Impression of Photonics West

Many years ago, around the time of the “dot-com” bubble, photonics had a similar bubble popping episode which in many ways was worse than the dot-com one.

The reason it was worse was that many companies at that time had real sales, profits, factories around the world and employed many thousands and thousands of people.

Going into the bubble Finisar was one of the smaller companies but we had been consistently profitable since our founding in 1988.  And our drop in sales while strong (about 30%) was much less than the biggest companies in the space which dropped 90%+ or simply went out of business completely.

One of the problems at that time was that people felt that “photonics” or the engineering discipline of the precise making, manipulating, amplifying and such with photons was the next wave to follow the “electronics” wave that had been so successful for venture investors and startup founders for the past 20-30 years.  Beyond similar sounding names there was promise in the late 1990s.  Fibers began to carry information at 2.5 and 10 Gb/s over distances of 1000s of kilometers using optical amplifiers, dispersion could be managed and corrected precisely, large numbers of wavelengths could be place onto a single fiber pushing the information carrying capabilities even further … and all these wavelengths could be amplified and dispersion corrected in parallel and as optical signals without conversion back to electron-based information.  Magic seemed everywhere in the field.  And to many people at the time, especially Venture investors, the world looked like this.

What we thought

 

Unfortunately this was not true.

What was true emerged over the next 5-8 years after the bubble burst.  And then we found out the world needs did not call for photonics to be so important.  So then the real world looked like this.

What was true

 

In reality, the most important trend coming to communications was to be wireless radio based communications that we see today as 3G/4G wireless phones, WiFi for LANs and Bluetooth for personal devices, etc.  It is technology that touches us in so many ways all the time.  And then we underestimated the resillance of copper based communications – on circuit boards, for inter and intra cabinet communications, for cable television and internet services, and even the upgrading of our phone lines to DSL.  So instead of being the whole square with electron based comms being marginalized and becoming insignificant, phontonics really only continued to dominate in long haul telecom and then it moved into data centers and buildings for datacom.  [Datacom is where Finisar got its start, today it dominates both spaces of photonic communications.]

Unfortunately so much money was invested that the field continued to be over funded for the next decade and consolidation took longer than everyone thought and many companies have very long periods of losses and shareholder disappointment.

Now lets move into the present day.  This week San Francisco hosted the Photonics West conference and exhibition.  It allowed 1000s of companies to show their products, to hear talks on various aspects of photonics technology and so forth.

And what I saw was that so much of the investment money has poured into optical fiber communications but that is beginning to change.  We are seeing the maturation of that field of applications for photonics but the fields of sensing are just beginning to find their strides.  And photonic engineering and sensing of the world around us – for self driving cars, more accurate medical diagnostics, better ways to make, manage, store and transfer energy are all being explored.  And these can bring a renassiance to the field and an even brighter future.

But we must not over invest in fields which have been good in the past.  As those mature they are less interesting for venture like investments and more the domains of larger companies that can invest the large sums needed to make smaller incremental improvements.

 

Posted in Essays, Investing, Optical Technology, Personal Stories

Block 71

Small World Group Incubator started in January 2010 as one of the initial group of 7 NRF TIS group.  It has been an interesting journey over the last 4 years.

To date we have started 15 companies, closed 5, sold 1 and have 4 of the companies nearing $1M per year in sales.  All that is pretty normal for the statistics of a seed level VC here in SE Asia.

Initially we worked out of offices provided to us by Nanyang Technological University at the NTU Ventures buildings.

But in November, 2011 we moved to “Block 71” which was an older building slated to be torn down so that newer and shinier buildings could be put up.  Building is the national sport of Singapore.  Block 71 was rescued from destruction by some folks at the National University of Singapore and made the home for startups.  In all fairness Block 71 is a partnership between the Media Development Authority of Singapore, NUS and others.

Small World Group Incubator took 4000 sq ft of space kept it relatively open except for some conference rooms and began adding companies to the space.  Today it looks more like a USA garage than a Singapore start up space.  It has 3D printers, CNC laser cutters and machining centers, soldering station, electronic measurement equipment, fixed wing and hex-copter drones, LED lighting, embedded energy monitoring and much more.

And wouldn’t you know it, but now Block 71 has an article about it in the Economist.  You can find it here.

