Arapahoe Chemicals a Boulder pioneer

Editor’s Note: This is the third in an ongoing series of stories tracing the family tree of Boulder County’s entrepreneurial marketplace.

BOULDER — With today’s employment boom, pharmaceutical manufacturer Syntex Chemicals Inc. can’t hire chemists fast enough — often looking outside the state to find them.

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But Syntex’s humble beginnings speak of a different time and a different Boulder.

It started in 1946 with brothers Tom Waugh and Richard Waugh, advanced degree-holding chemistry graduates from the University of Colorado. Neither wanted to go back home to Arkansas. So with no jobs to speak of in their field, they decided to start their own business.

Gathering their smartest friends who also wanted to stay in Boulder — John Bartram, Bob Inman and Oscar Jacobson — they founded Arapahoe Chemicals Inc.

“We didn’t have any money,” recalls Tom Waugh. “We went out and sold stock, hawking it up and down the street.”

After raising the princely sum of $80,000, the fledgling company bought an acre-and-a-half lot at the corner of Pearl and 28th streets, just outside the Boulder city limit at the time.

“It was across the street from a pig farm, so you didn’t notice the smell of the chemicals as much,” Waugh says. “28th (Street) was a lane-and-a-half dirt road that went nowhere but the city dump.”

The group built a two-story cinderblock building and began manufacturing “fine chemicals” — small lots of re-agents and intermediates workers sold to other chemical companies.

Arapahoe Chemicals had its ups and downs, including irate stockholders and a fire.

But it was an order for an exotic chemical that put it on the map. Waugh got a $17 order from Mead Johnson, the baby food maker, for 100 grams of NBS (N-bromosuccinimide).

Batch after batch of the chemical was a failure. What Waugh sent Mead Johnson wasn’t very good, he said, so he charged the company only $7.

But Waugh set to work perfecting his technique, coming up with a revolutionary method that produced NBS of over 99 percent purity. The process proved so good “we put the other manufacturers of it out of business,” Waugh says.

Years later, Waugh happened to be at the Mead Johnson plant, where he asked about that fateful order. Not only could no one find the purchase order, the company told him it doesn’t use the chemical. For Waugh it’s still an unsolved mystery.

But this feat of process design brought the tiny Boulder firm to the attention of world-class chemical manufacturer Syntex Corp., which purchased Arapahoe Chemicals for $4.7 million in 1965. (The name wasn’t changed to Syntex Chemicals until 1982, however. Syntex was bought by Roche Holding Ltd. of Basel, Switzerland, in 1994. Current President Eric Lodewijk says a new name is forthcoming in early 1998.)

Waugh and his partners, however, only saw a fraction of that cash because it was shared among 600 stockholders.

After the purchase, Richard Waugh was named president. In 1972, he transferred to Syntex headquarters in Palo Alto, Calif., as corporate vice president.

Tom Waugh stayed on in Boulder as vice president of research and development until 1969, when he “retired,” going on to serve on the Boulder City Council for a number of years. He also started selling commercial real estate. One of his proudest accomplishments as a broker was, after Arapahoe Chemicals relocated in 1976 to 55th Street, selling the Pearl Street property to Dayton-Hudson Corp., which built a Target store on the site.

In 1972, after 12 years with Arapahoe Chemical, John Birmingham decided he didn’t enjoy his job anymore. Soon a new company was born.

“When I started it was more in line of my interest in organometallic materials. Syntex was slowly starting to change their products to drugs and that wasn’t as interesting to me.”

To get back to areas of chemistry he preferred, Birmingham set up shop as Boulder Scientific, manufacturing small quantities of chemicals.

By 1979, Boulder Scientific began to grow. Like many of today’s entrepreneurs in search of affordable property, Birmingham discovered Mead.

“I was probably one of the first to exit Boulder,” he says. “It looked like a really good place with low population density; the interstate and railroad available.”

Boulder Scientific’s products are about evenly split between intermediates for pharmaceuticals, metallocene catalysts used to make polyethylene and polypropylene, and general industrial products for different applications. With 65 employees and several million in annual sales, the company’s growth rate has been between 15 and 20 percent a year, Birmingham says.

Well-known Boulder entrepreneur Bill Coleman started his career at Arapahoe Chemicals in 1959 in the research lab, later moving to sales and marketing activities.

Shortly after the Syntex acquisition, Coleman was asked to put together a team to design, build and operate a chemical plant in the Bahamas. When he returned to Boulder in 1972 he was named president of Arapahoe Chemicals, a position he held until 1979, when he started Colorado Venture Management.

“I wanted to start this because of my operations background, not chemistry,” Coleman says. “I had managed a couple of business for 13 years and knew what had to be done.”

An early-stage venture capital company, CVM has funded about 55 local companies. Among the most successful Coleman names McData Corp., BI Inc., Hauser, Biostar, Avalon Imaging, Coral Systems, Atlantes, Clinicom and Sievers Instruments.

Coleman also heads up Colorado Energy Management, which runs electric generation plants in Rifle and Brush. The waste heat from those enterprises operates Colorado Greenhouse, another Coleman venture.

Additionally, Coleman and another Arapahoe Chemicals veteran, Jack Kracklauer, founded Econalytic Systems.

Since 1969, Kracklauer had been director of the application development department, a group devoted to finding commercial applications for the 300 or so chemicals the company manufactured.

“I came up with a few candidates and spent the next 12 years developing a number of patents and patented applications,” Kracklauer says.

The fun ended, according to Kracklauer, when “Syntex decided they wanted to restrict Arapahoe to production and research support. I decided I didn’t want to work for a cost center rather than a profit center.”

Besides, Syntex was moving in the direction of pharmaceuticals and that didn’t interest him.

“My experience was in rubber and plastics and automotive and construction industries.”

As part of Coleman’s parting bonus he had acquired some of the technology that Kracklauer was in the process of developing. Thus, the two started Econalytic. Kracklauer spent the first 10 years developing the technology, a fuel additive that catalyzes combustion processes, improving gas mileage and reducing pollution.

Marketing the product has proved more challenging than developing it, Kracklauer says. Although it is sold commercially as a fuel additive, it hasn’t taken off because the auto industry isn’t interested, he says.

“The biggest problem is that we’re not a Tier II company. The auto industry can’t work with an entrepreneurial company, only Tier I companies like Allied Signal. We have to get a company like General Motors to tell a Tier I supplier that they should take an interest in our product.”

Kracklauer and his wife dutifully add it to the tank with every fill-up and get about a 10 percent gas savings, but most people don’t have that discipline, he says.

“We’d like the engine manufacturer to put a part in the engine that it adds this catalyst as the car runs.”

In 1980, after 20 years as a process chemist at Arapahoe Chemicals, Per Hultquist really needed a change. He started J’Leen Ltd. which designs and creates lead crystal sun-catchers that are used for “everything from jewelry to gifts to tree ornaments,” he says.

The Arapahoe Chemicals connection? None, according to Hultquist.

“There was some business education — operating and business costs, sourcing and stuff like that. The chemistry angle had nothing whatsoever.”

Hultquist just wanted to be an entrepreneur. “I enjoyed Arapahoe Chemicals when it was family-run and small but when it became a large conglomeration I didn’t like it as much. I didn’t enjoy the large corporate scenario. This is just my wife and myself.”

Students at the University of Colorado’s Center for Entrepreneurship, under the direction of Dale Meyer, professor of strategy and organizational management, are compiling the Boulder County Genealogy Study. The Boulder County Business Report is working in conjunction with the project and will publish results. To submit information for their study or to ask questions, contact Heidi Neck at 492-4169 or e-mail to Heidi.Neck@colorado.edu.