Let’s travel back in time to the late 2000s, early 2010s. The long-forgotten dot-com bubble has taught us how to live online. 4G is launched while there are over 4 billion mobile phone subscribers (68% of the global population) and 1.8 billion internet users (26.6%).
The Netherlands start to play a leading role across Europe in the advancement of photonics and at the centre of it all is Eindhoven. It is in the forefront of European photonic integration research. The Eindhoven University of Technology (TU/e) gathers and connects key European photonics players with the four photonics foundries in Europe, two of which are based in the Netherlands.
During this time, Boudewijn Docter, a post-doc researcher, and Tim Koene, an engineering postgraduate student, were attending TU/e sharing the same fascination for photonics and the same dream of starting their own companies.
“The very first generation of photonic integrated circuits and optical chips really grabbed my attention. I thought it was really cool. There was so much wonderful technology being developed at the TU/e chip laboratory cleanroom fabrication facility, but it still stayed at the university.”
“Something really special was happening in Eindhoven, there was an electronics photonics buzz. There was an entire chip laboratory cleanroom fabrication facility at TU/e just for photonic chips that almost no one knew about.”
A match made in
Boudewijn and Tim knew deep in their hearts that there is so much more that goes into developing wonderful technology, so they decided to sign up for entrepreneurship courses in order to improve their chances of success in their professional life. They both aimed to gain the skills necessary to start a new venture developing novel photonics technologies and products.
Thanks to a liaison officer, they were formally introduced for the first time at an entrepreneurship programme run by the TU/e’s Technology Transfer Unit. A 2-day entrepreneurship course at a stunning Belgian castle provided the perfect opportunity to test a partnership in practice. Tim and Boudewijn fundamentally complemented each other in terms of their technological expertise.
“That was the first time where we said OK, let’s join the course. But we were both going to set up our own companies. I was going to focus on photonics, Tim was going to focus on electronics. We figured we needed each other and could probably collaborate. And that was when we decided to try it as one team and see how it worked.”
“We had sort of a common vision of what we wanted to achieve. We wanted to do hardware, to make something that really adds value to the world of photonics .”
The first roadblocks
Reality quickly set in. It was going to be a challenging company to set up if they wanted to achieve their goals. After Boudewijn and Tim filed a patent with TU/e to be used as a basis for the first product, a major hurdle presented itself. TU/e did not fund the next phase of the patent application process. With no money to continue, friends, family and colleagues came to the rescue by providing TU/e with support letters and guarantees. This helped to underwrite the patent’s cost and keep it from expiring.
“I was actually surprised at how many people provided support. That gave us a lot of confidence.”
With one hurdle overcome, another appeared. The two founders needed 18,000 shares to establish a Dutch limited liability company. Once again, their inner and outer circles were there to support their ambition.
“You’re a broke university student who’s investing his time in a start-up, so I had to do the rounds of getting family and friends to inject that first capital. It was an interesting set of hoops to jump through.
It was good to see how willing everyone was to buy into that dream. In a sense, it was the first extremely informal, low-key funding round that we did, just pitching to the people that you know best.”
At the 2-day course, it became clear for Tim and Boudewijn what they wanted to do and which direction to take. The telecommunication sector is made up of companies that make communication possible on a global scale, whether it is through the phone or the internet, through air or cables, through wires or wirelessly. Developing hardware for telecom companies meant entering the global stage.
“To go global, we’d need to invest heavily in very expensive equipment, the technology and the people. We knew it would be a challenging company to set up if we wanted to achieve this. We’d need lots of money and people who had done this before and have the commercial and business development experience.”
Getting the company off the ground
TU/e won a funded research project and needed to show that the university collaborates with several different companies within the Netherlands. It was one company short. The time was ripe for Boudewijn and Tim to make their dream come true. EFFECT Photonics was born in December 2010.
“EFFECT is an acronym inspired by the name of a project I did as part of my PhD.”
EFFECT Photonics initially worked out of a small TU/e campus office, with free access to labs and the cleanroom. It was time for the company to start thinking about bringing people on board. That was when Boudewijn and Tim teamed up with James Regan, who has been serving as EFFECT’s CEO since then. James started doing some business development consultancy work for EFFECT pro bono as he strongly believed in EFFECT’s vision and bright future.
