The Luminate wager
Thursday, April 11, 2019
Source: Rochester Beacon
Sujatha Ramanujan, like many of the startups she shepherds through the Luminate program, knows first-hand what it means to move into high gear. Ramanujan had only a few months to help launch Luminate, the world’s largest business accelerator in optics, photonics and imaging.
“It was fast, really fast. … It was a hectic, hectic few months,” says Ramanujan, Luminate’s director. She joined the program in August 2017 and had to be ready to select its first cohort of businesses that November.
Ramanujan’s experience as a technology entrepreneur, her big-company pedigree through appointments at General Electric and Kodak, and her industry connections nationwide are illustrative of what these fledgling firms get from the program, which includes many other advisers like her.
“I had no idea (of) the depth of her connections and network, her global network and national network,” says Don Golini, founder of QED Technologies and chair of Luminate’s advisory board, who calls Ramanujan a force of nature. “She knows a lot of people and that’s an unbelievable asset to the companies.”
Administered as a program of NextCorps, Luminate is now in its second year. It is a startup accelerator focused on advancing next-generation optics, photonics and imaging-enabled companies. It aims to find entrepreneurs from around the world who are solving difficult challenges in augmented and virtual reality, autonomous vehicles, machine vision, biophotonics and other fields. The combined valuation of the companies in Luminate’s portfolio has grown from $10 million to more than $40 million in a little over a year, Ramanujan says.
In February, Luminate received $15 million in additional state funding, giving the program the ability to support three more rounds of business contests, marking a big win for the effort.
“All I knew when I took this job is that we had two cohorts and two years’ worth of funding,” she says. “(Now) it gives us three years—it goes from being a two-year program to a five-year program, which I think is terribly important because it gives these companies a chance to dig in and start to see results, potentially, (to) see a return on investment in that time frame. In two years it’s hard to see a return on investment.”
If companies and investors alike are able to see a return on investment, Luminate will have the power to further Rochester’s position at the forefront of cutting-edge technologies related to the manipulation of photons, answering skeptics who might view this as another flavor of the day for New York, or believe that the optics industry in Rochester is yesterday’s news.
“We’re a year out from our last cohort,” Ramanujan says. “No one’s gone under and that’s a really good sign.”
Building on Rochester’s roots
Luminate uses Rochester’s strengths in OPI to its advantage. The plan to launch an accelerator program had been brewing for a while, says James Senall, president of NextCorps, a nonprofit founded in 1987 whose mission is to be a catalyst for entrepreneurship and innovation-based economic development in the Rochester-Finger Lakes region.
Formerly known as High Tech Rochester, it was launched by three founding members: the Greater Rochester Chamber of Commerce, Rochester Institute of Technology and the University of Rochester. Since 2007, when NextCorps restructured, UR has been the sole member.
“We always had envisioned doing some sort of a large accelerator program in Rochester like what we had seen in Boston, the MassChallenge, in particular, and a few other large-scale accelerators,” Senall recalls.
The idea was to take a cohort of teams through a program, offering an investment to the winner upon graduation.
When the New York’s regional economic development councils were formed and the Upstate Revitalization Initiative was created, it provided an opportunity to pursue available funds.
“We thought it would be a perfect opportunity to pitch to the regional council and our community that this would be an important thing to do,” Senall says. “So, we put together a model, we put together a plan; we looked at best practices again and how we wanted to approach it and we ultimately honed in on the optics and photonics sector to focus on for obvious reasons.”
In July 2017, Gov. Andrew Cuomo announced $10 million for Luminate. With the funds in place, Senall, Golini and others set out to build an advisory board with deep expertise. Their efforts paid off—Luminate boasts a mix of venture capitalists and experts in optics and photonics like Eugene Arthurs, CEO of SPIE, the international society for photonics and optics.
Luminate now has roughly six people who work chiefly on the program, which is funded by the state for its operation and investments but has support from industry experts and businesses who donate their time and contribute expertise. It was easy for Golini to decide to lend support to the program; he describes Luminate as a perfect fit for Rochester.
“Rochester is truly a center of excellence in optics,” he says. “It’s not just a tagline in Rochester, it’s a real thing.”
