UH team shows how to turn idea into startup
“It wasn’t until we went up against MBA teams from Harvard and won ... that we felt we were on to something.” REECycle CEO Casey McNeil
This Cinderella story has legs and life lessons for young entrepreneurs to boot.
Almost 2½ years ago, I wrote about four under graduates studying business at the University of Houston. Aspart of their coursework at the Wolff Center for Entrepreneurship, they had to develop a business plan based on a technology invented by UH researchers andthenpitch it in competitions for cash andprizes.
One team, named RE E Cycle after a proprietary methodfor rare earth element recycling, went all the way to the Department of Energy’ s National Clean Energy Business Plan Competition. The teamsweptall three categories anddefeated graduate students from MIT, Georgia Tech and Michigan State.
That student business plan is now a real company, with two of the four students at the helm. RE E Cycle won a $750,000 National Science Foundation grant on Nov .7 to commercialize the technology, andit has the potential to collect another $500,000 in matching funds if it succeeds. That’s on top of the $400,000 the team won in competition or received in earlier grants.
RE E Cycle is an example of what a quality university can accomplish, and the power of competition and entrepreneurship. CEO Casey McNeil says the team always treated REECycle like a business they’d like to start, even if it seemedlike a long shot.
“We never saw it as a device for competitions, whichI think helped us winthe competitions,” McNeil ,26, told meat his office in the UH Innovation Center, a business incubator. “It wasn’t until we went up against MBA teams from Harvard and won in front of investors andbusiness
owners that we felt we were onto something. ... It was also a pushfor the technical team.”
RE E Cycle is based on a technology developed by Allan Jacob son and Pr a deep Sam ar as eke re in UH’ s chemistry department. They’ ve developed a method of using chemicals to extract rare earth elements from magnets recycled from computer hard drives.
As the company name suggests, rare earth elements like neodymium are hard to come by, and 90 percent of them are mined in China. The business team calculated that demandfor rare earth elements is likely to grow with the spread of technology and that recycling computer magnets could supply 20 percent of the U.S. market.
“Rare earths in the United States are going to be a very large opportunity,” McNeil said.
Jim Kane, a UH lecturer who guides student projects atthe Wolff Center,said China’ s dominance of the rare earth market is why he sees a market for recycled materials.
“China said ,‘ You want our rare earths for your magnets? Then you have to buy our magnets .’ Then they said ,‘ You want our magnets for your motors? Then you have to buy our motors ,’” Kane said .“Now they say ,‘ You want our motors for your refrigerators? Then you have to buy our refrigerators.’”
“What happens when youcanreverse all of that?”
Takingachemical process from the lab and turning it into a business, though, was far more challenging than McNeil expected, consuming the last 30 months. One team mate left to pursue a career else- whereafter he graduated; another left not long ago but retains anownership interest. McNeil, Samarasekere and Susan T ran remain.
“Some nights we walk out of this room thinking there is nowayinhell this worksout,” McNeil said. “And then we come back as entrepreneurs. Were run thenumbers, werecalculate it, wepivot some, andall of the suddenyou’ve got this great business model.”
REECycle has not accepted outside funding, relying solely on money from competitions andgrants. Without angel investors or venture capitalists demanding a quick turnaround, the team has had time to build a sustainable company that can producea rare earth concentrate that alloy manufacturers have agreed to buy.
“You can convince people to raise a bunch of money, and some would look at that andsaythat’s successful because of the amount of money that they’ ve raised,” McNeil added. “But companies aren’t successful just because they’ve raised money. I think what’ s been surprising mei show much effort, time and work that goes into creating anactual sustainable company.”
Topaythebills, McNeil has run another company he started while still a student called Vendera, which repairs, manage sand recycles mobile devices for large companies. Tranalso has a day job. The University of Houston has licensed the technology andretains a 10 percent interest.
REECycle, hashita turning point, nowhiring its first four employees to operate a new chemical reactor on the UH campus that will soon produce rare earths concentrate ona commercial scale. That will generatethe company’s first invoice sand pass an important milestone for seeking outside investment, McNeil said.
“When you sit back and look at where they started and where they are today it’s, ‘Wow, this is working,’” Kanesaid. “This is real job creation.”
Wow, indeed. Success for RE E Cycle is far from assured, but for something that started out as an undergraduate class assignment, what McNeil and his team have accomplished is remarkable.
Entrepreneurship is alive and well in Houston.