Chang's Investment Shop

Milton Chang's Incubic aims to put together a network of the leading fiber optic experts and investors

June 14, 2001

4 Min Read
Chang's Investment Shop

Can the influence of optical hotshot Milton Chang (see Milton Chang) change the currently negative connotation of the word "incubator"? That's what Chang and his partners at Incubic LLC are all betting on.

Chang, founder and chairman of New Focus Inc. (Nasdaq: NUFO), who has informally made investments under the Incubic name in the past, has turned Incubic into a formal incubator, an investment holding company which has already invested in four optical networking startups: LightConnect Inc., Oepic Inc., Opvista Inc., and Precision Photonics Corp..

Incubic also has informal relationships with several venture-capital concerns, including U.S. Venture Partners, Sevin Rosen Funds, Morgenthaler Ventures, and Intel Capital, some of which have already participated in funding rounds for the Incubic portfolio firms.

Incubic isn't about being a dotcom dormitory, according to Incubic partner Judy O'Brien, an industry insider (see Judith O'Brien Joins CIENA Board) and former partner at legendary Silicon Valley law firm Wilson Sonsini Goodrich & Rosati. Rather, it's a way to bring startups together with well-connected industry types.

"We're not an Idealab," says O'Brien, referring to the dotcom incubator that has recently fallen on hard times. O'Brien, who started on Feb. 1, says Incubic has a few desks available in its Mountain View, Calif., offices for very early-stage startups, but that the company mostly wants to help its firms raise venture money and develop sound business strategies.

Incubic's primary value resides in the brains and rolodexes of Chang, O'Brien, and Bill Nighan, the three main partners. Nighan, a former engineering vice president at Spectra-Physics Inc. (Nasdaq: SPLI), "really knows the issues of bringing a product to market," according to O'Brien.

"Each of the partners has a different expertise," says O'Brien, who claims to know "all the VC guys" through her previous legal career.

Though the Incubic Website lists the aforementioned venture firms as "VC sponsors," O'Brien says the VCs don't have ownership stakes in Incubic. Instead, the sponsor firms contribute a small amount of money to help with Incubic's overhead, and then have the opportunity to participate in the early funding rounds.

Gary Shaffer, a general partner at Morgenthaler, says many Internet incubators have earned their bad reputations by not providing startups with much help beyond buying office equipment and renting space.

"Incubic is doing a lot of the support work in engineering and prototype development," Shaffer says, tasks with which VC firms normally have to help seed-level startups. "A lot of the critical early work has been done." Morgenthaler, Shaffer says, has invested $1 million in LightConnect, a Newark, Calif.-based maker of dynamic MEMS (micro-electro-mechanical system) components (see LightConnect Names President/CEO).

The other Incubic companies also fit into the nuts-and-bolts fields of optical networking. Oepic, based in Sunnyvale, Calif., is developing "high-speed opto-electronic integrated circuits," according to the company Website; Opvista, in Irvine, Calif., says it "has seven patents pending on optical fiber transmission and switching in ultra-high capacity and intelligent long-haul and metropolitan area networks," which will be used in its forthcoming "hardware platforms."

Just getting off the ground is the Boulder, Colo.-based Precision Photonics, whose Website sports only a phone number, which may be answered by one of the company's founders.

Precision founder Chris Myatt, a former employee at the National Institute of Standards and Technology (NIST), says the firm is a components play that has "a bunch of people" out of NIST and the University of Colorado who are proficient in the areas of wavelength control and measurement. When asked if Incubic had helped his company get started, Myatt replied briefly but affirmatively.

"Yes, they've helped us a great deal," he said. "But I need to get on a conference call with them right now, to talk to an [Incubic] engineer."

O'Brien says Incubic isn't going to limit itself to optical investments. "We're also considering biotechnology and semiconductor [startups]. We're doing optical first because it makes sense, given our knowledge base." She says Incubic plans to work with four or five startups per year, taking a small equity stake in exchange for its efforts.

"We obviously want some stake, but there's no set fee."

Paul Kapustka, Editor at Large, Light Reading

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