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Fate of Pegasos desalinator in venture-funding cards

A great invention can change the world overnight, at least in theory. In reality, however, an inventor needs massive funds and management skills to make his invention practically applicable on a commercial basis, and it is quite rare that an inventor is a great entrepreneur.

News photoFresh venture: Motohiro Yoshikawa, CEO of Pegasos Electra Co., speaks in his office in Yokohama earlier this year.

A case in point is the project in the pipeline involving professor Takashi Yabe, an expert in laser-induced fusion at the state-run Tokyo Institute of Technology, and Motohiro Yoshikawa, a young business manager.

Yoshikawa, 33, set up a venture company, Pegasos Electra Co., in the summer of 2009 to commercialize Yabe's invention: a seawater desalination system using a new type of apparatus using solar heat.

"Professor Yabe's seawater desalination system, named Pegasos, would meet the requirements of quite a few countries in the Middle East, Africa and Central Asia, where water shortages are a serious problem," claimed Yoshikawa, CEO of the Yokohama-based company.

In the Middle East, numerous seawater desalination plants are in operation. They typically use the so-called reverse osmosis process, which filters out salt and other substances by making the pressurized seawater pass through a membrane.

While the reverse osmosis method requires a large amount of electric power, a desalination plant using the conventional multistage flash evaporation method requires a massive plot of land and a suitable location.

Compared to these conventional seawater desalination systems, the Pegasos system does not require a heat source, besides the sun, nor very much electrical power. And this new technology has a high efficiency even at a small-scale desalination plant, making it possible to place a number of desalination plants along a canal for irrigation in a desert, according to the company.

To promote his idea, Yabe set up a university-launched venture company in January 2007. However, he found it difficult to ensure sufficient financial support and Yoshikawa, who owns a company that markets prospective businesses, offered to help the scholar.

Yoshikawa set up Pegasos in late August last year with Yabe serving as its chairman. He raised about ¥200 million through his personal connections and used a major portion of the fund for Yabe's research and development activities.

The Pegasos seawater desalination system is just a derivative of Yabe's grandiose idea to create a new industrial society based on the energy potential of magnesium.

Yabe continues to pursue his plan to develop a solar-pumped lens technology to obtain magnesium from the sea. This will become the basis for his vision of creating a magnesium recycling society based on magnesium as the ultimate alternative to fossil fuels.

Magnesium is a light, strong metal. Its density is a quarter of that of iron and two-thirds that of aluminum. It is also a very good conductor of heat. Another notable property of magnesium is that it is highly reactive. It is also highly flammable, even able to burn in water.

The amount of magnesium produced worldwide is about 600,000 tons a year. About 70 percent of the output is produced in China and it is refined using a thermal reduction method with coal as the heat source. It is said that about 10 tons of coal are needed to produce 1 ton of magnesium, an energy-consuming and environmentally unfriendly process. Meanwhile, seawater contains abundant magnesium, approximately 1,800 trillion tons.

According to Yabe's plan, a low-cost desalination device equipped with a solar-pumped laser is used to extract magnesium from seawater. A large quantity of magnesium, which is obtained in an economically viable manner, can be used as fuel for automobiles and power plants. It will also be a promising solution for the global water shortage.

Whereas Yabe's experiments are claimed to have almost verified the technical feasibility of his theory, it would require more time, research and experiments before the application of magnesium for commercially viable purposes will come much closer to reality.

For the time being, Yoshikawa is concentrating on the manufacture of the test model of the Pegasos seawater desalination system, based on the prototype completed by Yabe. According to Yoshikawa, the Pegasos seawater desalination system is competitive against conventional equipment. In the case of equipment capable of processing 40,000 tons of seawater per day, the cost of hardware for the conventional systems ranges from ¥35 billion to ¥60 billion, whereas the Pegasos system is only ¥15 billion.

"As Pegasos is not a manufacturing company, we are now in negotiations with a major manufacturer to make the test model. This company also shows an interest in investing in our venture. Eventually, we must find a major trading company and a plant engineering corporation as our business partners to sell the equipment abroad," Yoshikawa said.

In the meantime, Yoshikawa himself has already launched extensive activities for the system. He has visited Saudi Arabia, Turkey and Uzbekistan to seek for prospective business networks.

"The Uzbek authorities are showing strong interest in our plant, and this Central Asian country is most likely to be our first overseas client in one year or so," he said.

In order to ensure other prospective revenue sources, his company plans to apply the seawater desalination system to the treatment of sewage and industrial wastewater.

"I am confident that we can find many clients in Japan and in China," he said.

In financial terms, Yoshikawa admits that his venture firm is in dire need of fresh funds to finance the undertakings, as the fund he personally raised will naturally run dry. He is now seeking investment from financial service firms, including foreign investment funds.

"If we accept such investments, we must be accountable to investors, who naturally have a bigger say in the performance of the company, and the profitability of our project," he admitted.

In this context, Yoshikawa regrets the immaturity of Japan's official system to nurture venture businesses and venture capital.

"The giant venture projects like ours need the financial support and commitment from the government or the public sector. Regrettably, officials of the governmental organs concerned are quite bureaucratic, conservative and prudent in allocating funds for venture businesses," he said.

It remains to be seen whether Yoshikawa's lone battle will pay off in the long run. The sheer fact is that his venture company has not earned any revenue since its establishment. Yet, he appears optimistic.

"This is the fun part of a venture business and it is my self-imposed challenge as a venture business initiator," he said with a smile.

This series has been prepared in collaboration with Enjin Co., which produces and operates a video website, kenja.tv, specializing in profiles of up-and-coming Japanese entrepreneurs.