Santur Bets Don’t Pan out for VCs
According to Sequoia Capital’s website, “Santur Corporation is the world’s leading manufacturer of high-performance tunable lasers for metro and long-haul WDM systems. The company’s patented DFB-array technology enables the fabrication of broadly tunable sources at the same performance and costs as fixed wavelength sources.”
I have absolutely no idea what that means, and, even after some research, I’m fairly certain I would do this company a disservice to explain their products to a stranger. In short, they’re based in the US and they make components for wireless devices, including some utilized by the American military. However, here’s one thing that is a little more black and white: Santur lost its backers a boatload of money when they recently sold it.
When Santur Corp. was acquired by listed, California-based NeoPhotonics for $39.2 million in cash, “plus an additional $7.5 million contingent on the financial performance of Santur products at the end of next year,” that deal represented Santur’s VC investors getting approximately 40% to 50% of what they had put into the company over about a decade. Lighthouse Capital Partners, Menlo Ventures, Sequoia Capital, Thomas Weisel Venture Partners and VantagePoint Venture Partners were among a group of VCs that channeled about $100 million into Santur over that time.
Over the years, Santur stacked up (and spent) quite a bit, generating solid revenue but slim margins. When it was sold, recent trailing six month revenues were approximately $21 million. The company launched in 2000 and early the following year, Sequoia Capital, Menlo Ventures and SDK, Inc. joined together to provide the company with its Series A funding (details were not specified). peHUB could not obtain specifics for its second round of funding.
In 2003, the company’s Series C bagged $10 million, and was led by VantagePoint (the round was later upped to $16.6 million in 2005, according to a statement from Santur). In July 2007, Santur’s Series D reeled in more than $26 million. And, in 2009, another $13 million was poured into Santur’s operations. Altogether, according to Thomson Reuters data, Santur took in more than $99 million between 2001 and its sale late last month to NeoPhotonics, at a substantial discount, to a company that has only been listed since February, and slipped below market benchmarks almost immediately after its strong debut.
US manufacturers have struggled to compete with rapidly proliferating and cost-efficient operations overseas; this has in turn contributed to struggles at Santur and among larger businesses, many of them listed on US markets (which have, like NeoPhotonics, underperformed compared to exchange benchmarks). Now, it remains to be seen how much value and viability will come from tech investments in the US, with higher labor costs and a far smaller market than the nascent tech economies of China and India offer. Further, it remains to be seen how VCs in hardware will make successful exits with stateside operations.
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