Venture investment into photonics shows signs of recovery

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Investment into the photonics industry is becoming more hopeful, although the growth pattern remains uncertain, according to venture capitalists and business angel investors meeting at the 'Invest in Photonics 2010' event in Bordeaux, France last month. The second of its kind, the event saw a rise in participation, with new attendees coming from the wider European and North American photonics communities, including a mix of business angels and venture capitalists (VCs) alongside various board level directors (CEO, CFO, etc).

Bernard Couillaud is chairman of Canadian photonics firm Oclaro, and served as chairman of the event's organising board. Couillaud told Electro Optics that many of the venture capitalists present at the event had recently opened new funds. 'The first thing the investors are interested in is to make money,' he said. 'They have not made money for quite a while now, almost a year and a half or two years, and some of them were starting to worry about their profession in some ways.' Couillaud added that the attitude at the event suggested that the worries were beginning to subside: 'On the financial side, we see that investors are cautiously optimistic. In 2010, there are signs of a gradual increase in investment levels and exit transactions. While we are not out of the woods yet, we are clearly in better shape than in 2008.'

Couillaud is confident that the photonics industry will have a key role to play in attracting the interests of the recovering investors, and the Invest in Photonics 2010 event was organised in order to highlight the opportunities within the industry. 'Without any doubt, photonics will be a part of this [renewed VC activity]. Photonics is so broad in terms of its applications and opportunities,' he says. Improving the investors' understanding of what constitutes a photonics application is another goal of the event's organisers: 'We try to educate [the investors], to show them that photonics is a very pervasive science and application space; it's present in every moment of our lives without us knowing that it's there. This is why we try to trigger their interest and curiosity, to say "Oh… I didn't know that! My telephone is a photonic device?"'

At the event, 12 companies presented themselves to the attendees in a special funding session. These companies had been selected by the organisers of the event on the basis of their suitability for investment, and each was hoping to raise funds to a total amount (across all 12) of approximately €30m. The presenting companies represented a diverse range of application areas, including optical transport, medical equipment, and intelligent lighting. The organisers of the event awarded the 'Best of the Convention' prize to LED Linear, a German company producing scalable interior and exterior lighting systems using LED technology.

Despite acknowledging the good reception for the hopeful companies, Couillaud is quick to point out that a VC deal may be many months in the making. 'When a venture capitalist puts money into a company, it's not going to be in the spur of the moment - it's going to take time. The usual rule of thumb is that for every 200-500 applications that the venture capitalist sees (depending on who you talk to), they will invest into just one company,' he said. Couillaud believes that the event will the presenting companies a head-start in their quest for funding, however: 'It's a first step that should help them quite tremendously, as we have given them access to a panel of investors, and also to people who can explain the process through which a company must go to find funding.'

Despite the optimism of investors and directors at the event, Cauillaud points out that there is still much room for improvement in encouraging European start-ups to thrive: 'In Europe, not only have we not yet found the balance that there is in the States in terms of being able to provide funding for start-up companies, but we've also not built an ecosystem that allows those start-ups and those ambitions to be successful. At some point this is something that will have to be addressed by the various governing bodies,' he told Electro Optics.

The event will take place again in the future, although details are yet to be announced.