We talked to Rob Toker of Lantha Sensors on how the firm is revolutionizing dozens of industries dependent on quantitative chemical data.
First of all, how are you and your family doing in these COVID-19 times?
Rob Toker: Everyone is doing okay, a bit stressed; our children’s school and social world is like everyone else’s, It’s in a very unusual moment. We’ve tried to take the opportunity to explore some new challenges and broaden our worldview and interests. It’s been a quieter, slower period in our family life – we’ve never overscheduled our kids, but this slowing was at another level. With our teenagers, we’ve fought through the setting aside of the video games on a daily basis and tried to find other outlets. Notably, our eldest has taken up a remote internship, with all its remote work challenges, which probably wouldn’t have happened in our normal, pre-COVID routine.
Tell us about you, your career, how you founded Lantha Sensors.
Rob Toker: I’ve been an entrepreneur and investor for more than 25 years now. To use a baseball metaphor, my style is to take some hard swings, but be smart about it and try to really see the ball — I’ve hit some long drives, bunt singles, and I’ve also missed the ball completely. I know it’s a cliché, but you do learn more when you swing and miss. But it’s also important not to overlearn lessons of the miss. I think overlearning lessons are all too common. Some folks take a shot at startups; for most, it doesn’t go well, and they take the wrong lessons away from experience. In some instances, they simply say to themselves, “I’ll never do that again,” and their startup quest is over – which is a real shame.
Over the years, I’ve been on both sides of the table, and at this point, I know what a good pitch and opportunity look like. I’ve analyzed at least 5,000 business plans across a range of industries, from software to BioMed to a host of companies across the energy complex from cleantech to oil and gas; most have had some type of fatal flaw that was evident early. Though many seemingly crazy concepts became prescient/transformative, these are the hardest opportunities to discerning. Highest order entrepreneurship is a business of exceptionalism; seeing what others don’t, casting aside doubt and critics, believing a different, and perhaps, better future could emerge. As they say, the surest way to predict the future is to create it.
Beyond technology, I’ve also done asset investments and development. I’ve developed several large energy and chemical projects going from concept to FID and COD with installed costs in the hundreds of millions.
I learned about the PCM advanced material technology coming out of Simon Humphrey’s lab at UT in mid-2019. It took me but a few days to digest and conclude that the raw material for a venture fundable company that could experience explosive growth was present. My analysis was straight forward: Simon could be a good partner, there was a potential to address real customer pain points, the presence of deep, differentiated, extensible core technology, viable near-term commercial drivers with large addressable markets, moderate technology and execution risks, moderate capital requirements, the potential for strong near-term revenue and high margins – all checked the boxes. For the moment, we have a blue ocean opportunity — no one is doing what we are doing how we contemplated doing it. Of course, that will change — first-mover advantage only goes so far; we have to go fast. We marshaled resources around the opportunity quickly — we’ve got great co-founders (Simon as well as Stoney Barton, Nick Barnard, and Ted Pettijohn), we’ve attracted a world-class team, secured smart outside investors (especially the GOOSE Capital Group Houston who we’ve known for 15 years), and a host of other allies that will help us along the way. To make Lantha Sensors a success, we need to know a lot about a lot of things — it is the proverbial team sport, and our team is tops.
How does Lantha Sensors innovate?
Rob Toker: Whenever we’re considering spending time, attention, and resources – we always first consider the end game. What does success look like? For a business, our business, like all others – will a customer write a check at a fair price in the not-too-distant future? Sounds easy but discerning the merits of early-stage concepts is hard. We have a very simple framework of “real/win/worth-it” — is the technology real, or is it BS? is there some gap, or does magic have to happen? We have some long-shot ideas, but we spend the most effort on what we view as real and actionable. When we do productize the technology, can we displace incumbent competitors and technologies? Can we use our technology advantage as a lever to pry open markets? And last, is it worth it? This is a question of box economics; what is the margin, can we sustain margin, can we extend and deepen our advantage, and do so on a risk-adjusted basis? Is it worth it for founders, management, and investors? All easy to talk about, but hard to do.
Our business started with one enormous advantage – technology. We attracted capital, and our capital base is growing, and quickly we will achieve some level of scale – that is, the trifecta: technology, capital, and scale – those elements will allow us to innovate faster and better.
The last category I’ll mention at this point is balancing order and chaos. Creativity thrives in loose, even chaotic environments. The seed can come to be in chaos, but it can’t take root without some structure and order around it. There needs to be balanced — in many ways, that is the purpose of balanced teams with critical thinkers and respectful questioners of assumptions. Large companies typically err toward too much order, too much process; they lose their risk appetite – this is the well-documented “Innovators Dilemma.”
At their worst, legacy businesses are slow and cumbersome and can’t pivot, which means they rarely innovate and just maximize on their legacy, cash cow technologies – like Karl Fischer titration (KFT) that hasn’t really evolved in 85 years (we aim to displace KFT in many use cases). As noted earlier, we are constantly identifying key gaps in markets and designing solutions to address those needs (portability, ease of use, quick results, no hazardous waste stream, etc.…) – and to do this well, it comes back to having the right team that understands not only the technology you are bringing to market, but also the overall business environment. We also seek out opportunities where there is latent demand; in other words, customers don’t know what they want until they see it – it’s like magic. Focus groups fail in this world, for there is a failure of imagination. People did not know they needed an iPhone until Apple showed them one. There are many examples of this type of innovation – though they are the rarest and riskiest.
