‘There is never a good reason to not try; there is never a certainty of failure. Having your own business is far less risky than being an employee.’ – Mike Morris, founder of Ocean Optics Inc. and Spectrecology
Mike Morris founded Ocean Optics Inc. in Florida in 1989 and led the company through two private equity investments, two acquisitions, the start of Ocean Thin Films and the sale of the company to Halma Plc in 2004.
Ocean Optics began with an SBIR (Small Business Innovation Research) grant from the US Department of Energy to make a fiber optic pH sensor as part of an instrument designed to study the role of the oceans in global warming. While designing the pH-monitoring instrument, Morris and his partner Roy Walters wanted to incorporate a spectrometer small enough to fit onto a buoy, and were surprised to discover that none existed. So they invented one and launched a revolution in spectroscopy.
Photo courtesy of Mike Morris
In 2007, Morris founded Spectrecology in Georgia, and he remains active at the director level for Ocean Optics, Wasatch Photonics Inc. of Utah and Prospect Photonics Inc. of Georgia. He also continues to develop new technologies in oxygen sensors, multispectral imaging and optical sensors.
Q: How difficult is it to transfer a good idea or technology into a business these days?
A: In some ways, it’s easy; in some ways, it’s hard. It is still true that if you are good at what you do – run your business with integrity, make sure your customers are satisfied – then word will spread and your services will be in demand.
If you are trying to start a business based on a new technology, it can be difficult. The ever-increasing pace of technical change gives you an ever-shorter window of opportunity. More importantly, the culture or environment where we hope to sell is changing even faster.
Q: What is the most important thing that entrepreneurs should keep in mind at the technology design stage?
A: Design for flexibility. What the market wants now may change quickly; the supply of devices and components you need for your product may go out of production; competitors can release products with superior performance or features without notice; product life cycles can be very short. Remember that if you are successful, your new product needs to be part of an ever-growing product family. Plan ahead; keep your options open.
Q: How necessary is it to have business partners, and how should you go about choosing them?
A: You need a set of people who will help you grow your business. Start building your network of stakeholders right away. Let your stakeholders know about your progress, seek their advice and guidance to help solve challenges, and use them to recruit new people to your team.
You may also need to bring in partners – team members who have an equity stake in the company. Partners are needed to bring talent and expertise that you lack, and sometimes they bring funding or technology as well. Partners must be as committed to success as you are, and you need to feel very comfortable working with them. Partners are expensive, so choose carefully.
Q: How can engineers or scientists best write a business plan if they have had no business training?
A: Writing is easy – the hard part is planning the business. This takes thought, effort, skill and imagination. Prior experience is not mandatory.
When Ocean Optics was just an SBIR company, we luckily signed up for a six-month business-planning mentoring exercise. We continued to develop our plan over the next year. Most importantly, we followed that plan for the next 15 years. The plan made it easy to make day-to-day decisions that fit into the bigger context. If you feel like you don’t have time to plan your business, you are very wrong. You simply must do it.
The most critical part of the business plan is the expression of the very heart and soul of the venture. What is your essential selling proposition? You can think of this as, simultaneously, your elevator speech for investors, advertising tag line, what you say when people ask, “What does your company do?” and even the epitaph on your gravestone after a lifetime of success. If you can’t convey this in 10 words or less, you need to keep thinking about it.
Your business model is also critical. Simply put, how will you make money? Understanding the money model requires that you look at three financial parameters: profit, equity and cash. Accounting has its own elegance, and creating a financial model in a spreadsheet that links these three parameters is something every entrepreneur should do.
I am also very partial to developing a selling platform. This is similar to a branding statement, but it’s more: It’s the story of your company. The story is all-important – it gives context to your offering.
Q: Is it a particularly difficult time to gain investment? Do you have any key tips for attracting investors?
A: It’s always hard to raise money! At Ocean Optics, I calculated I could earn about $1000 an hour selling spectrometers, or I could raise capital at a rate of about $50 an hour. Now there are more avenues to raise money using crowd-funding vehicles like Kickstarter, but there is more competition for those funds as well.
When you approach professional investors, it gets harder. Now they want to see proof that your team is qualified, and they still need to feel the passion and drive that makes startups successful. Professional investors will also look for factors that will reduce their risk [such as patents; exclusives; proprietary technology; great margins; having customers committed to buy; and having accountants, lawyers and bankers in your team]. Having other professional investors already signed on really lowers the perceived risk.
Technology-based companies also have another hurdle to overcome. You can have the greatest PowerPoint presentation in the world, but that’s not going to be sufficient to explain quantum optics, metamaterials or anything more technical to a financial person. Third-party endorsements from customers, independent engineers and scientists can help. Winning awards like Photonics Spectra’s Circle of Excellence [now called the Prism Awards, presented by Photonics Media and SPIE] goes a long way, too.
Often investors try to minimize their risk by “jumping on bandwagons.” It’s very tempting to mold your company to fit the profile of the latest craze, but be careful. Never try to sell yourself to an investor as something you are not.
Q: Do products ever fail at the launch stage? How can startups guarantee success?
A: Lots of products fail at launch, but it’s hard to even remember them. The main reason products fail is no one wants to buy them. Technical issues, quality problems, supply disruptions and the like can all be fixed. “No customers” is a problem that can’t be fixed so easily. You should always have at least a small group of potential customers in on the development, offering suggestions and committing to buy the product when it’s ready.
Mike Morris’ top three tips for startup success
1. Know your industry: Go to trade shows, read trade journals, attend conferences, and meet and talk to people. Build your network.
2. Know your customer: Visit potential customers; get to know their problems, their dreams and their aspirations. Find out how they live, what makes them happy, who they talk to, what they read and where they go to keep up with the latest in their field.
3. Marketing is everything: You can subcontract lots of things to outsiders and consultants, but you can’t subcontract the essence of your business. Being an entrepreneur is a leadership and vision challenge, not a management exercise.