Founder looks back as Coherent marks 40 years in business

EUGENE WATSON

The idea of the start-up company that became Coherent Radiation Laboratories (now Coherent) was stimulated in 1965 by the unwillingness of Spectra-Physics management to develop gas-ion laser products. As manager of sales and marketing at Spectra-Physics, I was aware of the growing demand for continuous-wave lasers producing more power and shorter wavelengths than was possible with the HeNe lasers that had propelled Spectra-Physics into leadership of the emerging laser industry.

The 1966 American Physical Society Meeting in New York proved to be the precipitating event in the formation of Coherent Radiation Laboratories (CRL). The discovery in 1964 of the CO2 gas laser by Kumar Patel at Bell Labs was important because it was the first laser capable of doing useful work. While touring the exhibits, I came across the Perkin-Elmer exhibit and saw a CO2 laser for the first time. I was struck by its simplicity--so simple that I was sure even I could build one. Upon returning home, I attended a Spectra-Physics board of directors meeting to propose that the company immediately begin the development of a line of CO2 lasers. As expected, the board rejected my proposal and I promptly announced my resignation from the company and my intention to start a new venture to produce gas-ion and CO2 lasers.

Acting on the vision

The next few months were filled with uncertainty and drama. I intended that my best friend, Earl Bell, would be a cofounder of the new enterprise and, at first, he signed on. Earl, the discoverer of the gas-ion laser, was an intuitive scientific genius. I considered it crucial that he be the technical leader if the new company was to have a chance of success. During this time, I was looking for investors and decided to approach the DuPont Company who had a strong interest in holography for optical data storage; they had formed a subsidiary, Holotron, to develop the new technology.

I contacted the DuPont New Technologies organization and its leaders invited me to come to Wilmington, Delaware, to discuss my about-to-be new company. They explained their interest in multiwavelength "white light" lasers for their holography project and asked if my new company would be able to provide this capability. Not knowing otherwise, and with Earl Bell as my technical guru, I said, "Yes, we can do that."

It was agreed that I would form my new company and return to negotiate the terms of a possible investment. I was excited--having such a major company as an investor was very beneficial in a number of ways: the prestige associated with the name; their contacts and resources; and best of all, they didn't want a controlling interest in the company--not wanting the stigma associated with the possible failure of the enterprise.

Coherent Radiation Laboratories is formed

Upon returning home, I encountered a serious setback. Earl Bell had decided that, as a founder of Spectra-Physics, he could not abandon his fellow founders to what some viewed as a potentially competing enterprise. It was to no avail to point out that Spectra-Physics was not producing either gas-ion or CO2 lasers.1 I had told the DuPont people that I would have two laser scientists and an experienced ME and EE on my technical team, and so I set out to fill the slots. I was very fortunate to find that Jim Hobart, a skillful laser scientist at Spectra-Physics was attracted to the start-up opportunity. Wayne Mefferd, an accomplished mechanical engineer, was similarly attracted. Jim recommended adding a second laser scientist, Steven Jarrett, who had been Jim's fellow graduate student in Peter Franken's group at the University of Michigan. Finally, I was very fortunate that Bob Rorden, an excellent electronics engineer, agreed to round out our technical team. How fortunate we were--all of these outstanding scientists and engineers coming together to lead Coherent into becoming the world-class technology organization that it is today.

To finance the startup, we used $20,000 of the proceeds from the sale of some Varian stock I had acquired during my tenure there--$175,000 in today's dollars. We moved the enterprise into my house in Palo Alto and set-up a laser-development lab in my laundry room, which had the necessary running water and 220 VAC. I then departed for the East Coast to negotiate a deal with DuPont.

Enter Dupont--with seed capital

After intensive negotiations with DuPont, our deal was sealed on a handshake, paper to follow. DuPont agreed to give CRL a nine-month contract to develop a 100 W CO2 laser with at least one delivery to a legitimate customer. DuPont would pay all expenses and, in return, DuPont would receive an option to take a minority position in the company, to be exercised at the end of the nine-month period. DuPont/Holotron would negotiate an additional contract for the development of two "white light" krypton-ion lasers. When we shook hands Ed Gee, the DuPont representative, offered what was to be an ominous caveat. He said, "Gene, you have to keep uppermost in your mind that DuPont, for whatever reason, may not exercise the option to invest at the end of the nine month period. By that time you will have acquired 'spending momentum' and you need to plan for that possibility."2 Of course, I took this as a routine comment, believing that we would perform and so would DuPont.

