Element 1 Corp. Tech Start-Up Changing the World by Way of Bend

What are the industries here in Central Oregon that drive our economy? Healthcare is 18 percent according to Jim Lussier, the former CEO of St. Charles. Real estate is 12 percent, according to Mike Hollern, CEO of Brooks Resources. That’s 30 percent, so what defines the rest of our economy? It can’t be all beer and tourism. I believe a large and growing sector to our economy is technology, research and development. Bend Research employs over 300 and is a think tank and incubator for young scientific minds. One of those minds that came out of Bend Research was an engineer, David Edlund who is one of the partners at Element 1 Corp., a technology company that has created hydrogen generators for fuel cells and other power intensive applications. These are smart guys who saw the world changing and created an adaptive technology to meet the needs of the new world.

CBN: What is Element 1? Edlund: Element 1 is a technology company focused on hydrogen generators; devices that make hydrogen from available fuels like alcohol and water or natural gas and water. When I say we are a technology company what I don’t want to imply is that we are a technology development company first and foremost, that is really secondary. We have a technology that we sell in a complete business model of sales and marketing as opposed to a technology company that generates revenue by doing research and development. You can run a company and make a very good living by getting government funding for research and development or have private companies pay for research and development. For me I find it dissatisfying. As a tech development company ultimately you are selling reports. I want to see technology go into something people will buy. What I love is using technology to solve a problem.

CBN: How did you begin your career? Edlund: About 20 years ago I started learning about hydrogen and how it relates to fuel cells. I graduated from the University of Oregon and went to work at Bend Research. It was at Bend Research where I started to learn about separations technology, how to separate one compound from another. In the late ‘80s and early ‘90s Bend Research was a foremost leader in that form of study. At that time I learned how to separate hydrogen from other gases. In learning what hydrogen was used for I learned about fuel cells. That introduced me to the problem in the fuel cell industry of how to create hydrogen to generate electricity. You cannot find pure hydrogen on earth because it floats away. Literally, it’s lighter than air. You have to make it and store it. Hydrogen is used in everything from refining petroleum to making pharmaceuticals as well as operating fuel cells. My career has been defined by “how do you make hydrogen and make it in a practical device that produces pure hydrogen.”

CBN: Who are your clients? Edlund: Our clients are primarily fuel cell companies. Fuel cells make electricity from hydrogen and oxygen. These companies need hydrogen and our company makes a device that generates the hydrogen. The option is to buy cylinders of hydrogen which are heavy and difficult to handle. It’s not practical in most cases. Our customers mostly target back-up power for cellular usage. When power is lost all communications are lost including emergency response team’s communications. All cell towers around the world have back-up power and usually by means of battery power but the longevity of battery power is not sufficient. The only alternatives are fuel cells or generators which are dirty and noisy.

CBN: Where is the highest demand for your product? Edlund: Demand has been growing worldwide over the last 3-4 years but the greatest demand is in Asia. They have a greater need for back-up power. In North America we have seen a government initiated requirement for long term back-up power. It was a result of hurricane Katrina. The FCC created the “Katrina Mandate” requiring cell communications companies to have back-up power in excess of 48 hours.

CBN: How long can fuel cells keep power operational? Edlund: Fuel cells will continue to make electricity as long as you supply hydrogen and air to the fuel cell. Our hydrogen generator will supply hydrogen and therefore power for weeks!

CBN: When did Element 1 begin and what is your business model? Edlund: In May 2010 my partner, Robert Schluter, and I started the business and now we are up to a full time staff of five. Currently all parts are manufactured in North America and final assembly is here. Our goal is to completely out-source manufacturing to Asia. We have prioritized that because most of our customer demand is in Asia. We want our first contract manufacturer in that part of the world.

CBN: How did the economy affect you? Edlund: It’s hard to say. We don’t have a reference point since we began the company during the decline. The economy wasn’t a positive factor in terms of obtaining equity investment. We recently received some equity investment that may have been easier to get if the economy had not been in decline.

CBN: How did you get financing? Edlund: We self financed initially. We started the company with a 50/50 partnership between Robert Schluter and me. At that point the pie was pretty darn small. After seven months, we had equity investment from a company in Taiwan. We then owned less of a bigger pie. Along the way we brought in other investors and continue to. We have also sold a manufacturing license to our design creating revenue. The total amount that we have sold is less than 50 percent but now the pie is much larger. We will have to sell more to secure the growth of the company. We need funding to expand our sales and marketing team, for filing patents, and financing inventory and receivables. Every time we have sold equity the value of the company raises.

CBN: Are you profitable? Edlund: We are not profitable yet as a company. We do sell our products at a profitable margin. CBN: What is the growth potential for your product and your industry? Edlund: As a manufacturer of hydrogen generators we have enormous potential. It would be hard to overestimate the growth potential. It goes beyond fuel cells into metal production, oil processing, artificial gemstone production even water purification. There is a process that uses microbes to remove nitrates from drinking water. That process requires hydrogen. The world needs water and nitrate contamination is very common.

CBN: What has been the company’s greatest challenge? Edlund: Survival! Certainly the financial, start-ups need money. When you are two guys starting a company it’s hard, it’s really tough. I think that was our biggest challenge. It feels like we are breaking through that.

CBN: What advice would you give to others managing a growing company? Edlund: Focus. We made a decision at the very beginning not to do everything. We passed on everything that may have been a distraction even if it might create a temporary stream of income. Our primary focus was on what we were doing in terms of human and financial capitol. That required we form a lot of partnerships. Don’t give up. You have to persevere. Things won’t go your way all the time; you won’t get all the deals or all the customers. You will have set backs. Never give up, there is always another option. Figure out the options.

CBN: What are your thoughts in terms of Central Oregon? Edlund: Central Oregon has been business friendly to us. EDCO has been extremely supportive. We owe them a lot of thanks. We want to create good jobs in Central Oregon and our business plan includes hiring 20-30 additional people over the next three years. The biggest thing for us as a community is the four-year college. When that happens this community is going to explode with tech and everything else that goes with it. That is going to be the turning point for businesses in Central Oregon.

I agree. Central Oregon has the potential to be a think tank of powerful young minds from all fields of study. The OSU- Cascades will supply a platform for intellectual and business development. It’s been some tough years for all of us. It’s time to get out of the mind-set of surviving and back into a mind set of thriving. If every small business in this town hired one person, just one person, the economy would change markedly. Elizabeth Ueland, Broker with Bend Premier Real Estate

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