Overall the article is a pretty good tale about how this single building became such a successful nucleation site for startups and it shows how when you create sufficiently distilled interactions things can transform pretty fast.

Write me with questions at flevinson@smallworldgroup.com

 

Posted in Essays, Investing, Singapore Incubator

How many functions can you carry in a cell phone?

It is reported that Bill Joy was one of the first to see that smart cell phones could incorporate so many different functions in to a single device.

So it is that today we don’t carry separate digital camera, PDA, music player, video player, compass, GPS/maps/route planner.

So what’s left?

For many people … very little. But for those that create content, they still carry about a laptop so that they can use this tool for their creative amplifier.

So how close are we to dropping that? Closer than you think.

The iPhone 5s has the Apple designed A7, dual core 64-bit processor which is very close to what I am using to create this blog. Now my workstation is a MacBook Pro, has 4 cores instead of 2 and has quite a bit more main memory but the rest of it is ready to fall. If I travel with the iPhone 6S in 2 years how close will they get? Convergence.

I used to need large HDD (hard disk drives) for local storage but the cloud has nullified and made that obsolete. I used to like having a CD/DVD player burner but that too is dying. I do want a keyboard and I need a mouse instead of a touch screen to make many tasks optimal.

But …

Soon we can kill off the laptop complete because it will be integrated into the phone or tablet maybe.

How will this be done? I suspect we will see a phone what can run both OS simultaneously. iOS will be for real time functions including voice and video comms, maps, chats, navigating the real world in real time. And OSX will be there when we drop into creative mode and want big screens, more precise formatting, placement and the tools whereby to explain ideas.

Both could exist and run simultaneously on what I would project would be the A8 but by the A9 it will be fully complete.

Imagine a world where hotels have digital displays where hooking up your phone in some docking cradle that includes charging … oops the rooms today already have that … you only need to make the digital connection. And the Display Share of Apple TV gives you that without any cables or other claptrap. You might still carry a mouse and keyboard but these are light and do not require heavy support on the road. At home you have these 3 elements to transform the phone into the workstation.

But in general you are carrying your workstation with you all the time and it is always there to support your creative moments.

All this has one HUGE benefit for Apple. As they dump Intel, they will reinstate their lost element of surprise pretty completely. Right now all of their workstation Macintosh computers have their roadmaps published essentially by Intel. You want a Mac, today it is basically the Haswell specs. Right?

When a technology is so clearly able to benefits the users and the makers of it – win-win – it will show up. Only question is how quick?

Posted in Essays, Green Perspectives, Investing

Welcome to the NEW Small World Group Website

OK, now you see us differently we hope.

We are the same people generally we were for the last 5 years but we have more experience.

Over the last 5 years we have helped start more than 15 companies.  They are all generally in the areas of clean tech, optical systems and novel materials.  Nearly all of these companies have been able to complete their MVP or minimum viable product and they have sold the product to a few early customers.  Some have gone on to make 2nd or 3rd generation products that are better and where improvements are based on customer feedback.  Some have engaged in licensing deals or raised more money from new investors.

What is key?  What is different?

We feel that our model of strong engagement with our companies, where we help them with technical, financial, sales, market decisions and not just listen and give advice at periodic board meetings is working.

We have closed some companies but in nearly every case the companies reached the MVP and revenue milestones but the revenue did not scale or grow as their plans thought it should.  In these cases we could not justify additional funding to chase what was a failed plan.

This is what venture capital is about … testing technically based, scalable ideas.  And accepting the decision of the market and customers.

We hope you will find this new site more open, empowering for you to share your ideas for businesses with us.

Maybe we can make magic together.

Posted in Essays, Investing, Singapore Incubator, StartUp Ideas

Natural Gas and Carbon

Rupert Murdock, that scion of conservative publishing actually types his own Twitter feed.  Here was a recent one –

LNG halves carbon emissions. So stop wasting billions on windmills now! On climate change, China is the whole game.

(note – LNG = liquified natural gas)

Its true that burning natural gas saves substantial CO2 emissions over burning coal.  And its true that China is the whole game … to a point.  But let’s dig a bit deeper.

Gas is burned in turbines to transform that energy into electricity; these turbines resemble jet engines so it is not chance that GE is one of the biggest natural gas turbine suppliers in the world.  GE is just releasing new turbines and their key new feature is that they start up and reach full power in 6.5 minutes.

