Developing a new product from conception through to commercialisation can be a long and costly process, as ShieldLiner Ltd managing director John Hassen discovered as he pursued the development of his company’s trenchless pipe lining technology.
Developing a new product from conception through to commercialisation can be a long and costly process, as ShieldLiner Ltd managing director John Hassen discovered as he pursued the development of his company’s trenchless pipe lining technology.
The listed Canning Vale-based company, which started as a two-man operation with one private investor in 2002, has now reached the commercialisation phase for its innovative new product.
The Shieldliner System is designed to line, repair and seal both gravity and pressure pipelines without removing them from their original position, ensuring a lack of surface disruption, lower costs, better sealing and reinforcement and improved performance.
Mr Hassen said raising capital was the toughest challenge the company had faced in developing its product to a commercial-ready phase, relying on a small number of private investors, their own money and “friends and rellies” for funding.
“Fundraising for innovation is really tough,” Mr Hassen told WA Business News. “We’re lucky we had some support in the early days from a couple of groups that believed in what we were doing. But capital is always a problem.”
This challenge of raising capital reached a head at the beginning of 2006, when the company needed to fund a $2.7 million project to raise the product to market-ready standards.
It was then that Mr Hassen applied for, and received, $1.28 million of federal government funding through AusIndustry’s Commercial Ready grants scheme.
Mr Hassen submitted the grant application after the product reached its fourth version, after comprehensive testing had satisfied the makers the product was of a consistently high quality.
“We we’re happy with the end quality, but what we had was something that was not particularly user friendly, it wasn’t something we could really sell,” Mr Hassen said.
“So we had to do a further development program, and that’s what this funding has actually done.”
While the grant covered almost 50 per cent of the capital required for the program, the grant application process proved to be a time-consuming and laborious process, according to Mr Hassen.
“I think the long-term planning and discipline associated with meeting the various requirements probably took us three to four months of actual man-time,” he said.
With previous experience in federal grant application assessments during his time as partner at PriceWaterhouse, Mr Hassen worked on the bulk of the application himself, with the assistance of the project manager for the financial modelling requirements.
This essentially saved him from paying a consultant’s fee, which usually equates to as much as 10 per cent of the grant amount.
“It’s not a simple process. But then again you don’t expect to get government money for nothing,” Mr Hassen said.
Despite the extensive process, however, Mr Hassen applauded the federal government initiative, as well as its research and development tax concessions.
Mr Hassan believes that, while it awaits market take-up of the product, the company is positioned to maintain a steady cash flow over the next 12 months after acquiring specialist trenchless technology contractor Premium Pipe Services Pty Ltd.
ShieldLiner also was appointed the exclusive Australian distributor for a range of pipes and fittings manufactured by Texas-based Fiber Glass Systems LP, in 2006.
Mr Hassen said diversifying the business should result in the company owning two cash-flow positive businesses, alongside the ShieldLiner System business.
“Because those businesses are very complementary [to our core business], I think its critical from our long term funding perspective we have these cash flow businesses,” he said.