Fellow board member Michael Foley, managing director and partner with Artemis Capital, a private equity firm in Boston, agrees.
“I think the effort itself is right on the money for what Rochester needs to do,” says Foley, who has lived and worked in Rochester, most recently as CEO of Reflexite. “There’s not a lot of regions that have something like the optics infrastructure like we have in Rochester.”
A big draw
That infrastructure is a big draw for young firms in the field looking to grow. The region is home to more than OPI 120 companies, has the lion’s share of patents in the field and employs 17,000 people, says Tom Battley, executive director of the New York Photonics Industry Association.
Luminate’s organizers did not expect the overwhelming response to the first call for applications. It began accepting applications for the first cohort in August 2017.
“There were over 100 plans submitted and I would say … it was really tough to pick 10 of 20, it’s just very high-quality deal flow,” Foley says. “It is a great, great idea and it was well-implemented. Sujatha gets a lot of the credit; she did a lot of the heavy lifting. She’s got a great team, but she’s really the person I give the credit to for pulling it off.”
In its first round, interest in the accelerator program came from within the United States, Canada, Switzerland, Ireland, Germany, Scotland, India, China, Russia, Qatar, Lebanon and Israel. That international interest was renewed in the second round as well.
To be considered for Luminate, companies must:
- have already proven their technologies at least at lab scale;
- be incorporated, and have a team of at least two full-time members; and
- be willing to locate executives in Rochester for the six-month program.
From the pool of applications, Luminate picks 20 in November, who compete to become the 10 finalists through a Lightning Round pitch competition. Ramanujan, who admits she’s not very good at artifice, attempts to get straight to answers that help her learn if the companies are applying for the money or more than that.
“If they say, ‘We’re hoping for financial investment and we’re excited about the connections that we can get here,’ that tells me they want to get the money and they just want to get out,” Ramanujan says. “If they say, ‘We’re here because it financially makes sense but also we look to the supply chain in the region, we think this is a good area to get our product made, we really like the talent … we need a U.S. headquarters and we don’t have one yet,’… if they give me something I can sink my teeth into and say that’s a good reason to be in Rochester, then that feels better to me.”
The selected contestants get $100,000 and a chance at winning $1 million at the end of the program—and possibly more that Luminate invests at its discretion. If firms get additional investment, they are required to commit to 18 months in New York. The finalists become residents at NextCorps from January to June, culminating their participation in the final Demo Day contest. Last year’s event, held in the Big Tent at the Xerox International Jazz Festival, attracted 500 people.
The regional benefit, Ramanujan and others say, is key for the program in terms of future investment from the state.
“If they don’t look like they’re going to do much in this region, then they’re not going to get further investment from New York State dollars,” Ramanujan says. “It’s not a good use of the taxpayer’s money.”
The board also is heavily involved in the screening process.
“The companies who come here absolutely come here because there’s a funding opportunity, but $100,000 isn’t enough to move for six months for most companies,” Golini says.
He wouldn’t have moved QED for that amount unless it benefited his firm in a bigger way.
“They come because of the money, but also because it’s really good for their company,” Golini says. “They get access to the advisory board, they get access to the real ecosystem (and the universities).”
By the time Luminate was ready to welcome its first cohort, NextCorps had settled into new digs at Sibley Square in downtown Rochester. The 40,000-square-foot renovation included space for prototyping and wet labs, private offices, suites and co-working spaces—an ideal setting for the collaborative atmosphere that Luminate hoped to foster.
Establishing a community
The first cohort arrived here in January 2018. Ten companies started the six-month program to accelerate commercialization of their ideas.
“I think we were really fortunate to get a very engaged group of companies that had some element of success,” Ramanujan says.
The organizers didn’t have as much as time as they would have liked to create a curriculum the first time around, but that didn’t lessen the impact the program had on the firms involved.
“They worked very diligently in developing an ecosystem to support the company in all its facets,” says Leslie Kimerling, co-founder and CEO of Double Helix Optics, and winner of last year’s competition.
Based in Boulder, Colo., Double Helix applied to the program not just because it needed to move to the next level, but also because there aren’t accelerators that are specifically focused on helping companies bringing optics technologies to the marketplace like there are for industries like software, for example.