How are these facts related?

Murdock and others around the world are going to push that we now have discovered so much new natural gas that we don’t need to invest in renewables.  You will see that on the USA political agenda too.  For example, we have begun using more natural gas ourselves BUT shipping our coal to Europe to burn.  So that our CO2 numbers improve while Europe’s efforts including all their renewable efforts are diminished due to the burning of our coal.

Markets value materials based on supply and demand but this economic equation has little way to value things in the somewhat distant future.  Natural gas may be plentiful for a few decades even.  And we can burn it in turbines for electricity and in buses for transportation and so forth.

But if we do that we will only postpone the challenges we have today with regards to sustainability.

Natural gas is a VERY good fuel to help manage peak loads and that is a big problem longer term.  Renewable energy will always be unstable in terms of its supply.  The sun shines or does not depending on time of day, weather.  Wind blows with high variability as well.  And we will build storage devices (Small World Group has substantial investments in this ares) that can help balance the grid but standing behind all of this technology, probably for more than 100 years, will need to be natural gas fired turbines.

We will need natural gas to be the final smoother of our power infrastructure until we develop base load power that meets all of the political tests for safety in terms of environment and fuel availability.  The only technology today that is an alternative to natural gas is nuclear – probably thorium fuel and not uranium – and for the moment that is unacceptable.  This will change but it may take many years where we will need to use natural gas carefully.

So in my opinion, Robert Murdock is wrong about mass burning of natural gas today.  We should supply energy from wind and solar on a steadily and strongly increasing basis and let natural gas fill in the differences.  China should do the same.  We all should because there is no other practical way forward.

Posted in Essays, Green Perspectives, Investing

Best Practices Even MBAs Might Overlook When Founding a Startup

In this essay, business education writer Juliana Davies explores many of the common mistakes entrepreneurs make when getting their startups off the ground–and how these pitfalls can be avoided. Small World Group has written about various aspects of a successful business model before, and Davies’ insights contribute to this conversation. More of her work can be found on http://www.mbaonline.com, a website dedicated to business scholars, prospective students, and recent graduates.

Small World Group’s Blog welcomes other authors to contribute to our discussion.

 

The current economic climate has spelled doom and gloom for nearly all industry sectors, with one notable exception—small businesses and start-up ventures. Barriers to entry are lower today than they have been in decades, which is likely part of it. The flexibility entrepreneurs have to nimbly work around problems, roll with the market’s punches, and innovate new strategies is also key. Many economic scholars have recommended that, if the country is serious about economic recovery, more federal dollars should be allocated to small business training and stimulation. Financial incentives and tax breaks can go a long way when it comes to helping a business get off the ground. In order for a venture to remain successful, though, its leaders must be strategic—they must avoid common pitfalls and be efficient and adaptable enough to pull through rough times.

One of the first mistakes many entrepreneurs make is failing to follow a coherent plan. Having an idea or basic concept is usually enough to get a company off the ground—but going further usually requires concrete direction. This most often comes in the form of a written business plan, but any hard and fast goals or vision statements can serve a similar purpose.

At the same time, though, entrepreneurs cannot be so married to their initial vision that they end up unable to adjust to a changing market or clientele shifts. “Just as lack of planning can be a problem, adhering blindly to your plan is a surefire way to steer your company off a cliff,” British business magnate Richard Branson said in an Entrepreneur magazine article exploring common startup mistakes.  “A successful entrepreneur will constantly adjust course without losing sight of the final destination.”

Fixating on competition is another early misstep. “Much better than fighting for scraps in existing markets is to create and own new ones. Sometimes you have to fight. When you do, you should win. But conflict tends to be romanticized, and people tend to get sucked in,” Forbes said in a 2012 article outlining tips for new start-ups. “It is worthwhile to think about how to run away from the fighting and build a monopoly business instead,” the article said.

Setting the right foundations is essential for success. Once off the ground, though, entrepreneurs often struggle with keeping processes efficient, and staying the course without distraction. Following best practices for start-up efficiency are often just as important as avoiding early mistakes. Expert recommendations typically include the following:

  • Appropriate leveraging of technology. Many young entrepreneurs treat e-mail, tweets, and instant messages as something of a given, but creating a plan or policy for how messages will be answered and when can save a lot of stress later on down the line.

