At Cool Clean Technologies, CO2 Is the Solution, Not the Problem

At Cool Clean Technologies, CO2 Is the Solution, Not the Problem

An Eagan company holds more than 80 patents that put the greenhouse gas to good use.

People and animals exhale it, trees and plants more or less inhale it, and many industries emit carbon dioxide as an undesired byproduct, a greenhouse gas. But at Cool Clean Technologies, Inc., you could say that carbon dioxide is the product—it’s what the whole company is built on.

That’s not entirely novel. Industrial gas companies have made carbon dioxide their business for decades. Multibillion dollar global players such as Praxair, Air Products, and Germany’s Linde AG capture CO2 from factories and refineries every day, then sell it in pressurized liquid form to other businesses that use it for everything from welding to making carbonated soda. Fast-food restaurants, for instance, are an enormous market for gas suppliers.

Fizzy Pepsi isn’t where Cool Clean Technologies sees its opportunity, however. In fact, the 10-year-old Eagan company isn’t interested in supplying CO2 to its customers, it’s interested in applying it to problems—especially where carbon dioxide can replace fossil fuels, toxic chemicals, or large amounts of water.

“We look for applications where we can be faster, better, and cheaper than the existing method,” says Jon Wikstrom, chairman and CEO of Cool Clean Technologies. Using carbon dioxide in the form of a liquid or a dry ice spray, the company’s products cool machine tools that cut and drill hard metals like titanium; they clean medical devices and hard disk drive components during assembly in a factory clean room. In a newer line of business, Cool Clean Technologies also uses CO2 to pull oil out of algae and other plants so it can be refined into biodiesel and jet fuel.

Think of Cool Clean as being simply in the extraction business, says Chief Technology Officer David Jackson: the company’s technologies extract dirt or contaminants from some things, oil from other things, and heat from machining operations.

But think of this, too: Cool Clean is in the business of extracting value from intellectual property (IP). The company holds or licenses more than 80 patents for specific ways of using carbon dioxide. Its challenge is not only to cool, clean, and extract, it’s also to decide when to make and sell a product itself, when to license its patents to someone else, and when to forge other kinds of partnerships to bring its portfolio of technologies to market.

Recycling CO2 produces no net increase in greenhouse effects, and no decrease either. So Cool Clean Technologies isn’t out to save the world from global warming. But it is out to make the world see carbon dioxide as the solution, not the problem.

“Clean Before It Was Cool” 

Wikstrom likes to play on the words in his company’s name to explain a central irony in Cool Clean Technologies’ start-up.

“We were advised”—by lawyers and others guiding the formation—“to hide the fact that we provided environmental benefits,” Wikstrom says. “It was like, ‘Hey, you don’t want to talk too much about providing these environmental initiatives because everyone will assume that if it’s an environmental solution, there’s something wrong with it’” in terms of lower quality or an uncompetitive price, he explains. “That was the mentality 10 years ago.”

He adds, “That’s why I like to say ‘Cool Clean: We were clean before it was cool.’”

Cool Clean was a spinoff from the Applied Technologies division of Chart Industries, an Ohio-based maker of pressure vessels, piping, and other equipment for industrial gases. Chart bought New Prague–based Minnesota Valley Engineering in 1999, which is how it picked up Wikstrom. He became president of the Applied Technologies group, whose main job was to develop commercial uses for gases, including carbon dioxide.

Along with MVE, Chart acquired rights to more than two dozen patents originally granted to the Hughes Aircraft Company. Hughes figures in the history of Cool Clean Technologies and several of its competitors. The California company was a pioneer in the use of CO2 for cleaning circuit boards, aerospace components, and oddly, for “dry cleaning” clothing.

Chart Industries was also focused on using liquid CO2 for dry cleaning. But in a down period for the industrial gases sector in 2001, Chart decided to shed projects that weren’t at the core of its business. That year, Wikstrom and about 15 investors put up a combined $1.5 million to buy some of Chart’s IP and launch Cool Clean Technologies. They raised another $5 million in private equity from an industrial gas company in Japan in 2005. A second private equity round in 2007 brought $8.7 million from the Oak Ridge Financial Group in Golden Valley, and brought on most of Cool Clean’s approximately 140 current shareholders.

The irony is that Oak Ridge, other investors, Wikstrom and his partners, and even Chart in the beginning were all drawn to an opportunity that had everything to do with environmental benefits.

At Chart, Wikstrom says, “the driver in CO2 was that we felt there were environmental trends coming that would favor the use of CO2 over energy intensive water-based cleaning or hazardous solvents.” The U.S. Environmental Protection Agency and various states were already moving to restrict the use of the solvent trichloroethylene and a similar substance, perchlorethylene. “Perc” is a recognized carcinogen still widely used in dry cleaning, but scheduled for partial phase out and emissions clean-up by 2020.

