March 2004

Spinoff Doctors

A company formed to commercialize Lucent's underused technologies expands its portfolio to include British Telecom and Philips Electronics.

By Wade Roush

A Lucent Technologies venture capital spinoff-initially launched to commercialize underused technologies from the company's labs-has secured sole rights from British Telecom and Philips Electronics to do the same job for them that it's doing for Lucent.

An early success made this leap possible. In 2002, the Lucent spinoff, New Ventures Partners of Murray Hill, NJ, sold one of its first companies-Celiant, which took a radio amplification technology out of Lucent's Bell Labs and developed it for next-generation cell-phone networks-for $470 million. And that meant New
Ventures Partners had cash and credibility "to talk to other corporations and say, We'll put up the capital and do this for you too, and in return, we'd just like to have exclusive access to your labs,'" explains managing partner Andrew Garman.

British Telecom was the first to grant this access, in return for benefits such as a part of any future sale or public offering of resulting companies. In 2003, New Ventures Partners launched four new companies based on technologies from BT's labs. One was Microwave Photonics, a Los Angeles concern developing a radio-over-fiber technology that makes it possible to expand cell-phone networks without adding base stations. Maurizio Vecchione, Microwave Photonics' president and CEO, says New Ventures went well beyond the role of the traditional venture capital firm-most importantly, negotiating licensing agreements with BT that didn't burden the startup with royalty payments.

Late last year, Philips entered into a similar agreement with New Ventures. While other companies, such as Arch Venture Partners in Chicago, specialize in building startups around technologies from large R&D organizations, New Ventures "probably has the most advanced set of processes and the deepest network of contacts," says Henry Chesbrough, a professor in the Haas School of Business at the University of California, Berkeley. British Telecom and Philips are now tapping that network.