WITNESSING PRESIDENT OBAMA'S inauguration up close was a moving experience -- for more than historic reasons. Tickets for 120,000 of the best seats and standing areas contained an innovative security strip intended to thwart fakes. Stars and stripes on the blue strip moved as a holder tilted the ticket.

Starting next year, new $100 bills are expected to feature a similar moving-image strip, already in use on bills in Mexico and Sweden.

The technology emerged from an occasionally rocky alliance between Crane & Co., one of the nation's oldest companies, and start-up Nanoventions Holdings LLC. Crane's experience offers insights into a common management conundrum: how to develop a breakthrough product with a tiny, untested partner.

The two companies faced technical and cultural setbacks as each sought to control the project, delaying the debut of the new bill. Crane has spent more than $15 million and conducted 82 trial runs since licensing Nanoventions'"Motion" technology five years ago. In December, Crane bought Nanoventions' sole active subsidiary.

Crane, a Dalton, Mass., family-owned paper maker with roots that predate the Revolutionary War, has been the exclusive producer of U.S. currency paper since 1879. Nanoventions, launched in 2000, had seven employees when the companies began collaborating in 2004.

"We had a very difficult customer and a very difficult technology," remembers Douglas A. Crane, a vice president and the seventh-generation family member to work for the company. "There was strife and head-banging along the way." Crane, which also manufactures stationery, had 2007 revenue of $206 million, according to Hoover's Inc. Mr. Crane declines to comment on the revenue figure.

The matchmaker for the unlikely marriage was the U.S. Bureau of Engraving and Printing. Nanoventions won an audience at the bureau to discuss and demonstrate its anticounterfeiting technology starting in 2001. Intrigued, bureau officials recommended that Crane work with the start-up.

Early meetings didn't go well. Nanoventions executives worried about losing control of their innovative technology, which uses tiny lenses to magnify micro-printing so images move in opposite directions when you shift a bill. Crane executives feared the start-up wouldn't meet the Treasury's exacting demands. "Neither company knew if the other company was going to be a friend or foe," says Brian Martin, Nanoventions president and CEO.

Nanoventions employees initially made the security-strip material by hand, and later with a small machine that could produce only 30 feet of security strip at a time. But Crane barred Nanoventions from building a larger, production-scale machine because the Alpharetta, Ga., start-up didn't have a fence or guards protecting its plant. "We really had to control production," Mr. Crane says.

With help from Nanoventions, Crane employees ultimately built a device capable of making 100 billion lenses per minute. But initial tests fared poorly. Embedded paper was so thick that presses jammed. Pallets of thick sheets toppled, earning the nickname "drunken stacks." When Crane tried thinner paper, the moving image wouldn't stay in focus.

The special paper also had trouble passing the U.S. government's laundry test, which required 25 prototype bills to remain intact when washed with eight cotton terrycloth towels in a machine with special temperature controls. The security strip repeatedly came loose. Crane tried adhesives from 20 manufacturers for about a year. Impatient bureau officials threatened to "pull the plug on the whole program," Mr. Crane recollects.

The federal agency had announced in September 2007 that it probably would unveil a redesigned $100 bill in September 2008. As that date grew unlikely, "there was frustration on our part," says Director Larry R. Felix.

Early last year, Crane found an adhesive that stuck. But the glue again made the strip too thick. Extra modifications and test runs lasted until June. Crane expects Uncle Sam's final approval for its embedded paper "any day," Mr. Crane says.

By summer, Crane executives concluded they had to acquire Nanoventions' security-technology unit to gain greater control over the technology and consider other uses. But that wasn't easy, either. Nanoventions executives threatened several times to walk away, even after they signed a letter of intent in July, Mr. Martin says. "We took positions that Crane had not seen from many other companies, especially companies our size," he adds. He declines to divulge details.

"If their technology wasn't so darn good, there's no way we would have come to an [acquisition] agreement," Mr. Crane recalls. And without the takeover, he continues, "it would have been hard for us to maximize the technology." Crane retained nearly all of the 20 Nanoventions employees.

The new $100 bill could debut as soon as early 2010. The precise date depends on when Treasury Secretary Timothy F. Geithner approves the revamped design -- and adds his signature to the note. A Treasury spokeswoman said she doesn't "have any updates" about timing.

Write to Joann S. Lublin at joann.lublin@wsj.com