  • Participate in social networks and online communities. This is obvious for most web-based businesses, but is something that other companies can have a tendency to undervalue. Web interactions drive traffic both on or offline, and many consumers expect at least an informative website.

  • Commit to an in-person networking plan. Just as eschewing the online space can spell trouble, so can relying on it exclusively. Many small businesses grow through word of mouth and personal connections. Reaching out to industry leaders, attending conferences, or speaking on panels can all come within this category if pursued for purposes of making new connections and forging professional relationships.

Many scholars believe that a resurgence of small business strength is a country’s best path towards any economic turnaround. Over the last few years, start-ups have created more jobs than big industry in nearly every sector. Investing in entrepreneurships will doubtless help spur innovation, but cannot alone fix the situation—long-term stabilization is in the hands of owners and executive officers who must manage what they have and turn it into something with long-term sustainability. 

 

—  Juliana Davies

Posted in Essays, Investing, StartUp Ideas

Singapore Update

A new Blog was launched this week by an early partner in Small World Group’s efforts in Singapore.  It’s author is Chris Vargas and he has moved his entire family to Helsinki, Finland to engage with the start up scene there for a year.  You can read his first post here.

In the post, he argues that Silicon Valley is less a “place” and more a state of mind.  I resonate with that.  See what  you think.  Welcome Chris!

After reading Chris’ first post, I was motivated to generate one of my own.  So today’s post is a summary of where we have come in the 3 years since I returned to Singapore and began working to start an Incubator here.

First a simple summary –

  • we have started 12 companies in Singapore plus 1 in the USA
  • we closed 2 of the companies (or are in the process of closing, more on that in a bit)
  • we raised more money for 3 of the companies in follow on fundings; all were increased valuations
  • 8 of the companies have strong clean tech focus
  • 1 company has a unique sports gadget
  • 3 companies have internet/web roots
  • 1 company brings a unique value proposition to emerging markets for computing and connectivity

Of the remaining 11 companies, 2 are currently seeking funding and have reasonable prospects.

One of the surprising results has been how long some of the companies have been able to stretch the money we invested.  Each of the companies knows that they must finish their initial product, sell it to some early customers and have those initial sales transact at reasonable gross margins for their industries.  We see that now happening for most of the remaining companies.

Our key investment thesis was that we wanted our “saplings” to be frugal with the money, learn how to be a full company with sales and customers and not think like a development group.  We funded our first company 24 months ago in October 2010 and now we see this transformation happening in each of the groups.  Hurray!

In Singapore, so many plans we saw initial had voluminous discussions about “markets” and how the new company would meet market needs.  We have worked consistently to tell them not to focus on markets … little companies have to focus on customers.  And now this is working.  HP and Apple can address markets, little startups must focus on initial customers.

We also have worked to create a “culture” in the Incubator.  Our culture is customer centric technology and business development.  My partner in Finisar, Jerry Rawls, was fond of saying that culture eats strategy for breakfast (lunch) (Peter Drucker is the root origin for this, I think).  And by this he meant, that Finisar’s culture – again one of fanatical customer satisfaction – would always trump us being clever, smarter, first to market.  And it is this same approach which we now work daily to maintain at the incubator.

And it is working!

This week on Wednesday, Sept 26, we will hold our 3rd open house where each of our companies present and tell their evolving stories to potential investors.  Most don’t need money so this session is about investors getting to know them BEFORE they engage.  They can hear plans, talk about customers and sales and then watch the companies for another 4-8 months before any money transacts.  It is a different model that has its origin in our culture.  We sell results not futures, teams and their accomplishments, not so much patents and promise.

 

Posted in Essays, Green Perspectives, Investing, Singapore Incubator, StartUp Ideas

10 Year Perspectives … And A Future Prediction

When Finisar went public in November 1999 our IPO was one of the hottest of all time.  We opened at $19/share but traded upwards above $100/share very quickly in the first few days.  It was a heady ride up for a while and a frightening ride down when the bubble burst in 2001.

