys is difficult and
  expensive
• Innovative technology reduces repair costs,
  allows re-manufacturing of initially defective,
  and refurbishment of used, components
• Manufacturing started. Restoration repairs of
  aero engine parts

Pratt Whitney / UTC (CT) E.O. Paton Electric
Welding Institute (Kyiv) Oak Ridge National
Laboratory
23
Advanced Grinding Technology for Bio-Source
Materials
Pinnacle Technology (KS) TexMet
(Dniepropetrovsk) NNSA Kansas City Plant

• Agricultural/forestry waste can be converted into
  consumer and industrial products
• Fillers for plastics chemicals fuel
  electricity animal feed fertilizer
• Global demand for bio-source products surging
• 23 Billion market growing at 9 per year
• Ukraine plant has expertise in particulate
  reduction, analysis and system design techniques
• Unique grinding separation technology for
  global industrial and agricultural markets

24
Advanced Welding Fabrication Techniques for
Al-Li Alloys
Boeing (CA) VNIITF (Snezhinsk, RU) E.O. Paton
Institute (Kyiv) Lawrence Livermore Natl Lab

• Russian, Ukrainian U.S. partners will design,
  analyze, fabricate prototype aircraft launch
  vehicle components
• Lightweight extruded panels reduce cost, improve
  performance
• Growth in commercial aerospace design
  manufacturing
• Significant annual sales, dozens of people
  employed (numbers proprietary)

25
Next Generation EB-PVD Apparatus
General Electric Company (NY) E.O. Paton Electric
Welding Institute (Kyiv)

• Innovative design improves commercially-available
  systems
• Higher deposition rates
• Reduced time operating costs
• Ukrainian partner will be able to compete in
  global market for multiple industries
• Aeronautical gas turbines
• Fuel cells
• X-rays systems

26
Flash-Butt Fusion (FBF)

• FBF applied in 55,000 km of pipeline worldwide
• Technology in use for 30 years
• FBF advantages
• bonds any metal to any other metal
• uses electric contact rather than welding rod or
  flux
• faster welding rates
• strong, high-quality welds
• higher labor productivity
• Oil, gas, chemical pipelines storage tanks are
  primary market for upgraded FBF

• Maverix (FL)
• E.O. Paton Electric Welding Institute (Kyiv)
• NNSA Kansas City Plant

27
List of IPP Projects in Ukraine

• ANL-T2-0224-UA Photonuclear production of
  radioisotopes
• ANL-T2-0229-UA Process Development Low Cost,
  Continuous Nano-Scale Purification Technology
  of Powdered Carbonaceous Materials for
  Applications in Electrochemical Energy Storage
  Systems and Electroconsolidation? Process
  Technology
• ANL-T2-0151-UA The Use of the MAGSEP Technology
  for the Decontamination of Milk, Juice,
  Baby Food, and Water from the
  Chernobyl-Affected Zone in the Ukraine
• DOEH-T2-0001-UA Next Generation EB-PVD Apparatus
• KCP-T2-0219-UA Advanced Grinding Technology for
  Bio-Source Materials
• KCP-T2-0224-UA Flash-Butt Welding
• KCP-T2-0222A-UA Custom Automotive Component
  Manufacturing
• LBNL-T2-0178-UA Screening of Botanical and Fungal
  Species Collected within the Territory of NIS
  for Pharmaceutical and Agrochemical Activities
• LLNL-T2-0090-UA Joining Technologies for Gamma
  Titanium Aluminide Castings
• LLNL-T2-0091-UA High Specific Stiffness Shafts
  and Advanced Bearing Coatings for Gas Turbine
  Engines.
• LLNL-T2-0113-UA Radiation Hardened Telerobotic
  Dismantling System Development
• ORS-T2-204-UA Welding and Brazing for Repair of
  Aircraft and Gas Turbine Engine Components
• ORS-T2-211-UA Development of Protective Coating
  Technologies for Gas Turbine Engine Airfoils
• PNNL-T2-0241-UA Cost Effective Production of
  Powder Metallurgy Titanium Components for
  High Volume Commercial Applications
• PNNL-T2-0245-UA Development of a New Lithium
  Metal Secondary Battery with Polymer
  Electrolyte and Cathode Based on Metal Oxides
• PNNL-T2-0272-UA Development and Commercialization
  of Straw Fired Boilers of 100-1000 kW
  in Ukraine
• PNNL-T2-0194-UA Empirical Discovery and
  Development of Crop Protection and Human Health
  Agents
• PNNL-T2-0201-UA Commercial Application of
  Europium for Gamma Irradiation in Ukraine
  Russia
• SNL-T2-0179-UA Brazing Process Improvement for
  Stainless Steel Tubes

