Zenastra Photonics Inc., a once-promising integrated components startup, has gone into bankruptcy.

Company COO Peter Brownhill confirmed reports that the startup, founded in 1999, has closed up shop and let go its 90 remaining employees. But he refused to discuss details.

Zenastra board member Timothy Lee, an investment manager with VenGrowth Investment Fund Inc., one of the firms that initially funded Zenastra for $40 million, confirmed that the startup was unable to get further funding.

"Nobody's more depressed than we are," he says. Apparently, Zenastra's third-round funding attempts failed when investors got cold feet, despite the company's promising start (see Zenastra Ships First Products).

"At the end of the day, even though [Zenastra] was shipping products to customers, the market would not let go of any more capital," Lee says. It was just too early in the company's life cycle to produce the hard evidence of market presence that investors were insisting upon.

"VenGrowth just couldn't fund Zenastra on its own," Lee says.

Other investors in Zenastra's original funding included Bank of Montreal, Business Development Bank of Canada, Eastern Technology Seed Investment Fund, and Ventures West. It's not known which of these, if any, were potential contributors to the startup's last round.

Lee denies stories in the Ottawa business press last night that indicate Zenastra is in receivership. "This isn't receivership, there's no protection, it's bankruptcy," he says. He confirmed that financial services firm PricewaterhouseCoopers has been commissioned to sell Zenastra's assets and intellectual property.

Zenastra's demise was anticipated back in August, when the firm laid off over 60 percent of its staff and canceled plans for its own fabrication plant (see Zenastra Zaps Employees).

At that time, industry sources speculated that the startup had wound up devoting much of its precious capital to "me too" products while focusing on integrated components, during a time when arrayed waveguides (AWGs) continue to dominate the market.

Sources also compare Zenastra's plight to that of Nanovation Inc., which also bet on integrated optical components made of new materials, then wound up in dire straits when faced with what amounted to a long-term research project with little prospect of immediate financial gain (see Nanovation Files for Chapter 11 and Nanovation Up For Sale).

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com