Going back two generations, we see parallels with our company and the instant Polaroid camera reducing the complex chemistry of darkroom machinations into the palm of your hand. In the 1940s, the animating ideas were a bit crazy, but the personalities involved were realists and driven by data; they made the previously impossible possible. Fast forward to the 1980s, Polaroid, fat and happy, it had a chance to bring to market early digital photography and had a full range of cutting edge inventions, including presentation projectors, but because of a range of factors (including risk aversion, careerists, short-termism, etc.…), they were not able to turn invention to innovation and wealth creation. They went bust slowly, a cautionary tale. The great innovators of our time, such as Bezos, Gates, Jobs, and the Google team, are all too aware of this history.
How did the coronavirus pandemic affect your business, and how are you coping?
Rob Toker: It has certainly impacted our forward momentum, but we quickly rallied to determine the best go-forward approach that still gives us a first-to-market advantage. That said, most notably, the biggest impact has been the supply chain delays at the beginning of shutdown and buyers pushing purchasing decisions out due to overall economic instability.
We focused on building resilience in our strategies, and one of the best of those strategies specific to the pandemic was not being single-threaded through a single vendor, market, or customer type.
Health and safety remain a paramount priority. We are a small team, and if someone gets sick, there is no slack to pick up the loss, so common-sense precautions are critical. Just like wider society, we not only have rights but individual responsibilities, and we are accountable to each other for our common good.
Did you have to make difficult choices, and what are the lessons learned?
Rob Toker: As with any economic slowdown, difficult decisions must always be made. We had to choose to slow down operations and R & D activities, especially in the pandemic’s early stages, when a lot was still unknown about the virus. Subsequently, we have been able to ramp back up quickly, and overall, we haven’t lost much of our timetable. On a positive note, when labs return to a more normalized work schedule, cost considerations for those labs will be paramount on the minds of lab managers and business executives, putting us in a perfect position to provide the best immediate cost-cutting solution. Better, faster, and cheaper is never out of style, but they become even more desirable in a resource-constrained world.
There have been some major lessons learned from this set of experiences. Trying economic times show us that customer needs shift and change, and a company must be nimble and able to change strategies just as quickly. Although there are many things you can control when leading a startup to the commercial stage, there are always other things you cannot control — so always build a time and money buffer (but remain aggressive with a focus on target goals). Even during the good times, constantly revisit risk mitigation strategies and always remember that people (the right team) are the ones taking tech to the next level, despite the hardships. Build a driven and cohesive team – and keep them safe and happy.
How do you deal with stress and anxiety? How do you project yourself and Lantha Sensors in the future?
Rob Toker: Stress and anxiety come from all aspects of life, not just the professional realm. Another word for stress is fear. How do you control fear? See it for what it is; inspect it, don’t ignore it, but don’t marinade it either. Importantly, you cannot think nor plan your way out of fear. You have to act – action combats stress/fear. You can only control what you can control, and sometimes that is just your own thoughts and expectations about a given set of circumstances. I pray for guidance and keep the faith and trust in our shared hope to build a future that is truer, more just, peaceful, beautiful, and loving.
Sometimes actions are stymied, and one must wait for something or another. We must be patient; during these times, fears and stresses can build. – even during those frustrating days, we must muster just a little progress because progress equals happiness.
I fully believe that in the next few years, Lantha Sensors will be a top leading portable chemical analysis company and viewed as a true trusted advisor in a multitude of verticals. In short, we anticipate success at the highest levels. I think for certain use cases, Lantha’s solutions have the potential to be market dominant. Business, as in life, looking too far ahead can lead to anxiety – we look up periodically but spend most of our effort in the here and now, getting it done every day.
Who are your competitors? And how do you plan to stay in the game?
Rob Toker: Because our technology is a real revolution in technological terms (literally never existed before), we don’t yet have any direct competitors. That said, we have a good number of indirect competitors from the legacy technology market, most notably the large manufacturers of chemical analysis equipment for determining moisture content in organic mixtures, the sulfur content in fuel streams, and isotopic purity isotopically enriched mixtures.
Right now, the large manufacturers have a stranglehold on the market, but that will quickly change when companies learn of the extreme competitive advantages our technologies offer.
Your final thoughts?
Rob Toker: We are on the cusp of launching products with several large companies that will highlight the fact that our solutions offer a significant competitive advantage for our customers. It is significantly less expensive with respect to installed and lifecycle costs. It’s extremely easy to operate, it’s hyper-portable (handheld), and can be used easily both in the lab and in the field. A solid innovation might solve one or two industry problems, but it is rare indeed that an advancement solves so many industry problems with one solution – we truly have one of the disruptive technologies that both business and tech professors will be discussing in 40 years.
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