HIGHWAVE

HIGHWAVE

Highwave Optical Technologies grew to be the European leader in the production, marketing, and distribution of optical network components, selling cutting edge technologies to the world’s top firms. The company grew from zero to $70 million in revenues in less than two years and went public in June 2000 valued at over $422 million.

Company Creation

In the early commercial days of the Internet, traffic was doubling every three months. This created an urgent need for an ultra-high-speed backbone to carry the multimedia traffic of data-hungry applications. Only photonics could do it. The leaders in photonics were Dr. Eric Delevaque and Dr. Sylvain Boj. They had spent a decade in the laboratories of France Telecom R&D Center (CNET) where they acquired an international reputation for expertise in optical components. Eric and Sylvain identified a portfolio of photonics patents in the CNET and negotiated their transfer to a newly formed company, Highwave Optical Technologies.

Seed and Expansion Financing

Realizing the power of the technology and the quality of the entrepreneurs, we helped Eric and Sylvain assess the market potential, define the product roadmap, and commercialize the technology. Dr. Ossama Hassanein provided the seed and expansion financing, and eventually joined the Company as Chairman of the Board.

Spectacular Revenue Growth

Highwave grew at a dazzling pace. In its first few months of operation, the Company sped up the creation of production facilities and secured large procurement contracts. The Company’s customer base, totaling over 50, included some of the world’s major telecom equipment manufacturers including ADVA Optical, Alcatel, ECI Telecom, Marconi, NEC, and Siemens. The Company established an international reputation for manufacturing superior products that met stringent standards set forth by both customers and industry associations.

Exit

Highwave grew in revenues from zero to more than $70 million in two years and went public at a market value of $422 million in June 2000. Post IPO, our investment of $1.6 million was worth over $73 million, nearly 46X return to our investors.

Turnaround

By 2001, following our exit, the Telecom market began a steep decline. Highwave retrenched from 1,000 to 250 employees, with products in two markets, four manufacturing plants, and a strong base of tier one customers. The Company asked us for help. We structured a financing vehicle (PIPE) with significant downside protection, created a syndicate that included a Tier-1 investor for transactional support. We identified a strategy of consolidation and rationalization of the industry’s excess capacity using Highwave as the platform. We helped the Company change course and embark on a major cost-cutting effort, shrinking Highwave to a single market which required only 65 employees and a single manufacturing facility. The Company’s operations were stabilized, and we were able to exit the PIPE investment through the public market at a 20% profit in one of the bleakest years in the high tech melt down. Good results, considering that the sector had suffered overall a drop of 95% in market value!