Tom Niemiec, who hold warrants in Cool Clean Technologies and is senior managing director at Oak Ridge Financial, says, “The potential in dry cleaning seemed very large,” but the recession and a widespread credit crunch dried up the market of dry cleaners who could afford to buy Cool Clean’s $150,000 machine. “There still is much promise in that field,” Niemiec says, “but the timing is radically different than what we’d seen.”

Wikstrom says there’s greater interest now in environmentally beneficial technologies, although his company still doesn’t use the environment as its primary selling point. Today, if he were looking to provide his investors with an exit—and there are no immediate plans for that, he makes clear—there’d be plenty of strategic-buyer possibilities. “Or a clean-tech private equity group. Everything we do is clean tech, and there’s a hundred private equity groups now that are doing different stages and sizes of companies like ours.” The job at hand for Cool Clean Technologies, however, is to reach projected revenues of about $10 million this year, and build on two profitable quarters at the end of 2010. There’ve been a few of those since the company was formed in 2001, but not a full year of profitability yet.

 

Nimble, Not Fickle

Being in business to make money from CO2-related IP, rather than from a specific application of CO2, produces a certain strategic mindset.

Wikstrom says a company with a single patent or application can go after one market and “get really deep, but you’re going to live and die by it, right?” He’s always aiming to go just deep enough, maybe engaging in manufacturing and sales as part of early product and market development, but then finding partners to hand that work off to, or translating a proven technology to a new application.

 

Cool Clean acquired more patents in 2001 from North Carolina–based Micell Technologies, and more still in 2005 from Raytheon (which had acquired Hughes Aircraft in 1997) and from California-based DeFlex Corporation, founded by former Hughes engineer David Jackson.

That year is also when Cool Clean gained Jackson’s services as CTO and those of longtime Hughes/Raytheon engineer Nelson Sorbo as vice president. Cool Clean now has 25 employees—about half of them engineers—15 in Eagan, and 10, including Jackson and Sorbo, in California. The company routinely culls its patents and has let some lapse, but its engineers have generated roughly 20 new ones. All 80-some patents in its portfolio have to do with pressurizing, depressurizing, or purifying CO2 and using it—sometimes combined with oils, other gases, or microwaves—in industrial processes.

“With a broader base of IP comes potentially more distraction or more decisions that have to be made, in terms of which applications do you pursue and when and how—you know, what’s the best business model?” Wikstrom says. “We spend a lot of time between the inventors and customers—especially the early, innovative customers—and the business model saying, ‘Now what’s the best way to monetize this product?’”

Being nimble enough to move on to the next thing is essential, but “at the same time, we have to have the discipline to finish, to take a product to the point where it’s making money consistently,” he adds. “It’s a constant battle of where to allocate resource.”

Dry cleaning became a space to pull back from in favor of precision cleaning, where Cool Clean now has Hitachi, Samsung, Fujitsu, Western Digital, and other major hard disk drive manufacturers as customers.

Cool Clean’s Solvair dry cleaning equipment is assembled mainly in India or Taiwan, with final integration and testing done in Eagan. At $150,000, it costs about twice what a standard perchlorethylene-based machine does. But Cool Clean says Solvair lowers a dry cleaner’s operating costs and can pay for itself in one to four years, depending on how the retailer chooses to use it and what state the business is in. Still, only about 20 Solvairs have been sold worldwide, almost none since the recession hit two and a half years ago.

Cool Clean turned sales and distribution for the Solvair over to R. R. Street Company of Illinois, a major supplier to the dry cleaning industry. Beginning in 2008, it shifted its own resources into marketing and selling the CleanFlex composite spray system for precision cleaning, which it had introduced a couple years earlier. Wikstrom says the payback for buyers of the $1,000,000 or less CleanFlex comes after just six months. And unlike the dry-cleaning market, which is made up largely of mom-and-pops, precision cleaning has bigger players who’ve had the wherewithall to continue making capital expenditures.

By last year, 60 percent of Cool Clean’s annual revenues came from selling CleanFlex precision cleaning equipment in the aerospace, medical device, and disk drive industries. While trying not to steal resources and momentum from that success, Cool Clean has worked at translating it to the machining industry.

“We were able to do that pretty quickly,” Wikstrom says. “The technology is very close in terms of the science and even the embodiment of the product, except there are major differences in . . . how we purify the CO2 and so forth.”

“Now we’re at the point where we’ve had some pretty good commercial success,” he adds, “and we’re saying, ‘Okay, do we crank this up with an internal sales force, or do we jump in with the major distribution companies in the business?’ And on that one, we’re leaning the second way.”

 

Who’s the Competition?

