Micro-LAM's laser-based tools find market, success quickly
One and done: That's the story of Micro-LAM's equity fundraising.
Most tech startups go out to the funding market for a seed round, then a larger A round and, more often than not, subsequent B and C rounds that keep the company alive but dilute the equity of earlier investors.
The goal is eventually be able to fund growth out of cash flow.
Micro-LAM's early investors haven't had to worry about their equity being diluted. Nor will they, based on revenue and employee growth curves. Unlike many other early stage CEOs, founder Deepak Ravindra doesn't have to worry about spending time on new PowerPoint presentations for investors or going on road shows to try to get venture capitalists to write him checks.
Soon after he sold his first machine in 2016, cash flow has been all the capital he's needed for his fast-growing company. Revenue was $1.7 million in 2017 and $4.6 million last year, with projections of almost $9 million in 2019.
Micro-LAM's formal name is Micro-Laser Assisted Machining Technologies Inc. The company makes laser-based tools to improve machining for ceramics, silicon and metal. The lasers generate heat of about 1,800 degrees Fahrenheit at a tiny point a tenth the width of a human hair, softening the target and greatly reducing cutting time and decreasing cutting tool wear.
The advantage for customers is they can retrofit Micro-LAM's laser tools into their existing CNC machines, a retrofit that can be done in about two hours. Systems range between $175,000 to $235,000. Ravindra said the company shipped 11 systems in 2017. It shipped 28 last year, including 13 in the month of November, alone.
An early win
There are first customers, and then there are first customers, deserving of italics.
Ravindra's was the kind startups usually only fantasize about.
It was AMETEK Precitech Inc., a maker of large, ultraprecision machining equipment in Keene, N.H.. It had one of Micro-LAM's systems installed on a machine early in 2016, a purchase that occurred after Ravindra called the company looking to buy, not sell, used equipment.
Mike Tanniru, Precitech's business director, told Crain's he was impressed by the technology and bought that first system not to do any machining of his own, but to show customers how well Micro-LAM's technology works, and how it can extend the life of cutting tools. By showing customers how to do better, faster machining, he'd sell more of the CNC machines that are fitted with Micro-LAM's laser tools.
After he sold that first machine, Ravindra started raising a seed round of capital that he hoped would hit $700,000. What he discovered was that investors love nothing more than an early stage tech company already generating revenue. He ended up raising $2.1 million, including $550,000 from the Grand Angels, an angel-investor group in Grand Rapids. Invest Detroit and Invest Michigan also joined the round.
"We ended up with more than we needed. I could have raised $5 million," said Ravindra. "We're cash-flow positive and we have a healthy amount of cash in the bank."
Ahead of its time
Micro-LAM was an early spinoff from Western Michigan University and its College of Engineering, its 2012 launch coming before the university had much in the way of policies, programs or support in place for spinoffs.
"Deepak was at the forefront here. When he started Micro-LAM, university support for startups was minimal," said D. Clark Bennett, the director of technology and innovation advancement in the Office of the Vice President of Research at WMU and a former patent agent with the U.S. Patent and Trademark Office.
"Deepak got through that lack of support, which says a lot about him. Deepak's skill set as a scientist was perfect, and he's evolved into one heck of an entrepreneur and business person," said Bennett. "The technology is very innovative, and it's nice that it can be attached to existing machines. It's a great way to sell something when it's applicable to what a company already has on its shop floor."
Micro-LAM's early growth was slow and measured, funded not by the equity markets but by a crucial first loan, then grants and other forms of capital that didn't dilute founder or investor equity, helping Ravindra continue the long slog of R&D it took before he could bring his first product to market early in 2016.
Ravindra licensed what had been an R&D project in the engineering school. After getting a loan in 2012 of $150,000 to buy used equipment from Battle Creek Unlimited, a nonprofit economic development organization, he moved his headquarters and lab into a building owned by the nonprofit.
That same year he got the first of several significant grants, a $50,000 grant from the National Science Foundation's I-Corps program to do customer validation. After he talked to 127 prospective clients in three months, he got an NSF Phase I Small Business Innovative Research grant of $150,000, followed in 2013 by a Phase 2 grant of almost $1.2 million.
In 2013, he also got $150,000 from the Michigan Emerging Technology Fund. He won $2,000 for the best new business idea at the 2014 Great Lakes Entrepreneur's Quest's ACE event in Livonia, and in the 2015 Accelerate Michigan Innovation competition in Detroit, he won the top $25,000 prize in the next-generation-manufacturing category.
Mary Sue Hoffman is now the managing partner of Ka-Zoo Angels, an affiliate of the Grand Angels. From 2001-2016 she was a technology consultant for Grand Valley State University, managing the Michigan Emerging Technologies fund, a partnership between the Michigan Economic Development Corp. and Grand Valley's Michigan Small Business & Technology Development Center.
She was the one who decided to award Micro-LAM its funding. "I called him to tell him and he said, 'This is the best day of my life. I just got $150,000, and I'm in the delivery room and my son is about to be born.'
"I've known Micro-LAM almost from the beginning. What stands out for me is the company's strong execution skills. What I often see in startups is that the remedy to a problem is to raise more capital," she said. "Deepak hasn't needed to raise more capital. He's growing out of cash flow. Their growth in revenue I attribute to their execution."
In March 2017, after getting funding from the Grand Angels, Ravindra moved from his tiny, 1,200-square-foot space in Battle Creek into 9,000 square feet of space in a building in Portage, south of Kalamazoo, and late last year began moving equipment into another 8,000 square feet of adjoining space.
From two full-time and five part-time employees when he sold his first device, Micro-LAM has grown to 18 employees. It has sold 50 devices to 20 customers in 14 countries, with distributors in Japan, South Korea, Taiwan, China and the Netherlands.
"It's easy to get growth, it's hard to manage it," said Ravindra.
It's a problem many tech startups never survive long enough to encounter.