This Company Rents Brains to PepsiCo and Others With Thorny Problems
Say your company needs an invention, process or widget but the research guys are out of ideas. Who ya gonna call?
If you're PepsiCo—or, for that matter, Meat and Livestock Australia—the answer is Xinova, a Seattle-based company that essentially rents out brainpower. Xinova has pulled together a network of 10,000 inventors, who have developed a range of products, from flour made from coffee byproducts to a coating that keeps cattle hides from turning into a tangled mess.
Jon McIntyre, who runs research and development for Pepsi's global snacks business, is a customer and believer. He says Xinova's strength largely lies in the diversity of its network; the company's brains for hire range from metallurgists to molecular biologists, home tinkerers to professional scientists. "They are unrivaled in their ability to conceptualize non-obvious solutions," McIntyre says.
Xinova's precursor, the Invention Development Fund, was founded in 2008 by former Microsoft executive Nathan Myhrvold. Its main purpose was to help develop and collect patents for his Intellectual Ventures, which earned a reputation for being a "patent troll" because it bought up intellectual property on the cheap and charged companies to use its IP, suing them if they went ahead without permission. More recently IV has sought to build things on its own, including an ultra-efficient nuclear reactor, waterless washing machine and self-repairing concrete.
In October, IV spun out the Invention Development Fund and renamed it Xinova, a portmanteau of Chinese and Latin words for new (xin and nova). The new fund, which is run by investment banking veteran Thomas Kang, will still collect IP and patents but plans to make money from its inventor network, not lawsuits. Xinova isn't profitable but has about 30 customers and “10s of millions” in revenue, Kang says. The original investors have stuck with the new venture. Now, with Chairman Jorma Ollila (a former Nokia CEO), Kang is looking to add more backers and raise $50 million in new funds. "The exciting part is being able to provide innovation much more efficiently than what you could do otherwise," Kang says.
Clients present their problem, Xinova turns it into a "request for invention" and shares the document online with the network. Xinova picks several of the best ideas and presents them to the client. In many cases, the best solutions come from unexpected places. A Chinese energy company that doesn’t want to be named approached Xinova because its scientists couldn't figure out how to build storage tanks capable of containing a highly corrosive form of gas. The solution came not from a metallurgist or materials scientist but from an audio engineer who pointed out that you can contain a gas inside a sound wave. It worked because the gas never touches the tank wall.
This model may help Xinova get away from some of the tactics that made IV the bane of the industry, says Jeffrey Schox, a patent attorney with his own boutique firm. "It shifts the core competency away from the lawyers and back to the inventors," he says.
Meat and Livestock Australia, an industry group, had an unusual request. It wanted to find a way of preventing so-called dags—deposits composed of dirt, hair and dung—from getting caked on cattle hides. Dags harden to the consistency of concrete, are difficult and painful to remove and raise the likelihood of germs entering the food chain. Xinova asked the network, and an Iraqi-Australian professor of polymer chemistry pitched a cattle version of Scotchgard that's sprayed on the animals and keeps feedlot muck from adhering to their hides.
"Xinova opened new lines of inventions in various fields of industrial applications of material science which I never thought of before," says Georgius Adam, who created the cattle spray and like most Xinova inventors received a cash payment for his concept and will get a piece of future sales of any products made from it. Being part of Xinova's network also takes care of things like patent application expenses and making lab work possible, as well as enabling him to attend company conferences that stimulate new ideas. The cattle spray is one of several projects Xinova has worked on for the Australian group, which has generated enough business that Xinova actually bought a herd of cows for testing purposes.
Xinova has been working with PepsiCo for about two years and has developed hundreds of inventions for the beverage and snacks giant. Neither company would provide details, but in its request for invention PepsiCo said it was looking for ways of detecting the emotions of a snacker to track customer satisfaction and for new snacks that offer multiple textures in a single food and unusual shapes or sounds. The first products are expected to hit the market as soon as this year.
The next step for Xinova is to promote its new name, build scale and cut costs. "I don't think enough people know about us," Kang says. "We need to get ourselves out there. We have to show them why this is good for them."
(A previous version of this story was updated to correct a company name spelling in the second paragraph.)