Cool Clean’s major competition in its target markets is not other CO2 technologies, according to Wikstrom, but traditional methods that are wet, dirty, toxic, or energy intensive.

In dry cleaning, it’s toxic perc. In extracting oil from algae, it’s a toxic and explosive solvent called hexane. In precision cleaning of hard disk drives, Cool Clean’s CleanFlex system, four robotically controlled nozzles that emit a spray of microscopic dry ice particles, usually replaces a process that relies on superclean, de-ionized water and carries a high energy cost. In cooling machine tools, the standard is to flood the work area with a mixture of oil and water that becomes a smelly disposal headache. Cool Clean says it can take that headache away, and compared with conventional cooling methods, it can extend the life of expensive machine tools and allow them to run longer and faster, creating a more productive shop floor.

Cool Clean does have to compete with newer technologies, however. Liquid CO2 dry cleaning machines are made in Sweden and China. An Ontario company called ATS Eco-Snow Systems markets a dry ice–spray application that competes with the CleanFlex system in some precision-cleaning markets, though not yet in hard disk drives. There are also ultrasonic systems for precision cleaning from Crest Ultrasonics in New Jersey and Branson Ultrasonics in Connecticut. And industrial-gas giants Praxair and Air Products both have developed CO2 cooling processes for use in machining.

“We haven’t really seen them out there selling, though,” Wikstrom says.

 

The Competition Is Us

Meanwhile, Cool Clean Technologies has to guard against becoming its own competition, which can happen in a couple of ways.

When it acquired Micell Technologies in 2001, Micell owned a franchise dry cleaning business called Hangers Cleaners that had perhaps a dozen franchises and 50 to 60 stores across the country. Cool Clean wanted to sell dry cleaning equipment to the entire dry cleaning industry. It didn’t make sense to stay in the franchise business and compete against its own customers. So Cool Clean licensed all rights to the franchise operation to industrial gas supplier Linde AG. Linde has been rolling out a rebranded franchise operation called Fred Butler Cleaners and adding dozens of stores in Europe.

“That’s a case where monetizing some intellectual property meant that we licensed the whole business concept,” Wikstrom says.

A more subtle form of self-competition is this: As Cool Clean moves from one technology or industry to the next in order to extract value from its IP, it risks the perception that it’s a jack-of-all-trades and a master of none.

“That has been an issue,” Wikstrom acknowledges, and so has the relative novelty of Cool Clean’s technologies. “This is a chicken-and-egg deal, where, as the technology–early commercial company, we have to get out and do some sales at the end-user level to optimize the product and to attract the major sales and marketing companies in that industry.”

Government grants are one way the company works at building its experience and reputation. In the biofuels and machining fields, Cool Clean is doing R&D work under grants from the Department of Energy and the National Science Foundation.

“We’re able to publish data and reports, and that opens doors at big companies like Boeing or Lockheed Martin,” Wikstrom says. “That gives us a lot of credibility a lot faster to attract the companies that we’re looking to attract to partner with.” Under one current grant, for instance, Cool Clean is working with Boeing, Sikorsky, General Atomics, and other aerospace companies on a new ChilAire-like machining application for use when high-tech composite materials are combined with extremely hard metals like titanium.

Cool Clean does appear to be gaining traction, particularly in precision cleaning. A spokesperson for hard disk drive maker Western Digital, who asked not to be named, says his company evaluated at least four other CO2-based cleaning applications before choosing Cool Clean’s. Cool Clean’s technology is years ahead of the competition’s, he says.

But Gary Rodak, founder of the Michigan-based consulting firm Machining Efficiencies, Inc., says there are still hurdles in his industry. Rodak has done work on behalf of Cool Clean Technologies and has recommended the company’s Chil-Aire process to fabricators. He says Chil-Aire’s toughest competition comes not from other CO2 technologies but from a process called “minimum quantity lubrication,” which uses methods more familiar to machinists and achieves some of the same benefits that carbon dioxide has over water-and-oil cooling.

Sometimes companies think they know what CO2 can do, but what they have in mind is an earlier, less-effective generation of technologies, according to Jackson. “Dry ice snow” used for precision cleaning in years past caused the surrounding atmosphere to form rain and left surfaces wet and contaminated. Cool Clean Technologies has had to work at differentiating its composite spray of carbon dioxide ice particles and other gases that leaves cleaned surfaces dry and uncontaminated, he says.

The name says what the company delivers, Wikstrom points. But sometimes customers that use and like Cool Clean Technologies regard it as a competitive advantage and don’t want to talk about it. Just like Western Digital, General Atomics spoke positively about Cool Clean, but didn’t want to give details about how it’s using carbon dioxide technologies.

“In a way,” Wikstrom says, “we’d welcome more competitors, just to help get the word out.”

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