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Marketing Ukrainian Technologies

• Ukrainian technologies are marketed to U.S.
  industry through IPP.
• Marketing vehicle - BISNIS, U.S. Department of
  Commerce
• TekhInvest, Ukraine identifies promising
  technologies from Ukrainian institutes
• USIC facilitates interactions between institute
  and U.S. companies
• U.S. company due diligence

29
USIC Working through BISNIS

• Amorphous and nanocrystalline tape-wound magnetic
  cores with high temperature stability of magnetic
  characteristics, Melta Ltd.
• Plasma surface hardening of flanges of wheels of
  locomotives, as well as passenger and freight
  cars, RPE Topaz Ltd.
• Holographic Coding Method to Produce
  Surface-Relief Holograms Incorporating Image that
  Is Recorded as a True Hologram, Spekl
• Vortex Bubble Contactor for Intensification of
  Heat and Mass Transfer in Various Industries,
  Institute of Engineering Thermophysics
• Ukraine Production of Nanodiamonds and
  Development of their Application Technologies,
  Sinta Ltd.
• Chitin Adsorbent for Heavy Metals and
  Radionuclides Technology for Liquid Industrial
  Waste Decontamination, Mycoton-Aglycon, Ltd.
• Vehicle-Borne H2-Producing Rechargeable Feeder
  for Hydrogen-Propulsion Automobile, Scientific
  Research Power Engineering Institute of
  Dnipropetrovs'k National University
• Gas-Thermal Jet for Surface Treatment and
  Coating, Kyiv National Taras Shevchenko
  University
• High Efficiency Photo-Electrochemical Hydrogen
  Production and Storage Cell, Institute for
  Problems of Materials Sciences
• Liquid Crystal Alignment Method, Institute of
  Physics of National Academy of Sciences of
  Ukraine
• Magnetocardiograph - Early Detection Of Ischemic
  Heart Disease, Kharkiv National University
• Superheated Vapor Impregnation of
  Capillary-Porous Materials, Pridneprovie Cleaner
  Production Center
• Vibrato-Diagnostic Imaging for Security
  Monitoring / Power Generation from Agricultural
  Industry Waste / Flame - Jet Drilling System,
  Yuzhnoye State Design Office
• Copper Scrap Recycling Technology, East Ukrainian
  National University
• Brazing and Diffusion Bonding of Metals to
  Non-Metals, Frantsevich Institute for Problems in
  Materials Science
• Advanced Acousto-Optical Modulator for Powerful
  Laser Radiation, Institute of Physical Optics
• Pneumatic Washing Cleaning Technology for
  Machinery Parts, National Science Center / High
  Critical Current Density Niobium-Titanium (NB-TI)
  Superconductors, Kharkiv Institute of Physics and
  Technology

30
Conclusions and Questions

• International institutions such as the STCU and
  programs like IPP are creating new, sustainable
  jobs for WMD personnel in Ukraine.
• They are adding new jobs to U.S. and Ukrainian
  economies
• IPP STCU help reduce risk for U.S. high-tech
  business
• Similar institutions and programs could
  accomplish the same
• There is a need to attract significant private
  investment to new technologies
• What role is the government of Ukraine willing to
  play to add to the current successes, to attract
  outside investment, and to lay the foundation for
  a high tech economy in Ukraine?
• To what extent are outside governments and
  companies willing to continue, is not increase,
  the level of support for the commercialization of
  Ukrainian science?