Small Biz: Tech Startup

INITIAL LIGHT BULB: A mechanical engineer who’s designed ejection seats for fighter jets, William Oliver developed a prototype for a better, greener alternative to the Styrofoam peanut in a Sedalia garage early in the millennium.
Oliver soon met Miguel Baldwin, a 25-year employee of UPS, and the pair joined forces, launched a company, VerteX, and started selling the product, ExpandOS, in 2005. “It was a no-brainer,” Baldwin says.
Sold via service contracts in tandem with machines dubbed Expanders, ExpandOS is shipped in densely folded flat sheets, much more efficient than Styrofoam peanuts, which Baldwin likens to “shipping air in a trailer.” Conversely, one truckload of ExpandOS sheets becomes 25 truckloads of packaging material after assembly onsite.
Baldwin serves as chief executive officer. Oliver is the four-employee company’s vice president of engineering.

IN A NUTSHELL: Short for “expand on site,” ExpandOS is “a highly engineered paper packaging product,” Baldwin says. “There’s nothing else like it in the world.” He says the individual ExpandOS units interlock for superior protection, thanks to 38 holes and edges, when packed into a box. “You get this coagulation – I like to call it paper cement.”
After signing a contract with a new client, ExpandOS ships an Expander to the warehouse. “Once they get it set up, we’ll come to them and train their people on it,” Baldwin says. But the patented machines are not for sale, rather handled with a service contract. The Expander then folds it and crimps the flat sheets into their final form.
Unlike Styrofoam, ExpandOS is recyclable and also uses paper from certified sustainable forestry. To mitigate moisture, the sheets are treated with a clay-titanium micro-spray. The product is milled in Lawrenceburg, Tenn., by GPI, and the Expander is manufactured by Westminster-based Metalcraft Industries.
ExpandOS is a premium product, Baldwin is quick to note, about three times the price of Styrofoam. “It’s a very specialized product. You have to have a mission.”
Regardless of the price, the market has responded: VerteX’s sales grew 400 percent from 2006 to 2008.
Ten Strawberry Street, a Denver-based importer of dinnerware, glassware and other products, has used ExpandOS to ship since early 2009. “We started using it for everything we ship, because it became so cost-effective for us,” says import manager Gregg Sciez, citing the elimination of costly breakage problems. “Across the board, it’s going to save you money. We’ve really enjoyed working with them as a company, and it’s been very successful for us.”

THE MARKET: “The estimate for all packaging everywhere in the world is $160 billion a year,” Baldwin says. “They say it’s the sixth-largest business of all businesses in the world.” Protective packaging, including Styrofoam peanuts, bubble wrap and myriad other products, is about a $12 billion worldwide annual market, he adds. To date, ExpandOS has enjoyed most of its success overseas. “Eighty percent of our business is in Europe,” Baldwin says. “We did over $1 million last year in Europe.”

FINANCING: The company’s startup was self-financed by the founders, via an equity placement by another company Baldwin is part-owner of, Lone Tree-based Founders Investment Group.

WHERE: DENVER | FOUNDED: 2005 | WWW.EXPANDOS.COM, DENVER

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