PROVIDENCE, R.I. (AP) — They turned from acquaintances into an unlikely business team senior year at Brown University during a class on entrepreneurship. The political scientist-, chemist- and engineer-in-training were thrown a vexing problem: Figure out how to eliminate the need for the backing on labels used on everything from FedEx packages to prescription bottles.
From fall of 2008 through spring of 2009, they considered all sorts of ways to get rid of the wasted liner and create a non-tacky label that would stick on demand. At one point, they even read up on the clinging power of barnacles.
Each got an A in the class— and the idea for a high-tech startup that was approved for $1.5 million in loan guarantees in August by the board of the Rhode Island Economic Development Corporation.
NuLabel Technologies, run by Max Winograd, Ben Lux and Mike Woods, has grown from an academic project to a 10-employee firm with plans to expand by 39 positions over the next five years. EDC board member Karl Wadensten calls the firm's work potentially "disruptive technology" — the highest compliment one might pay budding entrepreneurs hoping to break into a market worth some $26 billion annually.
State economic development officials believe the company is a promising part of Providence's fledgling Knowledge District, arguably the most critical economic development zone in Rhode Island, which has one of the nation's highest unemployment rates. City and state officials want to transform it from the one-time seat of jewelry manufacturing to a hub of knowledge-based industries like health care, life sciences and technology.
If innovation is the salve for Rhode Island's troubled economy, NuLabel isn't a bad start. What the firm has devised, its founders say, is a way for companies to eliminate the most expensive part of labels, the non-recyclable backing, which would cut costs by about half and reduce tons of environmental waste.
The story of NuLabel started when the three Brown graduates turned down job offers at graduation — well-paying consulting positions in Washington and Boston for Winograd and Lux, and an engineering post in New Jersey for Woods — to instead gamble that they might be the exception to the high failure rate of start-ups.
"When you come out of college, you think the world is your oyster," said Winograd, 24, a political science major from Atlanta who is NuLabel's president and chief fundraiser. "We're like, why not try this? There's no down side, and there's infinite upside."
There were plenty of down sides, of course — including what they call their "starvation phase." It included a lot of Ramen noodles and a little financial help from their parents, who were supportive, but would ask, "Are you sure?"
The three won a coveted spot in the first class of Betaspring, a program in Providence designed to help entrepreneurs turn promising ideas into profitable companies. With it came a small office space, one they soon learned wasn't conducive to mixing chemicals. They worked downtown by day, then on a "night shift" at a house Lux rented with roommates, where they cooked up polymers in the kitchen and basement. They spent so much time together Winograd describes their relationship as a "three-way marriage."
At the end of the 12-week program, they showed off a rough prototype that consisted of a black spray-painted box through which they fed a label that didn't stick to the touch. They had figured out a way — proprietary — to make it come out sticky on the other end, and they demonstrated by affixing the label to a piece of cardboard.
"It was either dramatic or anti-climactic," said Lux, 25.
Either way, the fruit of their long hours wasn't exactly something they could show clients. And they were without funding or gainful employment.
Said Winograd: "The honeymoon's over at that point."
But three months later, through connections made during the program, Winograd, Lux and Woods landed their most crucial investor: the first. "Max called and said, 'He's in.' I said, 'What do you mean, he's in?'" Lux said, recalling his disbelief.
The five-figure investment paid for lab work to test the strength and performance of their adhesive, proof that investors and clients would need. The three piled into Winograd's Honda CRV and drove to a facility outside Cleveland, spending time in a motel mixing glue samples.
Their adhesive not only held up, it proved twice as strong as a UPS label with a liner, Winograd said.
A few months and a few investments later, they got a real office in a Pawtucket mill. The firm kept growing, finally moving early this year to a 4,000-square-foot space in the Knowledge District where their neighbors now include Brown University's medical school. They've raised a little over $4 million in capital — in part through the strategy of calling everyone they know.
If their technology takes off — and that's a big if — the Economic Development Corporation's Wadensten says it could be a "game-changer." So far, NuLabel says it has two clients, whom it declined to name, and is in discussions to land others. Field tests of the hardware and labels are expected next year.
"We believed in ourselves," said Lux. "And the technology."