With New Cash and Facilities, Phoenix Transitions Out Of Startup Mode
It’s often not obvious precisely when an early-stage business reaches the point where it outgrows the “startup” label.
Case in point: Madison, WI-based Phoenix, which sells neutron generators and provides image-reading services to organizations in industries ranging from healthcare to renewable energy to aerospace and defense.
“From a cultural standpoint, everybody’s starting to feel the maturation of the company,” says Evan Sengbusch, Phoenix’s president. The company “still has the startup culture feel to it, [but] we’re transitioning out of that mode,” he says.
Phoenix recently disclosed in a regulatory filing that it raised more than $4.5 million in equity funding from three investors. The company expects to raise a total of about $10 million as part of the funding round, and will likely raise the remaining money by this spring, Sengbusch says.
Outlook Development Group, a Franklin, WI-based commercial real estate firm, is leading the round, Sengbusch says. The other participants are all investors who had backed Phoenix previously, he says.
The company, which has been in business since 2005 and shortened its name from Phoenix Nuclear Labs two years ago, employs about 90 people, 70 of whom are full-time, Sengbusch says. He declined to share revenue projections for 2019, but says the company expects to become profitable on an annual basis this year.
Phoenix plans to use some of the new money to fund the construction of two buildings at a planned new corporate headquarters in Fitchburg, WI, a suburb just south of Madison, Sengbusch says. The company will use one of the facilities, which it broke ground on last fall, to perform neutron radiography and other imaging work on new product prototypes Phoenix’s customers are developing, among other things. Phoenix expects it will open that facility in mid-2019, and move into the second building, its new headquarters, sometime next year.
During the first decade-plus Phoenix was operating, its main line of business involved manufacturing neutron generators and other equipment in Wisconsin, and shipping the machines to customers across the U.S. One application for the company’s particle accelerator-based neutron generator technology involves manufacturing medical radioisotopes used in bone scans, stress tests, and other medical imaging procedures. Other uses for the machines Phoenix builds include inspecting munitions and producing components used in solar panels.
Phoenix still custom builds equipment for clients at its headquarters, but last year said it planned to ramp up its imaging services division. One reason for doing so is to be able to serve organizations that need to test a prototype for radiation effects, for example, but can’t afford to purchase an entire testing system.
In an interview this week, Sengbusch, who joined Phoenix in 2012 and was named the company’s president a little over a year ago, says it also plans to send some of its employees to help provide imaging services at customer sites after they purchase equipment.
Some of Phoenix’s current and prospective customers “really want to get involved with day-to-day operation of the system and be trained and knowledgeable on it,” he says. “But there’s also a separate segment of customers that really just want the output. They want the images or whatever the end product of the system is, and have no desire to be involved or train their own personnel to operate it.”
After making a sale, Phoenix typically spends a few weeks training a customer’s employees how to use generators and other machines, Sengbusch says. Providing onsite imaging services, which he describes as “a new business model” for Phoenix, would represent a longer-term relationship between manufacturer and purchaser.
The company’s machines usually come with a warranty, Sengbusch says, and Phoenix provides support when its customers have maintenance issues. However, sending the company’s employees to customer sites represents a shift toward “supporting the day-to-day operation of the system,” which historically has not been Phoenix’s focus.
Working alongside customer staff at their facilities could bring “a lower barrier to adoption” for some organizations in the industries Phoenix serves, Sengbusch says. “I think in the long run, it could be quite beneficial, both to the customer and to Phoenix.”