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SPIE Professional January 2007

Light Touch

Clear goals and a firm sense of purpose resulted in a new approach to alcohol testing — and a new optics company.

By Jim J. McNally

graphic for SPIE Professional articleThe decision to form TruTouch Technologies Inc. evolved over a period of many months, although the motivations and skills required to successfully launch a company were honed over many decades.
The motivation to start the company was rooted in a personal commitment to affect a major public safety issue, namely alcohol abuse. Through the commercialization of disruptive technology, TruTouch has the potential to effect significant social good across a broad swath of our society.
I believe that identifying your true motivation from the start is the key to launching a successful company, as the ultimate success of the enterprise will be derived not only from your commitment, your drive, and your leadership but also from the core mission that set you on this path.
TruTouch's Technology
TruTouch has developed a noninvasive alcohol measurement device with an inherent biometric identity verification capability. Our disruptive technology is based on near-infrared (NIR) spectroscopy using a broadband light source, a fiber-based optical probe, a Fourier transform IR interferometer, and multivariate analysis techniques. TruTouch's noninvasive product is accurate, requires no bodily fluids (no blood, breath, urine), eliminates the handling of disposables, and permits unsupervised testing.

Our product marks the beginning of the shift away from today's testing practices to touch-based alcohol testing as its simplicity and accuracy eliminates the known deficiencies of the existing invasive test methods. TruTouch's technology will be used to develop a family of products that will permit practical, cost-effective alcohol testing in the office, factory, vehicle, and all law enforcement venues.

The Three Ps
Although each new venture has unique aspects and circumstances surrounding its start, there are core principles, The Three Ps, that can found be found at the heart of any start-up.
First, there must be passion. The entrepreneur must have a passion for creating new products that solve market needs, for creating jobs, for fostering economic opportunity, and for building teams. There must be passion and a contagious personal commitment to the core mission that drove the creation of the business in the first place.
Second, the company must be built on a foundation of solid planning. The entrepreneur, particularly technically oriented entrepreneurs, must ensure that strong market research underlies the business model. Based on this initial market planning, one must generate a funding strategy to ensure sufficient resources are available to develop the product and penetrate first markets. Next, the entrepreneur must develop and execute a plan to build the best team possible. New ventures face enough challenges?trying to build a successful, lasting enterprise without the right team is impossible. A final key planning activity that cannot be overlooked is a strategy to develop and protect the company's intellectual property.
Third, one must persevere. No matter how much passion and planning the entrepreneur brings to the new venture, there will be unanticipated roadblocks. It is well documented, and many recent examples support, that market forecasts for disruptive products are rarely correct. Not getting discouraged by the many "turndowns" from potential venture capital investors or other funding sources is essential. Use this process to improve your business model and to hone your message. All entrepreneurs will face market setbacks, changing industry dynamics, and macroeconomic forces beyond your control?relentless perseverance through rough times distinguishes the successful ventures.
The most important time for perseverance is during periods of self-doubt (many entrepreneurs might argue that these seem to be an everyday occurrence). In these times of self-doubt a compelling and meaningful core mission is needed to motivate the perseverance that will continue to drive the venture forward.
Birth of TruTouch
TruTouch is a spinout company that leverages investments in noninvasive technology developments for medical diagnostics. Our products are derived from tens of millions of dollars in noninvasive measurement technology developments including highly refined instrumentation, methods, and algorithms for noninvasive analyte measurements, including alcohol. Before starting the venture, we knew that the technology not only worked, but that it worked well, based on numerous human alcohol dosing studies (including ones sponsored by the National Institutes of Health).
But that wasn't enough. We needed to "find the pain" and validate that a market for TruTouch's products really existed. It was critical that we could articulate the key differentiating features and benefits to potential customers before we launched the company. Once we had done the proper planning, and convinced ourselves we had a market matched with a mission, we were ready to launch the company.
During the months of evaluation and planning, we uncovered several compelling facts that supported the creation of TruTouch. First, there are existing alcohol testing markets large enough to generate strong returns for our investors that justified investment in TruTouch. In addition, as with most disruptive products, there are additional, under-penetrated markets of significant size that TruTouch could break into with our technological capabilities. Second, we developed a strong compelling vision for the company, as alcohol abuse kills and injures hundreds of thousands of people each year in the workplace and on our roads.
Third, as mentioned earlier, the technology was solid and had been demonstrated in working prototypes. Fourth, TruTouch had a very strong base of intellectual property?in people, patents, licenses, and trade secrets. Finally and most importantly, we founded the company with a strong core team of dedicated people with a very broad diversity of skills, expertise, and an innovative spirit.
Challenges Met
There were plenty of challenges to be sure! First, we needed to initiate detailed planning (planning and more planning). We needed to find and hire (initially as consultants) expertise in marketing and sales to complete valid market research that would guide our planning and help to develop our go-to-market strategy. Next, based on the market research, a business model was developed and revised (and revised and revised) until it could withstand the scrutiny of potential investors.
After developing a reasonable business plan, we had to focus on the significant challenge of obtaining the funding needed to execute our business plan. We were successful in securing initial seed funding from a corporate source and individuals that enabled TruTouch to continue our product development and detailed business planning in advance of seeking institutional funding. The planning paid off as we were able to gain the confidence of professional investors in our TruTouch vision, our team, and the markets, and subsequently closed on a Series A financing with four venture capital (VC) firms.
Funding Strategy
Primary sources of funding for new business ventures include government grants, corporate development relationships, loans, and investors. TruTouch uses a balanced approach, combining investor capital and government grants. As we are focused on manufacturing and selling noninvasive alcohol testing products, we use caution in our use of government grants, and blend our product development plans consistent with the technology developments defined in the government grants. This way we remain on schedule for the launch of our products.
Our venture funding came from four VC firms after several months of road shows and diligence. The "diligence" was two-way as we were looking for not only a good financial deal, but also clear value from the investors beyond the investment money. I wanted from investors an alignment with and a passion for our vision, strong networks, strategic operational experience, and a mutual confidence in each other. These are characteristics that make for a successful relationship, and add true value to the investment. Obtaining this financing was a commitment to both our investors and our team as the "win" for everyone is in executing our plan and getting to sales.
Beyond financial capital, however, I hold intellectual capital and human capital as essential to the formation and success of a sustainable business. Critical to the success of any technology company is its intellectual capital. The patent estate that enables the business to produce and sell products as well as protect its technology must be strong. The proprietary aspects of trade secrets and know-how must be just as strong.
Yet, the sine qua non to the formation, the development, and the sustainment of a business is its human capital. Without a team of really good people there can be no sustained success. The team must be defined by its diversity?cloning not allowed?to create the "dynamic tension" required to develop truly innovative product breakthroughs. However, a collective goal, the desire to win, and a commitment to personal and professional ethics are the common elements required to bond a diverse group of individuals into a strong, functional team. Our team believes in the vision that improved testing technologies can reduce the devastating impacts and costs of alcohol abuse on society.
Motivation
"Why?" is a question often asked of the entrepreneur and one that isn't always easily answered. I do not consider myself an extreme risk taker (a characteristic often wrongly assigned to entrepreneurs). Rather, I am skilled at identifying and managing risks. New ventures face too many risks to list and as the venture grows and expands, the number of stakeholders increases and their incentives evolve. The entrepreneur has the responsibility to manage and maximize the risk-adjusted value of the enterprise for all of the stakeholders.
The other side of the risk/reward paradigm are the many benefits of being a successful entrepreneur. The obvious one is financial; yes, self-interest is a necessary part of our capitalist system. However, the ones that sustain me on a daily basis and enable me to persevere over many years are less tangible. Most important is the potential to effect a social good. Another is a true sense of satisfaction and accomplishment in achieving the company's goals. Finally is a sense of controlling one's destiny. These are the rewards I find most endearing and motivating.
Keys to Success
As you contemplate forming your own business (or your next one), I'll summarize with some basic reflections. Ensure that you have real markets seeking better solutions or technologies (and not a solution or cool technology seeking a market). Ensure that you have true passion for building a business. Be prepared to plan, re-plan, and plan again innumerable details about the markets and your operations. Persevere through all of the rejections from potential investors and customers as you drive to achieve your company vision. Most importantly, create a compelling mission for your company that will pull you through the hard times that unavoidably lie ahead.

