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Optical components

Nanovation in Crisis

Integrated optics startup Nanovation Technologies Inc. is in deep crisis today as it struggles to finalize an emergency infusion of cash to keep it going.

Yesterday the company was forced to lay off two thirds of its 169 employees following the collapse of a $75 million Series C round of funding. In a note to Light Reading today, Nanovation's CEO, Bob Chaney writes: "We are currently attempting to obtain funding to hold on to the remaining one third of our employees while focusing only on two silica photonic IC products and two indium phosphide photonic IC products."

Nanovation's crisis appears to have been triggered by Stamford International Inc., a shell company that provided a backdoor way of investing in Nanovation ahead of its planned IPO, which never actually materialized (see Nanovation Prepares the Ground for an IPO).

As Nanovation's largest common shareholder, Stamford derailed the latest funding round and is now offering Nanovation cash in exchange for control of its Board of Directors, according to Chaney's note.

In the note, Chaney says that Nanovation had secured a $10 million bridge loan with Motorola Inc. (NYSE: MOT) for its Series C round, in which Salomon Smith Barney was the placement agent. The money had been placed in an escrow account on June 29. Motorola is an existing Nanovation investor (see Nanovation Bounces Back).

Nanovation needed shareholder approval for the issuance of additional shares for this offering, according to Chaney. "The overwhelming majority of our preferred and common shareholders approved," he writes. "However, our largest common shareholder blocked this deal for nearly two weeks, causing Motorola enough concern to pull out on July 13, and the bridge round then collapsed.

"Nanovation still plans to deliver in August the industry's first true photonic IC, consisting of a switch, splitter, and monitoring taps all on a single substrate," Chaney concludes.

Nanovation has raised a total of $91 million in funding. The identities of many of its investors, apart from Motorola, have been kept quiet. A September 24, 1999, press release announcing a $16.5 million round of financing made no reference to where it came from. Similarly, a press release announcing a further $30 million round of funding, dated Dec 6, 1999, merely referred to an unidentified "crossover group of 13 mutual funds and mutual fund managers" as the source of the funds.

As it happens, it's almost exactly a year since Nanovation dumped its original CEO, G. Robert Tatum, and switched strategy -- bringing to an end an era of spending big bucks in order to pump up Nanovation for a whopper of an IPO (see Nanovation's CEO Gets The Heave-Ho).

At that time, Nanovation was already entangled in litigation with Stamford International, although John Ofenloch, Nanovation's VP of Finance, made light of it at the time. "It's just a monkey on our back," he said. Now the monkey has turned into an organ grinder.

— Peter Heywood, Founding Editor, Light Reading
http://www.lightreading.com
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Peter Heywood 12/4/2012 | 8:03:43 PM
re: Nanovation in Crisis Great input, Petabit.

One reason why we started out being sceptical about LMG was the terminology it used, which -- as you say -- was strange. We eventually concluded that this was because they were coming from a different industry - giant screens - and hadn't really figured out the telecom lingo. Does make one wonder whether they've figured out more important stuff, like telecom requirements.

Another reason why we've approached LMGR crab-wise is that we get inundated with very offensive messages from complete whackos whenever we say the slightest un-positive thing about LMGR. it looks orchestrated.

The fact that LMGR seems to be taken seriously by folk like France Telecom and Boeing -- both of them have agreed to test its technology - has made me sit up and pay more attention.
realoptics 12/4/2012 | 8:03:44 PM
re: Nanovation in Crisis Anyboday remeber 5-6 years back, there was a Canadian gold mining company called Brew-X? Nanovation and a few others are similar to that company, just at a smaller scale.
Photonboat 12/4/2012 | 8:04:01 PM
re: Nanovation in Crisis Reading the comments about Nanovation reminded me of a truism.

Nanovation would have told you that they were making a bet that they could successfully develop an existing technology where others have failed; by spending a lot of money, they would be able to pull this off.
Really? Sometimes more horsepower thrown at a problem won't solve it in a more timely manner--for instance: "nine men can't make a baby in a month."

