Future is bright for CorkBIC client Nualight as investment funds flow in

22 October, 2009

IT'S been less than six months since Nualight secured €5m from the ESB's investment fund and the Cork firm has already returned to the fundraising trail.

"We're looking to raise another €5m," says chief executive Liam Kelly, who's expecting to seal the new deal by Christmas, encouraged by a "lot of interest".

The sunny outlook is a far cry from the headier financial days of 2004, when Nualight's pitches for early finance fell on the deaf ears of Ireland's venture capitalist community.

Back then, Mr Kelly presented would-be investors with a vision for a company that would create the first ever energy-efficiency LED lights for supermarket fridges and freezers.

Mr Kelly had the necessary pedigree -- he'd already bred an LED start-up from birth to a multi-million euro sell-off -- but the investment community still refused to bite.

"They were heavily focused on IP [intellectual property]," recalls Mr Kelly. "What we were doing was a mixture of in-house developed patents and ex-house technology we'd license.

"Connections with customers were a very important part of our business too, so we didn't really fit their IP model."

Five years later, Mr Kelly's Nualight fits snugly into the fashionable 'clean-tech' box since its LED lights are more environmentally friendly than the fluorescent ones they're replacing.

Mr Kelly's 2009 pitch also has the benefit of a proven market -- aided by €800,000 worth of BES investment, Nualight had already gotten its LEDs into thousands of supermarkets across Ireland, the UK, Europe and the US by the turn of the year.

"We had customers, we had sales, we had a plan that made sense," says Mr Kelly. "Had the ESB not invested at the time, we did have other people who were quite willing to."

As soon as the first €2.5m of ESB cash hit Nualight's bank account the Cork firm embarked on a recruitment drive, vowing to create another 60 jobs to bring its headcount to 80. So far 15 of those new staff have already joined, including some "very senior management".

There might be a recession on but you wouldn't think it to listen to Mr Kelly recite plans to double Nualight's turnover this year and treble it again in 2010. Beyond that, the forecasts get more dramatic -- Mr Kelly says Nualight, which has yet to turn a profit, intends to be a €100m company with "probably 100 staff" in five years' time.

Nualight's pitch is three-fold; the firm says its products are environmentally friendly because they use less energy; are cost friendly as companies have to pay for less energy; and are sales friendly as they create an aesthetically pleasing environment that promotes buying.

"If you've got a 100-watt fluorescent bulb in a freezer, 95 of those watts are becoming heat that then has to be removed from the unit," says Mr Kelly.

"For LEDs there's a lot less heat, and you can get the same illumination with less watts so it's cheaper."

As for the recession, Mr Kelly admits that it makes things "harder" since "a lot of capital expenditure decisions have been delayed" regardless of Nualight's promise of a three-year payback.

"The market is big enough that you can accelerate the growth somewhere else," he adds.

"Food is a good area because people need to buy food."

Nualight also has the benefit of multiple customer classes -- if retailers aren't biting, fridge and freezer manufactures might be minded to incorporating Nualight's LEDs into their new designs, or installers might get in on the game.

Firmly anchored to its 25,000 sq ft Cork premises, Nualight also takes a broad view of its market place, going up against competitors Phillips and GE on their home turf.

"Ireland will probably be less than 5pc of our business by 2010," says Mr Kelly. "We want to be the leading player in Europe and a significant player in the US."

All-out world domination, however, isn't on Mr Kelly's immediate agenda. "Asia is something that perhaps we'd look at later," he says. "A small company always has to be very aware of not overstretching its management bandwidth."


Mr Kelly takes a similar view of the LED technology he works with -- in his last company he used LEDs to illuminate quality control systems in factories. However, Nualight's brief is confined to using LED for lighting fridges, freezers and some high-end retail.

"A lot of young technology companies make the mistake of trying to do everything," says Mr Kelly. "In fact, you really just have to pick the most attractive one or two things and start wheeling that out, if you try to do everything, the sales and marketing will kill you."

Having avoided being killed by sales and marketing, Mr Kelly is gearing up for a "very exciting year", as he contemplates a "couple of very big opportunities in the pipeline" that he's "pretty confident" of turning into multi-million euro deals.

But even buoyant businesses like his aren't immune to the massive changes that have taken place in Ireland's financial landscape and the topic of banks draws an immediate frown.

"They're very, very difficult," Mr Kelly says. "It's not clear they have money to lend right now. There are facilities which in principle we should have access to, but in practice it's not clear we'll take them.

"There are situations where the bank will provide invoice discounting but will expect the ceo to sign a personal guarantee, even if the ceo only owns a minority of the company. That's one of the inappropriate things that seems to arise."


The international financial crisis is also making its presence felt chez Nualight, as the supermarket behemoths play for extended credit terms.

"We've had customers who look for 60 days. If the business is interesting enough and the gross margins support that, then we'll do it," says Mr Kelly.

"Internationally, there's a very big company that claims it will only do 120 days. They claim people are accepting it, but that's probably the exception rather than the rule."

The "inappropriate" behaviour of banks and the unreasonable demands of the big multiples aren't enough to dent the spring in Mr Kelly's step, though, as he looks forward to all the possibilities afforded by the fresh €5m and the second €2.5m from ESB in early 2011.

Fundraising beyond that is anybody's guess. "It's possible somebody might want to buy the company but you can't really be focused on that right now," says Mr Kelly.

"Right now we're focused on building a fast-growing, profitable business."

Source: Irish Independent



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