“When we started working together, we quickly realised that we really wanted to take things to the next level. We needed to start raising our own money, start developing our own products to keep the IP and build value.”
James, Tim and Boudewijn traveled together to San Francisco to attend Photonics West, a leading event for the worldwide photonics industry. While there, Boudewijn met up with an old friend who used to work for a leading data centre company in Silicon Valley. His friend put half an hour aside from his busy schedule to meet with the EFFECT Photonics team and discuss a possible business opportunity.
“We made our pitch. The search engine giant was working on a huge project aimed at deploying ultra-high-speed internet, and needed a specific device for its new infrastructure. We were in the right place at the right time. They asked ‘Can you do this?’ And we said ‘YES!’.
To be honest, we left the meeting thinking we’d never hear from them again. Two weeks later, an email landed in our inbox requesting a proposal. We were more than a little surprised!”
The telecom giant became EFFECT Photonics first customer and their first commercial project began. They started engaging with their large-scale development project with great enthusiasm! It was really happening. The project ended successfully in 2014.
EFFECT Photonics team soon needed to decide which markets to target. The telecommunication global landscape seemed intimidating and very competitive, so James, Tim and Boudewijn began looking at niche markets like medical applications and oil and gas.
First funding round
EFFECT Photonics secured its first funding through Bright Move, a local fund that empowers innovative start-ups in southeast Netherlands. The company used the loan to start building some very early hardware to show customers. This early funding enabled them to hire James Regan and futher grow the commercial team by hiring Robert Hughes (previous VP Sales & Marketing), each with over 20 years of experience in the global telco market. Their vast connections get EFFECT in the door of big system integrators like Ericsson, Nokia and Cisco that need optical components from a company like EFFECT to transmit data over optical fibres.
“What we actually discovered was that penetrating these markets would be more challenging than originally thought. We decided to zero in on the telecoms industry.”
Recruiting top finance talent
Dennis Maas (CFO) joined the team beginning of 2013 at a critical point in EFFECT’s history, during the preparations for an external venture capital round. His 25 years of professional experience in accounting and auditing at key players and his deep understanding of the finance domain made the EFFECT Management Team even stronger.
The first hardware started being built in the same year and the excitement of all team members was indescribable.
A critical person in our history
The Swiss-German fund, btov Partners, a consortium of informal investors led by Dr. Christian Reitberger, saved the day by taking the lead in the next venture capital round. Christian is a critical person in EFFECT’s history and a strong supporter of EFFECT’s dream. Christian is a very experienced investor with a physics background and he knew that hardware alone would be very risky for the company. On the other hand, a voice inside him was telling him to believe in the dream of James, Boudewijn, Tim and Robert and invest in EFFECT. He put some of his own money into the company. This created trust among potential b-to-v investors and created a positive environment for further funding. Christian’s leadership encouraged investors who did not know the photonics industry and EFFECT’s hardware to invest.
The investment contract got formally approved and countersigned at the notary just before Christmas.
“Either we go there to start the preparations, or wind down the company and we’re all left to find another job, or we sign the big investment contract and we’re set for 2015 onwards and on the path to growth.”
Touch and go
EFFECT Photonics raised its first venture capital Series A round in 2014. The team pitched to over 30 venture capital funds and venture capital negotiations dragged on. Responses were discouraging; no venture capital group was willing to take the lead. EFFECT was primarily in hardware and not in software, and at that time photonic software was critical for development of the technology. It was considered a big risk for investors in the photonics industry.
Money was running out. At the end of the year, EFFECT Photonics faced the prospect of not being able to pay salaries and having to close the company on Christmas Day of 2015.
We are a family
EFFECT Photonics left the office on the TU/e campus where it all began and moved into its first “home” in 2014. It was an old, derelict industrial building in Eindhoven’s Strijp-S district. Today it functions as a veritable living lab. Rent was affordable for the 60m2 office space. EFFECT was one of the first tenants and, though the team was alone in the building, they never felt lonely having the whole EFFECT family alongside them.
Paul Rosser (VP Operations) came on board and the management team was fully formed by mid-2014. At that point, together the management team and the first engineers were 12 strong. All these loyal, committed people became a family. They invested their time in something that wasn’t very certain but they all believed in EFFECT Photonics and knew that something extraordinary was about to happen.