>>LMG are not a scam, but have moments of heading towards Silkroad.<<
I know very little about LMG, but I recall they do acousto-optics. This technology may actually finally have its day--witness Novera Optics, Brimrose, and a few others making dynamic gain flattening filters.

>>great deal of difficulty qualifying their components to Telecordia GR-1312 or GR-1221. It's not because their process is in any way flawed, it's just that you need a lot of packaging knowledge - which is in very short supply.<<
Oh wise one, you speaketh the truth here! What do you think is the percentage of startup firms that, because they will fail to both pass the Telcordia standards in a timely manner and acheive the necessary production rates/yields in manufacturing to be competitive? I don't even like to think about this myself, because the body count will be pretty high unless we see a return to the days when investors were more willing to fund money-losing companies at high valuations.
dickmilde 12/4/2012 | 8:04:14 PM
re: Nanovation in Crisis Chronus should be Cronos.

Dick Milde
dickmilde 12/4/2012 | 8:04:14 PM
re: Nanovation in Crisis Peter... You are correct. It was/is Chronus that Nanovation had an arrangement with for producing MEMS.

http://www.nanovation.com/pres...

Dick Milde
Petabit 12/4/2012 | 8:04:17 PM
re: Nanovation in Crisis Hi Peter,

Glad to hear you were fishing.

Silkroad were interesting because several of their quoted claims were technically incorrect (or just wrong).

LMG are not a scam, but have moments of heading towards Silkroad. For example the LMG invention of an 'information compressor', which everyone else refers to as a WDM. Or their 4x32 switch, which is actually (as observed at OFC) four 1x8 switches in the same box.

Us techie types get really annoyed when jargon is used incorrectly, and that causes people to let rip on message boards etc. Most of the jargon battles were won by the techies - the only notable loss was OXC (now one of the most confusing terms going).

Lumenon are interesting since they have a variant on the ormosil approach to planar devices. Sol-gels can be used to deposit glass on a whole variety of surfaces - the anti-reflection coating on your monitor being one. BUT it is really hard to lay down thick layers, they have a habit of cracking when the water evaporates. So, like many others, Lumenon have added some polymer to the mix. About 4% polymer does a really good job of preventing the cracking without trashing the optical properties. So far, the Lumenon ormosil process is much like everyone elses. They differ in adding photoresist to the polymer to speed up processing.

If I were a betting man, I would place money on the fact that Lumenon are having a great deal of difficulty qualifying their components to Telecordia GR-1312 or GR-1221. It's not because their process is in any way flawed, it's just that you need a lot of packaging knowledge - which is in very short supply.

Repeatability may be a problem too.

P.
thorny 12/4/2012 | 8:04:19 PM
re: Nanovation in Crisis Are you starting to believe that LMG may not be a scam after all, Peter?

Greg
numeruno 12/4/2012 | 8:04:28 PM
re: Nanovation in Crisis reg. polymer in telecom ... any comments on solus which is using them in there fabry perot interferometers ... as mentioned in the last article on solus !!
LRcarr 12/4/2012 | 8:04:30 PM
re: Nanovation in Crisis I believe they did run MUMPS wafers through Cronos, but they were planning on doing manufacturing in the Michigan plant that they purchased. I have no idea how far they got in bring that facility up.

I just remembered that I published a paper with a few people at Silkroad. Having worked with both companies, I can definitely say that Nanovation had superior engineering talent. They just had a problem that was too hard to solve.
Peter Heywood 12/4/2012 | 8:04:36 PM
re: Nanovation in Crisis Was Nanovation doing its own MEMS stuff? I sem to recall it showing something at OFC 2000 that was jointly developed with Cronos, the MEMS outfit bought be JDSU.

BTW, I'll see whether it's worth doing a follow up story today. I think Nanovation's board met yesterday.
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