Which Ph.D. will serve me best?

Aug. 1, 2001
I overcame the temptation of a high-paying job to go on for a Ph.D. Should I consider a major in physics instead of optics? My view is physics provides more options, whereas the optical-network business may go out of favor.
1304qa Chang New
Q: I overcame the temptation of a high-paying job to go on for a Ph.D. Should I consider a major in physics instead of optics? My view is physics provides more options, whereas the optical-network business may go out of favor.A: It is good to see that you are planning for a secure financial future. Since there are successful individuals in almost every field, a better starting point is for you to think about what you have a passion for. Chances are you will do well in what you really enjoy doing. The truth is a formal education is really to prepare you for lifelong learning, and the major you pick is enabling more than it is limiting. That is, what you do later in life can be quite different from the specialization of your thesis topic. A Ph.D. in physics prepares you well for just about any career because it is at the foundation of many sciences. Some physicists even successfully migrate into life sciences and make significant contributions there. True, optics is only a branch of physics, but one can get into lasers and quantum electronics and apply it to problems in basic physics, too. And since it is generally acknowledged that "optics is enabling," you are not going to run out of job or business opportunities by majoring in optics. It is also safe to guess that optics in telecommunications is not going to run out of steam anytime soon.

On a more philosophical/psychological level, you may want to take a moment to think about what you want to be when you "grow up," because what one is able to accomplish is often a self-fulfilling prophecy to one's vision. And if your vision is a bit cloudy at this time, pay attention to the personality/philosophy/views of the thesis adviser you pick, because your vision can be greatly influenced by your professor during this formative stage of your life. Most young people are surprised when I ask them to define what they will be like at age 60. However, I must confess that when I was your age I did not realize how useful that exercise could be.

Q: What are the ins and outs of a bridge loan?A: A bridge loan is used to tide a company over until the company can complete its next round of financing. The loan usually bears interest and may have warrant coverage. That is, the loan converts to stock at a discount off the next round price. Depending on the risk perception, warrant coverage could be in the 15% to 50% range. In normal times, a bridge loan is used to provide operating funds allowing time for lawyers to draft documents after investors agreed on a term sheet to invest; or it is used to provide time for the company and its investors to agree on an appropriate valuation. For example, the company is optimistic about closing a big order, or investors are nervous seeing a product development milestone missed.

Given that valuations for privately held companies have taken such a drastic downward spiral in recent months, a bridge loan is used to allow time to see how the stock market would perform "a couple of months" down the road. What is happening is VCs are tired of being forced into making bridge loans to keep their portfolio companies afloat because it is very difficult to raise money from new investors. Also customers and service providers are nervous, interpreting the need for a bridge loan as meaning "the company is in trouble." Another problem is when the bridge loan is sizable, new investors view it as a way for inside investors to take advantage of the situation and would therefore demand a lower valuation to match. And since warrant coverage is a discount on the valuation, it creates a negative feedback loop to argue for lower valuation.

My advice is for the company to go straight to getting the next round funded to avoid dealing with the uncertainty of the stock market. And if you have to use a bridge loan, keep it small and stretch your spending to make it last.

Q: How open should I be with my investors?A: I always advocate "honesty is the best policy." As a practical matter, people always think of the worst when they don't have complete information, and surprises breed distrust. On the other hand, you must provide some degree of filtering by challenging yourself because perception is not always reality. If you are a very optimistic person, you might be totally oblivious to problems and wind up providing only positive feedback to your investors. The opposite can result in an impression that the company is problematic. So, be open, but balance your views by having people around you who see things differently.
About the Author

Milton Chang

MILTON CHANG of Incubic Management was president of Newport and New Focus. He is currently director of mBio Diagnostics and Aurrion; a trustee of Caltech; a member of the SEC Advisory Committee on Small and Emerging Companies; and serves on advisory boards and mentors entrepreneurs. Chang is a Fellow of IEEE, OSA, and LIA. Direct your business, management, and career questions to him at [email protected], and check out his book Toward Entrepreneurship at www.miltonchang.com.

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