Learning Experiences
One of my most interesting early entrepreneurial experiences was as program manager for the development of a 4-m optical telescope on Haleakala in Maui, HI. The program had been stagnant for three years when I became the program manager?a classic "turnaround" situation. The telescope was a one-of-a-kind congressional interest program with high visibility in the Air Force. The training I had received over many years in the Air Force prepared me for the challenges.
I started by establishing a clear vision for the project, and then, most importantly, found the right people to "get on the bus" and ensured they were in the right seats. We worked to instill a passion in the team for the project, and applied small unit leadership principles to ensure the essential aspects of the project were delegated to empowered team leaders. As a team we mapped out plans, identified the key risks, aggressively pursued the annual funding, prioritized the decisions we faced, and applied our resources. I followed a disciplined methodology of regular reviews of progress, adapted to changes, and focused on execution.
In the end we achieved our shared vision of building the Defense Department's largest ground-based optical telescope with the world's most advanced adaptive optics system to meet our customer's requirements.

Jim J. McNally
SPIE member Jim McNally co-founded TruTouch Technologies Inc. (Albuquerque, NM) in January 2005 and is the CEO, president, and chairman of the board.
TruTouch's new noninvasive alcohol measurement device was named one of the Best Inventions of 2006 by Time magazine because of its potential to identify drunk drivers faster and easier than ever before.
McNally has more than 28 years of business experience directing advanced-technology organizations, both start-up companies and large organizations. He received his BEE (summa cum laude) from Manhattan College, his MS from the University of California, and his PhD in optical sciences from the University of New Mexico.
He is chairman of the board for the New Mexico Optics Industry Association, and member of the University of New Mexico's Business and Industry Advisory Cabinet, the SPIE Policy Committee, and the Technology Ventures Corporation Technology Executives Council Advisory Board.

DOI: 10.1117/2.4200701.09

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