By Jeff Karoub
Small Times Staff Writer
NORTHVILLE TOWNSHIP, Mich., Feb. 22, 2002 — John Vala walked the corridors and clean rooms of a plant that hoped to make and sell what had been dubbed the industry’s first true photonic integrated circuit.
But Vala didn’t see high-volume production on his tour. Instead, he was there to bid on a color copier at Nanovation Technologies Inc.’s liquidation sale, which began Tuesday.
“There’s a lot of nice equipment here — it’s such a shame,” said Vala, who is starting his own business and looking for bargains on “big, expensive stuff.”
Nanovation, which made optical circuits for MEMS-based technology, went out of business in November after trying to reorganize under Chapter 11 bankruptcy protection.
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| Machines and office equipment are among hundreds of items for sale at the auction of Nanovation Technologies Inc. The Michigan-based photonic integrated circuit maker closed in November, after failing to secure a bridge round of financing worth $10 million. |
The company laid off 120 of its 169 employees in July following the collapse of an expected bridge round of financing of $10 million, and the remaining employees were cut in November.
The funding was to have been part of a $75 million round, and the company had raised $91 million in equity funding since it spun out of Illinois’ Northwestern University in 1996.
The question of how a company with such big dreams and dollars could fail was on the minds of Vala and many others attending Nanovation’s auction at its former 108,000-square-foot headquarters and laboratory in suburban Detroit. Equipment at a research facility in Evanston, Ill., also was up on the block.
Nanovation isn’t the only firm in its industry to close. InLight Communications shut down in November after failing to raise enough money to get its optical MEMS subsystems to market — despite raising $11.5 million in venture capital earlier in the year.
Others in optical networking also have fallen on hard times. Canadian-based Zenastra Photonics, a former competitor of Nanovation’s, filed for bankruptcy in October, though a new firm reportedly has acquired a majority of its assets.
Much can be blamed on the economy and telecom sector in particular, which has been especially weak. But a shakeout also has begun, analysts say, because there is only so much demand for optical components — even in good times.
“I think it’s just the beginning — there are too many companies out there,” said Marlene Bourne, a MEMS analyst for Cahners In-Stat Group.
“We will see more. These will be companies who have had good management, very low burn rate … but for whatever reason they don’t have the savvy to get customers or they can’t get their foot in the door.”
Lawrence Gasman agreed. The president of Communications Industry Researchers Inc. said Nanovation and other recent casualties were a bit too optimistic in selling their technology, which was scientifically sound.
“Probably like everybody else they overestimated the market for some of this stuff. They weren’t alone in that. Companies that survive are the ones that had a lot of money in the bank.”
The optimism was evident at Nanovation’s auction, where million-dollar fabrication equipment was used little, if at all. Some machines remained in shipping crates, with only the front removed for display.
Everything was for sale. Items ranged from socket sets to a scanning electron microscope. The items were divided into 500 lots, which could be one or several related units.
Nanovation bought its Michigan headquarters in 2000 at a reportedly great price and with state tax credits. But the size made it expensive to renovate and operate for a company in development, according to one former employee.
“It was way too big for them,” said Jim Ronald, Nanovation’s former maintenance engineer who now works for the court-appointed trustee overseeing the firm’s dissolution. “They should have started off with a smaller building.”
For instance, Ronald said, half of the clean room space was not used, and the company used only one of three massive ovens for making wafers.
“It seems like we were a little bit ahead of our time,” lamented Melanie Ofenloch, the firm’s former vice president of communications who has since returned to her native Texas. “What with the market and funds available … we just kind of ran out of time.”
Vala came to the auction seeking deals but found few. He said the fact that so much equipment was ordered but never used tells him a lot about the company’s state as it moved toward production.
“You see all this … and to see the switch was never turned on, it suggests to me someone didn’t plan very well.”
A jar, marked “broken glass,” was propping open a door to a clean room. Vala stopped to inspect it, and found it actually contained broken wafers.
“All those wafer chips have to pay for all of this stuff,” he said, gesturing to idle equipment with auction numbers affixed to them. “So you better plan well.”
“This (jar) could have potentially paid the electrical bill.”
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CONTACT THE AUTHOR:
Jeff Karoub [email protected] or call 734-528-6291.