October
7, 2000
Venture capitalists scouring
the area seeking their stake
Jill
Vardy
OTTAWA
- There's a new way to get rich in Ottawa: Rent an office. Start a company
with the word "photonics" in its name. Wait for the venture capital.
Companies
who make photonic or fibre-optic equipment find themselves in the middle
of a gold rush, and they're the gold. Venture capitalists are scouring
Ottawa looking for their stake in the booming market for equipment that
sends light signals zinging through the glass fibres of optical communication
networks.
The market
is so hot that a new venture capital firm, Venture Coaches, plans to invest
in nothing but early-stage photonics and wireless companies.
"We've
done our homework and we feel strongly photonics will be a key market
for us," said Larry Perron, a partner in Venture Coaches. "Photonics is
putting Ottawa and Canada back on the world stage."
At the
end of June, $600-million in venture capital money had been invested in
Ottawa, much of it in photonics companies. That's twice as much as was
invested in all of 1999.
Money
is so easy to come by you don't even have to go looking for it. Companies
that have laboured in obscurity for years making optical equipment report
they're being approached out of the blue by potential investors.
Those
investors are probably the folk who missed out on some of the hottest
financings this year -- almost $60-million for Zenastra Photonics Inc.;
$31-million for Tellamon Photonic Networks Inc.; $10-million each for
Trillium Photonics Inc. and Tropic Networks Inc., both infant companies.
Metro
Photonics Inc. is expected to be the next to close a round of financing,
one that is rumoured to eclipse Zenastra as the largest single round of
venture capital financing to go into an Ottawa photonics company. John-Peter
Bradford, CEO of Metro, declined to comment on the imminent financing
round.
The optical
entrepreneurs know the money is flowing freely. There was standing room
only at a recent seminar on attracting venture capital financing to optical
companies, sponsored by the local high-tech entrepreneurs association.
A meeting next week on financing optical companies, sponsored by the Ottawa
Economic Development Corp., expects a similar crowd.
There's
been a flood of photonic start-ups -- 50 this year, by some estimates
and they're finding there's no problem locating the money to fuel their
growth. And that could be a risk to everyone, some of the experts say.
"There's
no question that financing is easier, but that's good and bad. Good because
you don't have to wait long to get it. Bad because it's encouraging people
to come out with companies built on recycled technology and poor business
plans," said Omur Sezerman, CEO of 15-year-old OZ Optics Ltd. OZ is staying
mum about its own financings, but published reports say it closed a $25-million
venture capital round during the summer.
While
easy money is nice, not all the investments in photonics companies are
going to pan out, Mr. Sezerman said. "I'm not talking about anyone particular
in Ottawa, but in the sector as a whole there's a lot of fool's gold ...
If I were an investment banker I would do a lot more due diligence about
the people and the technology," he added.
PHOTONICS
FINANCINGS IN 2000:
Closed
deals
Company
Value Date
Zenastra
Photonics
Inc.
$59-million April
Tropic
Networks
Inc.
$10-million July
Tellamon
Photonic
Networks
Inc.
$31-million August
Trillium
Photonics
Inc.
$10-million September
Ongoing
deals
Metro
Photonics Inc.
Adventera
Communications Inc.