A Laser Focus: Three Questions With nLight CEO Scott Keeney

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2007, Keeney says. In 2008, nLight made a couple of acquisitions that didn’t add to profits right away, but he predicts the company will be back to being profitable in 2009.

Here are a few more highlights from our recent conversation:

Xconomy: Tell me more about the strategy shift in the early days of nLight.

Scott Keeney: We started the company focused on telecom, and that went through a miserable downturn. I had to go back to the board in late 2001-2002, and say, ‘This telecom market doesn’t make sense. It’s not going to come back, or provide the industry structure we need.’ Our initial idea didn’t work…We’d always planned to go beyond telecom. So we were prepared in that sense. In telecom, we were concerned from the very early days. We put plans in place to make a transition [to other markets] earlier than our competitors. We hunkered down to 20 employees, down from 80, and we barely survived.

X: So how have you managed to survive in a terrible economic climate for semiconductor companies, in particular?

SK: Our performance features are better than the competition. We’re the leading company in this space. Other companies are broader-based, or vertically integrated. We focus solely on high-powered semiconductor lasers…Our industry is really driven by a completely different set of economics. There’s a broader base of applications from telecom to defense, medical, industrial. It’s a much smaller market, on the order of a couple billion dollars. But it’s growing nicely.

While the near-term outlook in almost every industry is bleak now, I’ve never been more optimistic about where lasers will play in the longer term. The performance [cost per watt of power, efficiency, brightness] has improved by an order of magnitude every 5 years—that’s our version of Moore’s Law. It has driven much greater penetration in our markets…It’s daunting with the automotive downturn. But we still see growth.

We’re being pretty cautious, heads-down. We’re keeping personnel costs down, as lean as possible. In product development, we’re focused that much more on products for the near-term. Our development cycle is a minimum of six months, usually 12 to 18 months. But the really big opportunities are three to four years out.

X: With all you have learned in the past 10 years, what’s your management advice to entrepreneurs?

SK: Focus on aspects of the team. The core management, the technical team. Hire for strong athletes. Think about how a person will fit in, in the longer term. Also, entrepreneurs don’t think enough about investors as part of the team. Venture capitalists can be challenging and have an appropriate role. And there’s big differences in VCs. Make sure you get good ones who are experienced. Early on, we got VCs who had been around and been through downturns.

It wasn’t one specific piece of advice, but it’s an ongoing counsel throughout the process. I made mistakes, or they had advice that wasn’t always quite right. It’s an ongoing corporate governance process. I always think when I see Series A PowerPoint pitches that look so nice and tight and elegant—I don’t know of any company that actually followed that plan.

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