During the .com bubble people spoke of the 4 horsemen of the Internet.  Here is the list as I recall it –

  • Cisco – the routing and networking leader who stock had doubled nearly every year for the previous 10 years and who had beat the street estimate for their quarterly earnings by $0.01 for 40 straight quarters
  • Sun MicroSystrems – the server and unix leader whose engines served up the web pages we were so eager to consume
  • EMC – the storage champion whose Symmetrix(TM) storage units held the evolving content
  • Yahoo  – the leading portal and search engine of that time
Each of these were undisputed leaders of that time and in people’s thinking there were so strong that being replaced did not seem possible.
If you ask that same question today – Who are the high tech/web leaders, the surprise is that all of these have been replaced.  In some cases because they have failed to live up to their legacy and in some cases because their importance has simply diminished or their products have become commoditized.
Here is today’s list –
  • Apple – the leader in mobile platforms, content distribution and the “gold standard” for computing
  • Google – the leader in search, web ad based revenue, and so much more including their own mobile platforms
  • Amazon – the leader in eCommerce and in cloud services via AWS
  • Facebook – the leader in social networking
Each of these companies is larger than the previous 4 in so many dimensions.  Facebook has nearly 1 billion users!  Google has deep knowledge of so much of the web and its total user base.  Amazon delivers nearly every product from diapers to eBooks to lawn equipment.  Their product base is larger and the number of customers may make them the largest retailer in the world by some metrics.  And then there is Apple, the largest market cap company in the world AND it was proclaimed dead and not attractive as even a dirt cheap acquisition just a bit before 2000.  Such changes.
Let me add one more data point.  What did this list look like in 1988-1990?  Then the list was –
  • DEC (Digital Equipment Corp) for the compute/server leader
  • AOL/CompuServe for the portal
  • Seagate or IBM for storage
  • ATT/Lucent for networking gear
Here is a table that summarizes this.
Best Tech Companies Over Time - Click to Enlarge

Best Tech Companies Over Time – Click to Enlarge

There are several things that are remarkable about this table.
First all of these companies are from the USA.  I have been asked whether I  expect any Chinese companies to be on the list for 2024.  The straightforward answer is I am not sure.  The demographics and “Asian Century” tsunamis would seem to make the answer yes.  But the corruption and Asian ways work against it because creative destruction is not practiced there.  It is just that creative destruction that we permit our very best companies to not exist in 10 years in the USA that makes the new comers to this list possible.  Even ones that go from failure to largest market cap company in the world in that time frame!  For example, in Singapore, Singtel is still the largest networking company and it was so in 2000 and in 1988 as well and the largest engineering company in Singapore is Singapore Technologies.  Creative destruction is not practiced very well in Asian cultures.  Evolution is more common.
Next, every 12 years or so the list entirely changes.  But the words “creative destruction” are not broad enough to describe what really happens.  Entire fields are redefined.  Storage at the hard disk level was important in 1988 and so Seagate was dominate, storage as a platform was important in 2000 so EMC led, but by 2012 cloud computing and virtualization has rendered storage a commodity and something that you pick up and drop as needed as a part of the cloud so Amazon dominates.  Base technology and the system architecture both change and that is best done in a very free and open platform like the USA provides.
Finally we come to the question that should have an obvious answer by now.
Who is on the list in 2024?
Simple.  None of those on the list today!!!
I can already see some of you rubbing your eyes in disbelief.
But you must think it so … the real question is who should we be betting on today that is small or down and out but who sees the future more clearly than these giants today?

Posted in Essays, Investing, Singapore Incubator, StartUp Ideas

More Less Abundance

OK, every once in a while you get a TIRADE from this website.  But hopefully it is one that teaches you not to believe everything you read on the web or in books.

Today, we take to task the book “Abundance” which was discussed in the previous column.

Here are the claims –

“… imaging toilets that require no infrastructure.  No pipes under the floor, no leach field under the lawn, no sewage system … these high tech toilets powder and burn the feces and flash evaporate the urine … Rather than wasting anything, these toilets give back: packets of urea (for fertilizer), table salt, volumes of fresh water, and enough power that you can charge your cell phone while taking a c**p …

Toilets account for 31% of all water use in America …”

And here are the facts from a US Geological Services report –

USA Water Use - Click to Enlarge

USA Water Use – Click to Enlarge

Different, right?