The nine months went by in a blur, including a demonstration that the laundry room CO2 laser Jim Hobart had made was real by reflecting the beam onto my across-the-street neighbor's garage door. The growing, darkening, smoking spot proved that the beam was coherent. My neighbor never learned what that mysterious spot was or where it had come from. Jim and I made a memorable delivery to our first customer, the Boeing Manufacturing Research Lab in Seattle. I say memorable because we first became aware that the laser was operating by discovering a hole being burned in our customer's new tweed jacket. The installation was not considered successful until we went to the store and replaced his jacket.

Coherent's existence threatened

The real excitement then began--the nine months were up and I was in the DuPont headquarters in Wilmington to seal the deal on the exercise of their option, and there was some urgency because, as Ed Gee had forewarned, CRL now had significant "spending momentum." Ed began the conversation by reminding me of his earlier caution about the risk that DuPont might not go forward with the deal, for whatever reason--and then he said that the DuPont Company was NOT going to exercise its option. Ed explained that DuPont was facing a possible cash-flow shortfall and all outside investments were on hold. In short, end of deal.

Exit Dupont--enter the Rockefellers

WOW--CRL had performed--who would have predicted that DuPont wouldn't! Stunned, I asked Ed if I could sit in his conference room for a while to collect my thoughts. "Spending momentum" was uppermost on my mind and I needed to find a fast solution. I was thinking, "I'm out here on the East Coast so I might as well talk to East Coast people with money while I'm here." This was before venture capital became organized so there weren't many options. I thought, "It's reported the Rockefellers have money so let's give them a call." I knew the Rockefellers wouldn't be interested in any deal DuPont had turned down, so I needed Ed Gee's help in backing up my story, hopefully complete with a recommendation for my company. I went back to Ed's office and told him my plan. Ed was not enthusiastic about telling anyone about the potential DuPont cash crunch--it was not publicly known at the time. But being the gentleman he was and realizing that my only chance was that the facts be told, he said, "OK Gene, I'll tell one person, on the phone, one time. Your job--be sure I'm talking to the right person."

There were several Rockefeller's listed in the Manhattan phone book but "Rockefeller Family & Associates - 30 Rockefeller Center" seemed right. I called the number and told the receptionist: "The DuPont Company has an equity option in my new company and is quite pleased with our progress but, for internal reasons not publicly known, they are unable to exercise their option. Is your organization interested in picking up the DuPont option?" The receptionist asked me to hold, and after some time, another voice came on the line and said, "This is Charles Smith--what is this option you want to talk about?" I told him the story, and that the DuPont folks were willing to corroborate the facts--but to only one person, on the phone, once. I asked Mr. Smith if he was the right person. After a pause, he said, "Yes, Gene, I am the right person." I put Ed Gee on the phone and, true to his word, he told the complete story, adding that were it not for their cash flow issue, he was certain DuPont would have exercised their CRL option.

At Charlie Smith's invitation, I flew to New York, gave the cab driver the famous "30 Rock" address, and after a swift elevator ride, I entered the hushed, richly paneled inner sanctum of Rockefeller Family & Associates (now Venrock Associates). Subsequent discussions with Charlie culminated in the Rockefeller family members becoming investors in CRL. Shortly after, I received an envelope in the mail (pre-FedEx) containing personal checks signed by the brothers David, Laurence, Nelson, and sister Abby, as well as the Rockefeller Children's Trust, all of which were promptly deposited in the CRL bank account, now seriously depleted by spending momentum.

Sequel

Sometime later, over a beer, Charlie said, "¿you know Gene, you had no chance of getting a hearing at our group--we get over a thousand proposals a year--except I just had to know what was going on at DuPont." 3 Lesson: DuPont gave me a hook--since then I've always tried to have a hook.

REFERENCES

1. Soon after the formation of CRL, Spectra-Physics began the development of both ion and CO2 lasers.
2. "Spending momentum"--a term indelibly implanted in my mind.
3. Just after being named CRL's CEO in 1968, Charlie tragically died from a particularly virulent cancer.


EUGENE WATSON is the founder and first CEO of Coherent. He lives in Wyoming; e-mail: ewatson@wyoming.com.

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