“Our company is funded today through (National Science Foundation) grants, which has really helped us de-risk the technology, so we were ready to go to the next level,” Kimerling says. “The Luminate program came along actually quite timely for us based on where we were as a company and where we needed to go next. It all made sense to apply.”
Kimerling realizes that her class was a test for a new program, but Double Helix grew from it, as did she.
“We continue to benefit from the partnership and relationship with Luminate, with Sujatha and this broad ecosystem in New York State,” Kimerling says.
Ramanujan and others are intent on demonstrating the area’s strengths. Working with Battley, who is also executive director of the Rochester Regional Photonics Cluster, Ramanujan organizes an event where finalists give an elevator pitch to a room full of optics manufacturers and suppliers. That’s only possible in Rochester, Golini observes.
“If you try to do that networking event on a Tuesday night in Boston for optics and photonics companies, I don’t know that you can get as many even though there are 100 times more companies,” he says.
Says Battley: “It’s like magnetic particles—immediately after presentations they all kind of self-select and they connect with one another. … It’s great to have the local optics and photonics community connect with the Luminate people.”
For Double Helix, that evening led to meaningful conversations.
“It was enough exposure that the companies I’m working with right now, I met many of them at that evening,” Kimerling says. “It opened the door and gave me the opportunity to begin to understand the ecosystem that was available.”
Without Luminate, she adds, her company wouldn’t have been able to find such partnerships, given its distance from Rochester and its limited resources. Double Helix’s technology modifies the light path with user-changeable phase masks to deliver optimized super-resolution 3D images, offering superior depth resolution and precision. It has applications in life sciences, drug discovery and material science, among other fields.
Kal Gwalani, CEO of Mango teQ, based in Auckland, New Zealand, was looking to establish an office in the United States. His firm, a member of the second cohort, was considering options on the West Coast. Mango teQ is developing frontier augmented reality technology. Its initial focus is to retrofit a heads-up display onto helmets. The system, Reyedr, helps motorcyclists keep their eyes on the road using holographic technology to display information at infinite focus, in the line of sight.
“I was pleasantly surprised to find out about what Rochester offers in terms of its optics ecosystem,” says Gwalani, whose firm now sees Rochester as integral to its future. “We are in the manufacturing and design phase of our product, and optics is an important part of our heads-up display system.”
It was one of the main reasons his firm decided to apply to Luminate. Like Kimerling, he finds the education and information Luminate provides, beyond technical help, extremely beneficial. He also appreciates that the program does not have a one-size-fits-all approach. Advisers offer assistance based on the stage each company is at, while allowing for free time for owners to keep running their firms.
“We had a product that was fully designed and we were looking to expand it and so they were more helpful to us I’d say on the business side,” Kimerling says. “When I look back at my pitch deck as a finalist, the pitch deck that I gave to Luminate investors at the end of six months, it’s like night and day. It’s not the just the pitch deck. I use the pitch deck as a metaphor. The program has you sit down and do all the things that you need to do as a company.”
Double Helix has been a success story for Luminate: After winning the big prize on Demo Day, the day that companies in the cohort vie for the grand prize of $1 million by demonstrating their technologies and their progress, Double Helix took home the PRISM award, a coveted industry accolade.
“We’re a lead investor, we’re on their board, we’re part of the initial group that said you can do this. That was a Luminate company and they beat out industry giants, the big labs,” Ramanujan says. “The little startup that worked its way through Luminate took the industry’s first place award.”
She says she was ecstatic at the win. It validated Luminate’s ability to pick and identify game-changing technologies.
“I think that’s a pretty good measure,” Ramanujan says. “We are the only one that does this right now. … Our reputation is growing; our applicant pool is strong.”
Her enthusiasm for assisting these startups doesn’t go unnoticed. It is, in fact, what keeps them going. Kimerling says Ramanujan has strong commitment to the program and is invested in its success and the future of the companies within it.
“She understands that the teams are in different places, we come with different levels of knowledge and experiences, and she’s able to adapt her support to both those dimensions,” Kimerling says. “She really sees the companies for who they are and she sees the teams behind the companies for who they are.”