The fact is that the major uses of water are for power generation cooling and irrigation.  These comprise 80%.  So it is unlikely that “toilets account for “31% of all water use in America”.  Moreover, domestic water use accounts for 1% of the water use and it is quite likely that toilets account for 31% of that use so in actuality toilets account for 0.31% of all water use in America.  Wow!  A 100x mistake!

Moreover if you were really going to make a difference, where would you put your efforts in have more fresh water in circulation?  Clearly into better forms of irrigation and thermoelectric power generation.

And there are efforts well underway for both.  Israel has been developing drip irrigation and its improvements for many years.  Power plants with out using fresh water for cooling is now part of most generating plant proposals in California; there policy change is diving technology innovation.

It has a biblical ring to it … but by knowing the truth, you can set your self free to work on solutions for the real problems in the world.

Got a fact that seems wrong?  Send us your questions and we will fact check!

Posted in Essays, Green Perspectives, Investing, Singapore Incubator, StartUp Ideas

Abundance and Exponential Growth

I am reading a book entitled Abundance.    Here is a synopsis of the book –

“We will soon be able to meet and exceed the basic needs of every man, woman and child on the planet. Abundance for all is within our grasp. This bold, contrarian view, backed up by exhaustive research, introduces our near-term future, where exponentially growing technologies and three other powerful forces are conspiring to better the lives of billions. An antidote to pessimism by tech entrepreneur turned philanthropist, Peter H. Diamandis and award-winning science writer Steven Kotler.”

This is clearly a vision worth understanding.

And it is a vision supported by many different elements of our technologically based society.

But the foundational argument for the book is that technology and the progress it brings is essentially growing at exponential rates.  This compounding is manifest in many areas –

  • computing power grows along with Moore’s law so that every 18 months or so computers get 2x as fast or capable and you pay the same price
  • disk drive storage expands at rates also aligned with Moore’s law
  • shipped fiber optic bandwidth has been expanding at a rate of 10x every 5 years for more than 25 years

There are many more examples.

Similar facts helped NASA in the early 1950s feel it was possible to land a man on the moon in ~15 years even though no human had ever left the earth beyond flying in an airplane!

Perhaps the leading futurist today is Ray Kurzweil.  He published a series of books that have proven uncannily accurate – The Age of Intelligent Machines, The Age of Spiritual Machines, The Singularity is Near.

Clearly if you look around you there have been inventions or products introduced in each of the last 4 decades that never existed and before the end of the decade they were pervasively owned by many people throughout the first world – microwave ovens, VCRs, CD players, DVD movies, Video Games, Internet, Google, FaceBook.

Clearly some things that looked impossible in the past now are possible due to exponential growth in technology.

But …

Such growth does not apply everywhere.  It was predicted in the early 1960s that you would be soon flying on supersonic aircraft for intercontinental travel.  However as Boeing has introduced the 707, 727, 737, 747, 757, 767, 777 and now the 787.  The speed of the aircraft has not increased exponentially as earlier predicted or hoped.  In general it has not grown at all.  Why?  Because it was not practical to operate aircraft at such speeds economically.

Are there other such examples that are today not generally recognized?  Sure!

Optical fiber cable today carries about 1 Tb/s typically using individual channels of 10 or 40 Gb/s and then using multiple wavelengths or different colors of light on the same fiber.  But it is not clear at all that the growth of the last 25 years can be sustained.  Why?  Because optical fiber has bandwidth that is limited by Shannon’s law and other electrical and optical physics.  And in that technology and physics we are reaching the limits of what is possible.  So the growth will slow now over the next decade.  There can still be an enriching of the technology platform and clearly many more fibers can be put into a cable but the actual information carried on a single fiber is reaching its limit just at the amount of information carried on copper wires reached its limit about 20 years ago as modem technology matured.

Other examples are around as well –

  • automobiles are essentially the same as there were in the 1940s: same top speed, same basic construction
  • shipping is essentially the same
  • building size and construction technology has not changed much: we have today only slightly taller buildings than the empire state building where the design was complete and construction started in 1930!

Just to name a few.

It is easy to get caught up in this fervor but in reality exponential expansion in capability never lasts very long before running into limitations imposed by physics or economics.

So be careful when you read how these trends of the past 20 – 40 years are going to solve the problems of the next 40.

 

Posted in Essays, Green Perspectives, Investing, Optical Technology, Spiritual Threads