The big surge
With secured funds thanks to b-to-v Partners, EFFECT Photonics secured Series A funding in 2015, placing it even closer to bringing its optical System-on-Chip technology to market and to meeting the exploding demand for bandwidth in cell towers and between data centres.
The company’s attention turned to growth and expansion, scouting locations for specialised telecommunications product development and manufacturing. EFFECT Photonics settled on Brixham, a small town in the Torbay district in the county of Devon. Brixham is conveniently situated to provide access to the resources used by the well-established hi-tech cluster of companies and expertise locally based there.
EFFECT Photonics developed a product line and placed its first order on equipment needed to carry out measurements. The team left its cramped quarters behind and moved into a new 300 m2 office space, simultaneously doubling the staff from 15 to 30.
Where do we go
EFFECT had some setbacks in terms of product development, realising that what the team wanted to achieve was more difficult than expected. They faced challenges in many areas, including the partners they were working with, their supply chain, the people contracted to produce the chips they were designing, and even the electronics components they needed to design in. They required more time and money because the telecom market is constantly changing so their product strategy had to change to reflect market conditions, fluctuations, and dynamics. They began to focus on the expansion of mobile data 4G and 5G networks. We needed to raise more money from their investors at the time.
Big money for a big deal
By 2017, the company was almost there with the product. To scale up production, it needed more money. This would mean raising a venture capital Series B investment round but that was beyond the capacity of the investor at the time. The team needed to get new funds on board.
EFFECT entered into an agreement with Skylane Optics to supply narrow-tunable optical transceivers to telecom operators in Europe and the Americas. How did they get this important new business partner? Because their transceiver met the need of telecom operators in lowering their sparing and provisioning costs. Also, 10G DWDM fixed wavelength EML optical transceivers weren’t widely available. EFFECT successfully dealt with these issues.
Ride the wave
In 2018, EFFECT was searching high and low for investment funds. The team did a lot of rounds. In the end, they secured funds through Innovation Industries. With support from private and institutional investors, this local independent venture capital fund leads the B rounds, and about half of EFFECT’s original investors also joined in this round. The team completed the series B funding to accelerate the ramp of their tunable SFP production line and to fund the development of future technologies.
By the end of 2018, EFFECT entered the commercialisation phase by establishing a marketing and sales department to get the product to the market. There were now 100 people working at EFFECT.
“That really put us on the next wave of expansion.”
Ready, set, produce!
By 2019, EFFECT had developed its platform technology. It was finally ready! The heart of the product is the optical chip. EFFECT fixed its last bugs. Delivery of its first optical chip to clients was now a reality.
EFFECT secured funding from PhotonDelta to support its growing 5G and data centre business. The company used this investment to further accelerate product development and business scale-up. Over the last 25 years, they have been cooperating in the research, design, development and manufacturing of integrated photonics technologies and components in Europe.
At 120 employees in 2019 and growing about 50% year on year, EFFECT expanded its workspace in Eindhoven to 1,800 m2.
The company’s sales force was put in place, and EFFECT was ready to push its goal to go global.
“We grew from just the two of us to a hundred and twenty people, so it’s been quite a journey.”
The future is now
“2020 is really going to be about becoming a stable production company.”
By the end of 2020, EFFECT plans to have a steady flow for the first product leaving the factory. In parallel, the team will be working on other product variants based on that first product. But they will also be working on the next-generation products that need to come out in a few years. These are all telecom products.
For these next-gen products, and to be able to serve the customer in this expanding market, the team needs to further develop the supply chain and the partners with whom they are currently working. Some of these partners can handle the scale that is required today, but they could have trouble scaling up to a factor of 10, or maybe even a factor of 100, in terms of volume.
To meet this challenge, EFFECT is working a lot on the supply chain to make the technology more widely available.
“In 2020, we’ll go into full mass production.”
When production really takes off, we’ll need more personnel at the UK facility. We plan to double the technicians and operators from 50 to 100 in 2020.
The future’s so bright, I gotta wear shades
Where do we see ourselves in 5 years’ time?
Our company is a global market leader in optical transceivers with a portfolio of 15 to 20 plus products. We’re about 2,000 people strong. We’ll probably need to go through a Series C investment round. With this technology, there are over 100 million markets that we can target. If we succeed in capturing a few of these, we’ll be one of the biggest players in the telecoms industry.
“That’s a big mountain to climb. A lot of things have to happen between now and then, but that’s the potential.”