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Optical/IP

KPL's Startup Struggle

It's been a humbling time in the optical components business, and even the all-stars haven't been able to escape the slump.

Consider KPL Ventures (no Web site), the firm led by former JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) executives Kevin Kalkhoven and Dan Pettit. Now called KPLJ, with the addition of Russell Johnson (a fellow JDSU vet, not a castaway), the firm has seen its optical portfolio wither from world-saving heroes into potential has-beens.

KPLJ Ventures partner Kevin Kalkhoven himself has been popping on and off of Light Reading's Top 10 lists, vanishing for a while after leaving JDSU and then reappearing as a money man. Sadly, it might be time to drop him from the list again, because the optical downturn has taken its toll on KPL's portfolio.

In more ways than one, KPLJ was a product of the bubble. The company's funds come from the pockets of its partners, whose fortunes in turn come from JDSU's former success. And its portfolio companies hit the market during the bubble with sweeping, world-changing plans, most of which are now dashed.

Some saw their target markets evaporate with the bubble. Innovance Networks was building a core box, a segment that collapsed quickly. Iolon Inc. was going to be a hero delivering tunable lasers to simplify DWDM operations -- but tunables weren't ready in time for the bubble, and the need for them cooled down afterwards.

WaveSplitter Technologies Inc. focused on components for the then hungry long-haul space. The company was even planning an IPO but had to backpeddle as the long-haul market collapsed (see Wavesplitter Files for $155 Million IPO and IPO Window Shuts Tighter). At least one of the portfolio companies is sticking to its guns. Optium Corp. still sees hope for its transceivers, but the company is facing a tough, overcrowded market.

It's unclear what happened to Blaze Network Products Inc., but competitors have presumed the transceiver company dead for more than a year. It's rumored Blaze is subsisting with a skeleton staff; occasional calls to the company during the past few months have gone unanswered.

Here's a look at the numbers, with headcount figures linking to the most recent Headcount reports on each firm.

Table 1: KPLJ Optical Investments
Company $ raised Latest round Headcount*
Innovance Networks $130M Feb. 2002 50
WaveSplitter Technologies Inc. $124M Dec. 2002 50
Iolon Inc. $85M Apr. 2002 41
Optium Corp. $55M Feb. 2003 not available
Blaze Network Products Inc. $55M Nov. 2000 unknown
* last reported figure


Obviously, KPLJ isn't on the hook for every dollar in that table; the figures represent the total funding raised by each company.

Like most optical companies that got their start during the bubble, these firms have had to scale back their ambitions. They might survive, but they're not going to change the world.

The news isn't all bad. Optium got a $12 million infusion in February, and Innovance is reportedly in the running for a Verizon Communications Inc. (NYSE: VZ) RFP. (See Optium Raises $12M, and Analyst: Verizon Optical Shopping.)

Of course, that's just the optical part of KPLJ. The company has other irons in the fire, such as an investment in LGC Wireless, a startup dabbling in cellular technologies. Even in 2001, Kalkhoven was stressing the potential of access devices and the need to develop new platforms (data-ready cell phones, for example) to deliver data (see Kalkhoven's Five-Year Plan).

Kalkhoven and his partners were all out of the office and couldn't be reached for comment. But they don't seem to be deterred -- and neither are other components magnates. Don Scifres, another former JDSU exec, has started SDL Ventures; and Hatch Graham, who's headed companies including Arroyo Optics and Bandwidth9 Inc., says he's starting a VC firm.

— Craig Matsumoto, Senior Editor, Light Reading

JohnMosesBrowning 12/4/2012 | 11:16:08 PM
re: KPL's Startup Struggle But, what's really important is that Kalkhoven will be the savior of Championship Auto Racing Teams! www.cart.com
redface 12/4/2012 | 11:16:06 PM
re: KPL's Startup Struggle I wonder what happened to Kalkhoven's planned purchase of a Golfstream personal jet. He is so vain.
OptoScot 12/4/2012 | 11:16:03 PM
re: KPL's Startup Struggle This is truly embarrassing...

From memory I think the most that was ever invested in an optical startup in Scotland was about $10m and this was considered "huge".. Mind you, it did mean the VCs lost a lot less when they went phut which they invariably did because they ran out of cash or time or both.. We're nothing if not in it for the short term in Scotland :-)
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