Ramanujan’s background—she has a PhD in electrical engineering, and her experience as an entrepreneur and patent holder—adds to the Luminate experience. The advisory board does the same, with its experts who check in with their assigned companies at least once a month.
“Our technology is a hard technology,” Kimerling says. “It’s elegant, but it’s really hard to understand the physics behind it and so the fact that someone like Sujatha can sit with me and we could be talking about something business-related and I knew even though she didn’t know the exact details of the technology, she understood its context (and) its place in the world.”
That the board and other mentors and advisers have that fundamental reference knowledge is a huge plus, she says, adding that the spirit of community that Luminate has created goes a long way. Kimerling notes that everyone involved in the effort wants to help these companies.
A strong reputation reflects well on Luminate, but it’s still early to measure success. For Senall, long-term success translates into an even more vibrant optics, photonics and startup community. Though he points to studies that show net new jobs and economic dynamism come from starting companies, Senall understands patience is required. So, the short-term metrics are the quality of applicants, partnerships in Rochester and building a startup presence.
“We’ll see in five, six, seven years from now how it’s playing out,” Senall says. “The advantage of this program is that the state is funding it, but we’re also taking equity in the companies. The idea is that it gets funded once and the money we get back from these investments is plowed back into it. It could be that it’s a program that’s funded once because of the investment we have in these companies.”
Ramanujan would like Luminate to eventually wean itself from state funding.
“I would like us to be more and more self-sustaining,” she says. “I’d like these companies to grow and return, I’d like industry to come and invest in the area. So, eventually we can run programs and help startup businesses, slowly weaning ourselves of state dependence, so that the state can pick the next thing they need to invest in.”
Does Rochester need Luminate?
Skeptics of state-funded programs view Luminate as a temporary favorite, part of a political agenda. Senall also is aware others believe OPI is an industry on its last legs.
“So, why pay attention to that versus something else that’s perhaps hotter?” he says. “The reality here, though, is that optics, photonics and imaging is what’s driving many of the hot sectors these days—augmented and virtual reality, sensors that enable autonomous driving vehicles, new imaging techniques for medical procedures, new types of electronic displays, etc.”
Adds Ramanujan: “I think somebody who’s not in industry, they start thinking it’s lenses and cameras. Their definition is not my definition and it’s not the definition of the companies in Luminate.
“Optics, photonics and imaging is anything high-tech that involves the manipulation of photons. … It’s the analytical arm of pharmaceutical research, it is all solid-state and up-and-coming electronics. It is imaging, but it is also data processing and how to handle image data.”
Rochester in the past has tried to move away from being known as the imaging capital of the world. In 2002, the area opted to rebrand itself; instead of “the world’s image center” it would be “made for living.” And yet, more than 15 years later, Rochester has attracted companies from all across the globe to compete for an OPI accelerator program.
Still, a key metric of Luminate’s success is jobs, which are likely to come slowly.
“When you have a startup-based program, people don’t understand what startup means, how long it takes for a company to grow or how they’re growing. Shouldn’t we have 400 jobs?” Ramanujan says. “Well, the job growth thing is a gradual thing and it’s not just inside the companies. (Critics) need to look the effect (on) the manufacturing, the supply chain and all the people that are getting employed. It is happening, it’s growing, but it will take a little bit of time. For those who want instant gratification, we get a little bit of pushback.”
For Battley, who playfully calls Rochester’s strengths in OPI an embarrassment of riches, it’s worth it to be able to say the city houses the largest optics and photonics startup competition in the world, in addition to the technologies being grown here.
Senall, who isn’t certain if the general public knows that Rochester is on a global stage with Luminate, hopes success—which includes the launch of new technologies, global connections and job growth—will break through the noise. Perhaps then, members of the community—beyond those directly or indirectly involved in Luminate—will become louder advocates.
“I don’t see this as a boondoggle at all,” Golini says. “I believe that providing seed money to startups is the stuff that grows an economy; that is the way to do it. If you can do it in an area that you truly have a competitive advantage in, like optics and photonics in Rochester, then that’s leveraging a strength. (It) would be wasteful if we didn’t do anything.”