Optical Capital proves catalyst in community

Firm's ventures thriving in photonics industry

Small business

February 18, 2002|By TaNoah Morgan | TaNoah Morgan,SUN STAFF

If Howard County is a hotbed for the photonics industry, Optical Capital Group is one reason for it.

The photonics-focused venture capital firm, founded by Corvis Corp. CEO David Huber, has led funding for three of the county's most noted photonics companies, and owns part of another.

And even as the telecom industry seems to have hit rough times, companies funded by Optical Capital have had advances.

Last year, two of the firm's holdings sold for a combined $550 million. And last month, Dorsal Networks, an underwater network provider that was raised in Optical Capital's accelerator in Columbia, announced it was being acquired by Corvis in a $90 million deal that is expected to be completed by spring.

Three Howard County-based companies that Optical Capital has funded - Codeon Corp., Quantum Photonics and Optinel Systems - also are either sampling customers in the field trial phase or shipping products. Quantum also just closed its second round of funding last week, raising $27.6 million.

"We're very happy about that," said John Spirtos, chief executive officer of Optical Capital. "It means the technology is working."

Optical Capital Group invests in early-stage photonics companies that are producing core optics components, networks and storage and wireless equipment. The firm was started as HRLD Venture Partners in 1997 by Stephen Gilbert, of Gilbert Global Equity Partners, and Huber.

In March 2000, the investors changed the fund's name to Optical Capital Group, and raised $220 million in two rounds of investing from more than 40 investors.

The firm has invested in about 17 companies, four of which are in Howard County. According to Richard W. Story, executive director of the Howard County Economic Development Authority, the group has been prominent in the development of the photonics industry in the county.

"They've been a real catalyst in the fiber optics industry in the corridor," said Story. "Any venture firm of that size in any community is an important piece of the financial infrastructure. With the amount of capital they have and the amount of additional capital they can attract, doing that from a platform in Howard County has got to be good for the county."

The firm's headquarters, just off Oakland Mills Road in Columbia, is a 60,000-square-foot facility that houses Spirtos, the fund manager, a team of scientists who have had experience with commercializing technology, legal counsel and an administrative team that includes a marketing director who helps many of the companies develop their marketing strategy.

The facility also is equipped with T-1 network systems and clean rooms, which were created so that the fund could host a business accelerator - a type of privately held incubator. However, one of the firm's core companies, Dorsal Networks, now occupies most of that space.

The accelerator is one of the things that marks Optical Capital as a little more sophisticated than other venture capital firms, according to Nancee Ruzicka, a carrier infrastructure analyst with the Yankee Group, a Boston-based market research company.

"A lot of weeding out these ideas is being able to ask the right questions," she said. "They have a way to verify the things that people tell them are accurate, but also to help the folk they incubate to get going. There are some technical folks among them who have the background to ask the right questions."

As is the case for most venture capital firms, fund managers at Optical Capital are heavily involved in their investments, many times sitting on the board of the companies, helping them with hiring, marketing and strategic planning, and trying to protect and guide the companies through their research and start-up.

Optical Capital typically tries to be one the first investors in what Spirtos called "next generation technologies," leading a financing round with other venture capital firms.

But with the photonics industry bouncing along what many observers are hoping is the bottom of a brutal market, the firm has been slow to pick up any other investments, and Spirtos said he is not holding out hope that things will pick up soon.

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