Zenastra Zaps Employees

Components startup cuts 60 percent of its workforce, as it tries to sit out a funding famine

August 31, 2001

3 Min Read
Zenastra Zaps Employees

Canadian startup Zenastra Photonics Inc., which is developing integrated optical components, appears to have run into trouble.

According to an article in yesterday's Ottawa Citizen, Zenastra has laid off 160 workers -- about 64 percent of its total staff -- in a bid to conserve cash. It has also cancelled plans to build a $40 million fabrication plant in Kanata, Ontario (see Zenastra Announces $40M Expansion).

Zenastra didn't dispute the story, but declined to go into details. All that executive VP and COO Peter Brownhill would say was that the company "had to restructure in order to remain viable."

In many ways, the news is not surprising. Zenastra's previous round of funding was way back in April 2000, when it scored $40 million -- believed at the time to be a record for an Ottawa company. Given that most startups set out with the intention of raising enough venture capital to last 12 to 18 months, it's likely that that slice of cash is running out.

In fact, in May 2001, Zenastra indicated to Light Reading that it was trying to close a second round -- a round that never materialized.

So, what went wrong?

On the one hand, Zenastra has unveiled a good few products -- a quick glance shows that it has the same sort of product mix as companies like Lightwave Microsystems Corp., with widgets based on a well-proven silica-on-silicon waveguide technology. Zenastra also claims to have received orders for those products (see Zenastra Ships First Products).

On the other hand, the startup is reportedly dabbling in some other, wacky technologies -- the kind of thing that was hugely exciting 12 months ago, but today is just a distraction from the more mundane work of shipping real products on time.

"There are promising new waveguide materials that we want to keep our eye on," Zenastra CEO Peter Scovell told Light Reading back in January. Scovell highlighted polymers and photonic crystals as two technologies his company is interested in -- although he didn't say to what degree it was pursuing them (see The Hole Thing).

Rumor has it that Zenastra likes polymers. But, although it's not the only startup that thinks so, polymers have yet to prove they are a suitable material for making optical components.

Tales from other startups highlight the dangers of trying to push a new material technology too far and too fast. Nanovation Technologies Inc., for example, started out with the intention of making integrated optical components entirely out of indium phosphide. But when this turned out to be a long-term research project (see Nanovation Comes Down to Earth) rather than a business proposition, the company switched horses -- to silica-on-silicon -- and has since run into further problems (see Nanovation in Crisis and Nanovation Up For Sale).

"I have the same feeling about Zenastra as I had about Nanovation," says one industry source, who didn't wish to be named. "I think people seriously underestimate the amount of work it takes to get a new material system right."

— Pauline Rigby, Senior Editor, Light Reading

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