CINCINNATI - Founder doesn’t mean forever.
Adam Malofsky learned that lesson in March when the board at his five-year-old startup, Sirrus, eliminated his management position as part of a broader restructuring initiative aimed at turning the company into a billion-dollar player in the global specialty chemicals industry.
Formerly known as Bioformix Inc., Sirrus is a Loveland-based company that makes chemical compounds that could improve the performance of adhesives, sealants, ink and industrial coatings. Malofsky and his father, Bernard Malofsky, developed the technology and spent five years raising capital to build a company around the idea.
But their strategy shifted in December, when the company’s board of investors and advisors installed a new management team that reduced staffing by 25 percent. The new leaders repositioned Sirrus as a research and development shop seeking industrial partners to move its products into the marketplace.
“The old business model had us going head to head with Dow Chemical,” said Jeff Uhrig, who replaced Malofsky as CEO in December. “We just couldn’t develop the technical support to deliver these products in the market.”
Uhrig is a Cincinnati-raised engineer with an MBA from the Kellogg School of Management at Northwestern University. His 15-year business career includes investment-banking experience with Piper Jaffray and management experience at a specialty chemicals company, Elevance Renewable Sciences Inc. in Woodridge, Ill. He joined Sirrus last August and was promoted to CEO in December.
At the same time, the company said Adam Malofsky would be chief innovation officer and Kousay Said, a former Dow Chemical executive, was promoted to chief commercial officer. Uhrig said the board later resolved to reduce spending that wasn’t compatible with the new partnership strategy. The elder Malofsky remains the company’s chief technology officer, while Adam remains on the board. The founders still own about 10 percent of the company, Uhrig said.
In an email to WCPO, Adam Malofsky said he has “every confidence” in the new management team and stands ready to help in any way he can.
“Sirrus is likely going to be my life’s greatest creation and accomplishment but by no means was its creation a solo effort,” he said.
Uhrig said the former CEO “had an employment agreement that the company has agreed to fulfill.” Uhrig doesn’t expect any “long-term ill effects” from the management realignment.
“Bernie is our heritage,” Uhrig said. “His entrepreneurial spirit as well as Adam’s is what drives us to be successful. I know Adam and Bernie are supporters of this new vision.”
And it is quite a vision.
Uhrig believes he can build a $1 billion enterprise from a pair of tiny molecules that could make it easier and cheaper to paint cars, seal wood, splice together optical fibers and coat the inside of a can of corn. Uhrig says the company has developed a new class of monomers - known by the trade names Chemilian and Forza – that can be manufactured in large quantities without losing their stability and bind with other molecules without the use of heat, light or chemical solvents.
“We really want to be an enabler of advanced manufacturing through the use of our chemistry,” Uhrig said. Automakers, for example, “use significant amounts of energy to cure paint in their production facilities. Our technology allows these automakers to paint a car without any energy use. That dramatically reduces the energy consumed. But more importantly … we can drastically reduce the amount of capital spent to install ovens or other capital equipment used in the curing process.”
Sirrus is talking to automakers and coatings manufacturers about formulating its monomers into new products that would be distributed by those new business partners. Similar partnership discussions are underway in the other industries, including construction, electronics and food and beverage.
Those arrangements will save Sirrus money on the front end, as it avoids regulatory expenses, product development and technical support costs. But it will also produce lower revenue and profits on the back end as Sirrus splits sales proceeds with partners. If the strategy works, however, it could put Sirrus innovations into lots of new products in the next five to 10 years.
Uhrig is cagey about how much revenue the company will generate in the near term, but over 10 years, he thinks it will be possible to hit $1 billion.
“This monomer platform will exceed a billion dollars in revenue,” Uhrig said. “Our management objective is to obtain the largest share of that as possible.”
The company recently got a vote of confidence in its new strategy when it raised $7.35 million in its fifth round of capital investments, bringing its total amount raised to $30 million. The latest investments came from Arsenal Venture Partners and Braemar Energy Ventures II LP, according to the MoneyTree report , a quarterly venture capital summary published by PricewaterhouseCoopers and the National Venture
Capital Association. Arsenal and Braemar are venture capital firms with representatives on the Sirrus board.
Another investor is CincyTech USA, a public-private investor of seed-stage financing that participated in two financing rounds for Bioformix in 2010 and 2012.
“They have strong technology and a strong management team. They have a clear strategy and they’re executing that strategy,” said Bob Coy, CincyTech president and CEO.
Uhrig said Sirrus is seeking four new hires for research and development roles. He expects the company will raise additional capital for a manufacturing facility and increase employment by more than 20 in the next two years.
An initial public offering or company sale is possible in the next five years, but Uhrig thinks the company could easily remain in Cincinnati for the long-term.
“We love this city,” Uhrig said. “We think it’s an incredible opportunity for this company just given the breadth of resources that are in this area. Most people don’t know it but behind agriculture, chemicals and polymers is the second-largest industry in Ohio. So, yes it’s our full intent to stay here.”
As for the founder, Adam Malofsky is now looking for the next big thing. His Linked In profile says Malofsky is “immediately available” after leaving Sirrus in March.
“I am a creator,” he said. “It’s time to create more magnificence with my friends and colleagues.”