nLight at end of the tunnel
Laser manufacturer has outlasted two downturns, is accelerating growth
Sunday, August 28, 2011
Vancouver-based nLight has grown through the tough recession years by advancing its highly specialized laser tools, opening new doors for its products in consumer goods, medicine, and defense.
Now the company is accelerating its growth with help from $17.5 million of equity financing from several Silicon Valley firms that have long contributed to nLight’s success. nLight is expanding its Vancouver headquarters and manufacturing building to make room for more employees. And it is moving closer to an initial public offering as it establishes a stronger footing in a fast-growing but highly specialized industry.
Scott Keeney, nLight’s co-founder and chief executive officer, says an IPO has always been under consideration as the company has grown during its 11-year history, attracting $110 million in equity financing (including the recent $17.5 million) along the way. He won’t attach a timeline to the possibility of an IPO. But Bill Ericson, a general partner in Mohr Davidow Ventures, one of three investment firms providing nLight’s most recent funding round, says the company is in an increasingly strong financial position and poised to go public.
“They are at a scale and market position where they can consider (an IPO),” said Ericson, an early financial supporter who serves on nLight’s board of directors. “At this point, it’s not a speculative question, with nLight’s revenue and market opportunities.”
Other investors in the new funding round are Oak Investment Partners and Menlo Ventures. All have been partners with nLight throughout its history.
nLight develops and manufactures a variety of lasers based on its proprietary semiconductor laser diodes and optical fiber technology. Earlier generations of laser were large and costly. Semiconductor lasers are smaller, more efficient, and able to work at varying wavelengths, making them useful in a much broader range of products.
nLight expects sales to grow 50 percent this year, to around $70 million. The company has added 100 employees in the last year, with a current U.S. workforce of 230 employees in Vancouver and 68 in Hillsboro, Ore. nLight has 150 employees overseas in sales and manufacturing, and operates manufacturing plants in Lohja, Finland, and Shanghai, China.
Made in America
Keeney says the company, founded in Seattle in 2000 and relocated to Vancouver two years later, is happy to be planting deeper local roots. China’s lower labor costs have enticed countless companies to shift manufacturing overseas, but runaway inflation has reduced the cost differential, he says. Taking overall costs, including quality control, into account, local manufacturing remains highly competitive, Keeney says.
“I’m bullish on manufacturing in Southwest Washington,” he says, with words that are welcome in a county still deep in the economic doldrums. “It’s a great place to do business and manufacturing.”
nLight is one of the few private Clark County companies with enough financial strength to attract large equity investors, but getting to this point hasn’t been easy. It initially focused on products for the telecommunications industry, only to be caught in the downdraft of that industry’s downturn in the 2001 recession. nLight dropped from 80 employees to about 25, Keeney says.
Still, the company has averaged revenue growth of 20 percent to 50 percent per year. It turned profitable in 2007, dropped out of profitability the following year due to acquisitions, and has been profitable ever since. Ericson credits Keeney and co-founders Jason Farmer, now vice president and general manager, and Mark DeVito, vice president of device engineering, with the vision and persistence to achieve that success through the 2001 downturn and the more recent, and much deeper, recession.
“At the core, it’s about this team’s persistence, their compatibility, and the culture they built,” Ericson says. “They never stopped recognizing that with their powerful technology platform advantage they would find big problems that could be solved, and they just didn’t quit.”
“This is a great entrepreneurial story,” he says.
While the industry is growing, the number of companies is small, Ericson says. “There are probably only 10 laser companies in the world sophisticated enough to understand this,” he says. “This is a really hard technology.”
Ericson compares the laser industry’s trajectory — rapid technological advances coupled with big price drops — to that of the microprocessor industry. As computer chips became faster, smaller, and cheaper, new uses emerged in smartphones, tablets, and countless other consumer products. In the laser industry, improvements in the smaller, more precise semiconductor lasers opened new uses in medicine and other fields, and created new markets.
Keeney cites as an example the widespread availability of laser hair-removal tools. In the past, a doctor would purchase a system for $50,000 and patients would come in for costly treatment. “Today you can buy the same technology on Amazon for $400,” he said.
The advance in laser technology intersects computer advances — the semiconductor lasers are used to create smartphones and other electronic devices as well as solar panels and electric vehicle batteries, Keeney notes. “We couldn’t build the products we have without lasers to weld and cut holes,” he says. “Lasers are just a requisite.”
In February, nLight was one of 24 U.S. technology companies that participated in the U.S. Commerce Department’s weeklong business development trade mission to India. Keeney was part of that trade mission, along with Farmer and Anmol Nijjar, who now holds the title Director of India for nLight.