Silicon Valley’s Novalux, after eating through about $300 million in capital and debt from at least a dozen investors, has finally found a peaceful end.
The Sunnyvale, Calif. company, which initially wanted to sell laser technology to telecommunications companies building out fiber-optic networks, has been sold for $7 million in stock to electronics maker Arasor.
Novalux was one of those “walking dead” companies you heard about after the last Internet boom. It was founded in 1998. After the internet hype went away in 2000, the company no longer had a business, but it was funded to the gills with venture capital. It was dead, but still walking. So why did investors keep backing it, even after it ran out of money in 2003? It’s easy to find fault in retrospect, but the lesson here may be to know when to cut your losses, and to shut down a company and return money to investors. It’s always difficult to do, though, because of the sweat, blood of starting something, and because you can convince yourself there’s a way out. Novalux, for example, turned to apply its laser technology instead to microdisplay technology, to serve home theaters — a logical move at the time. When the company came out of bankruptcy in 2003, its existing investors returned to splash it with more than $30 million over the next few years to try its new model.
In 2000, the company was valued at more than half a billion dollars, so investors in the company at this valuation have lost a lot of money. This is more unfortunate news for Silicon Valley venture capital firm Crescendo Ventures, one of the few investors to back the company at every step –through the fall, and again when it emerged out of bankruptcy.
Other major backers were DynaFund Ventures, Morgan Stanley Venture Partners and Vanguard Ventures (another struggling venture firm).
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