February 7, 2014 in Business

Edwall, Wash., man invents paper-based data storage device

By The Spokesman-Review
 
Dan Pelle photoBuy this photo

Andrew DePaula is president of intelliPaper in Edwall, Wash. His company has developed a technology allowing customers to have USB drives installed on paper cards. The product is produced in an old Ford Model T dealership.
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Andrew DePaula credits divine inspiration for his invention, a technology that turns a sheet of paper into a flash drive that can store and transfer computer files.

DePaula, 40, said he got the idea for intelliPaper in 2006 while looking for ways to make a smaller and cheaper data storage device.

Eight years later, DePaula runs a 10-person tech startup based in tiny, unincorporated Edwall, Wash.

Despite its remote location and population of just 50, living and working in Edwall makes sense to DePaula, a quiet, energetic engineer and father of four.

“Part of our goal as a company is to be successful, to make cool things. But it’s also to do good in the communities we serve,” he said.

The business is tucked into a 1920s-era building, a former Model T dealership. The back side of the building is off-limits: That’s where workers are converting sheets of paper stock into data storage devices.

It’s where intelliPaper’s “secret sauce” is made, says DePaula. It’s secret by design, he adds: “It doesn’t take a lot of rocket science to understand how we make our product. We protect the machinery and techniques very carefully.”

He demonstrates how it works by taking a business card and tearing off a thin strip along one edge. He folds the strip twice, creating a double-layered section at one end.

The V-shaped edge of the strip is inserted into a computer USB port, and the computer recognizes it as a storage device. On this piece of paper – roughly twice the thickness of an index card – are dozens of files, including a video, documents and other content loaded there for one of intelliPaper’s customers.

It’s a high-tech spin on direct mail and marketing, said Chad Smith, vice president of sales for MMI, of Spokane Valley. MMI is the sales and distribution manager for intelliPaper.

“I call what it offers easy information exchange,” he said. “Coupons, Web links, anything a company wants to help customers find and get a look at, that’s what this does.”

Late last year, intelliPaper landed an order for 125,000 cards from WyoTech, formerly the Wyoming Technical Institute, a Laramie-based technical college. The school is using the cards in marketing materials.

The only problem, so far, has been not being able to produce large orders quickly, DePaula said.

Last year intelliPaper had to turn away orders for up to 3 million units because his Edwall work site was still ramping up capacity, he said.

Smith and others who’ve reviewed intelliPaper say its technology could potentially change how companies communicate business-to-business, with their customers, and with anyone using the Web.

Margie Hall, head of the Lincoln County Economic Development Council, said intelliPaper is certainly the only tech company based there.

“This is a county whose economy has always been farming,” she said.

The hunt for a cheaper thumb drive

DePaula said a basic advantage of intelliPaper is its ease of use.

He compares it to how people used to use floppy drives. “People would buy a box of floppies for $10 and when they met someone and wanted to share, they’d hand over a floppy.”

IntelliPaper is like those floppies. “You just hand them out,” he said.

Single thumb drives cost anywhere from $5 to $20, so most companies don’t hand them out by the dozens for promotion.

In 1996 DePaula got an electrical engineering degree from Walla Walla University, a Seventh-Day Adventist college. After working in Walla Walla and Portland for a few years, he and his wife began looking for a rural community where they could raise their family.

In 2000 they chose Edwall. Forty minutes from Spokane, it allowed DePaula to work for the Seventh-Day Adventist regional office in Spokane.

He helped the church develop a CD-ROM for potential new members. In 2008, in search of a cheaper way to produce a thumb drive for data storage, he attended the Consumer Electronics Show in Las Vegas.

DePaula found no company that could produce the device for less than $3 each, which was still too high for his purpose.

Inside his hotel room, DePaula looked at his show ID card and noticed it had a thin radio-frequency ID chip in it. He figured if chips can be made that small, so could USB storage.

“In two hours I had it basically worked out,” he said. He credits God for helping inspire the idea.

After incorporating and rounding up $1.5 million in investment, DePaula moved into the intelliPaper building about two blocks from his Edwall home.

His investors so far have been friends and others he’s met through his church. The company has five product patents, with three more in process.

In 2012, when the company began production, DePaula found that he could produce his first batch of intelliPaper cards for around $1 apiece and still make money.

DePaula, who is currently CEO, and the company board expect that intelliPaper will turn a profit within 12 months.

Last year the company hired Donald Klein as interim CEO. Klein had worked as a consultant for Innovate Washington, a state agency focused on helping tech startups, and had learned about the company through that agency.

Klein helped intelliPaper land its first big orders, including one from FedEx for 5,000 memory cards.

He stepped down from the CEO post late last year, partly because of the driving time to and from Edwall and partly because the company’s board wasn’t ready to pursue investment options he thought were needed.

“I still support the goals of the company,” Klein said. “Andrew is a great innovator and intelliPaper has a solid future.”

Coming up: more capacity

Like floppy disks, DePaula wants intelliPaper strips to be disposable. The company guarantees they’ll work a minimum of five times. One card on his desk was left in a snowbank over the previous winter and is still working, as are several others used at trade shows hundreds of times.

Coming improvements are much larger data storage – from less than 1 megabyte to 32 MB – and the ability of customers to load their own content onto the strips. Currently, intelliPaper does that work.

The product provides customers with instant feedback as people insert the paper strips into their computers; customers like FedEx know exactly how many people actually open the cards.

At present the intelliPaper plant is able to produce roughly 20,000 units per month. DePaula wants to push that to 40,000 units within a few months and hopes to reach a capacity of 500,000 units per month eventually.

If the company grows as planned, DePaula sees the need to hand over the CEO reins to someone else so he can focus on long-term plans.

For now, Edwall is the right place for his company, he added. He’s found good workers both in Lincoln County and from Cheney and Airway Heights.

“All things being equal, in Edwall we have access to a railroad, post office and a state highway.

“We’re better connected to the arteries of supply and demand than we would be in the (Spokane) Valley because of the traffic there and other concerns,” he said.

“Plus, we do more good being here than we would being in Spokane.”

If the company keeps growing, he said, he’d open additional manufacturing plants across the country rather than move from Edwall.

“That way we can spread the good around a bit instead of concentrating it all in a few places,” he said.

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