Optical Connections Magazine Summer 2022


COMPANY DEVELOPMENT In 2015, the company closed its Series-A funding. For James, this was a real landmark because at that time, funding for early-stage hardware was very hard to come by. The general view was that hardware would be obtained from Asia and the only concern for western companies was to concentrate on the software. Although in recent years, the pendulum has swung back in favour of sovereign control over the manufacture of key technologies, at that time, investors were looking for software apps where a product could be available in three months with minimal capital investment. Fortunately, there were still a few visionaries left who saw the value of hardware technology and being impressed with the viability of EFFECT Photonics’ business plan, were willing to invest in the company. The next stage was to find locations for specialised product development and manufacturing, which led the company to establish a facility in Torbay, in the south-west of England. As he explains, in 2000, there were around 6,000 people developing and manufacturing telecom lasers in southwest Devon, and because it’s such a pleasant location, after the telecom crash, most remained in the area. Since then, several global leaders in technology, like Lumentum, II–VI Photonics, Gooch & Housego, Spirent, Prior Queensgate, Nanusens, and Bay Photonics have become established in the Torbay area making it an important location in the UK for advanced electronics and photonics. In 2018, the company completed its series B and began to develop all the fundamental optical building blocks required to put a complete coherent optical transmission system on a single chip: the “Manta” chip. This work continued in parallel with its ongoing commercialisation of tuneable transceivers for 5G networks. In 2021, EFFECT Photonics closed its Series-C funding round raising US$43 million, and in March 2022, the company acquired the Coherent Optical Digital Signal Processing business from Viasat and added another US$20 million. With full ownership of the key optical, DSP and FEC functions, the company can now offer seamless integration, cost efficiency and security of supply with a full portfolio of building blocks, such as the tuneable laser and DSP, and/or complete solutions. As regards facilities, in addition to Eindhoven and Torbay, they have a small custom facility in Taiwan, another in Maynard, Massachusetts, and by the end of April 2022, a third facility will open in Cleveland, Ohio, which will bring the company’s headcount to around 250 across six sites in three continents.

James Regan, CEO EFFECT Photonics (left) and Carlos Lee, Director General EPIC.

FACTORS OF SUCCESS James puts EFFECT Photonics’ success down to the following factors: Eindhoven ecosystem: In the first few years, seed funding and other support from the regional ecosystem around the Technical University of Eindhoven were of crucial importance. Seed funder “BrightMove”, BOM (the Brabant development agency), Photon Delta, the national bodies RVO and Invest NL together with the EU have all been invaluable, alongside visionary individual investors who paved the way for larger institutional investors to follow. The company wouldn’t be here today without them. Fusion of technology and business development mindsets: The development of EFFECT Photonics has been due mainly to the successful marriage of two groups of people: a highly innovative group from the Technical University of Eindhoven and an industrially seasoned group from the southwest of England. Customer orientation: With the emphasis on commercialisation, it was agreed early on not to put all their resources into just working on technology. They would also need to talk to prospective customers to find out what problems they could solve with their technology and adapt products to the customers’ needs, rather than vice versa. Clearly defined commercial goals: Right from the start, they wanted to make a real company in line with what James had spent his whole career doing, i.e., taking technology out of the lab and using it to create business. Accordingly, rather than focusing on low-volume, high-priced products, their mission would be to make complex coherent technology ubiquitous by taking it into entirely new markets.

Investment: The focus on scaling, business and customers meant that investors could see that EFFECT Photonics was not just another company with a technology that didn’t know where to go. Instead, they saw a company with clear ideas on how to simplify a complex technology and produce high performance, low cost and scalable optical solutions to meet the projected soaring demand for high bandwidth connections. Continuing Investor confidence in the company has resulted in multiple funding rounds.

What’s your advice for the next generation of entrepreneurs?

“First, don’t try to do it on your own; you will need to have the right set of skills. For this reason, research has shown that it’s more effective to set up a start-up with two than it is with one, and it’s better with three than with two. But once you have more than four or five, you start to saturate, so aim for a small group of like-minded people. Second, by like-minded people, I mean those who are willing to roll their sleeves up and to commit and take risks. They also need to have the same ambitions as you because alignment of ambitions inside a team is crucial. In our case, the founders have been through hell together and we’ve all grown as people, so we have the good chemistry and we fit well together. Third, early-stage funding, which is the hardest to obtain, is fundamental for establishing the technology proof points. In our case, we were able to do this with EU and national project funding for the first few years. In fact, as Europe hasn’t got many early-stage hardware VCs, without such funding, it would have been extremely difficult to develop.”



ISSUE 29 | Q2 2022

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