Welcome to the 130th edition of Deep Tech Catalyst, the educational channel from The Scenarionist where science meets venture!
This week, I sat down with Tobias Egle, Senior Associate at Fine Structure Ventures. We explored how advanced materials are becoming increasingly critical to photonics, why foundry compatibility and manufacturing risk matter as much as laboratory performance, how photonics startups can shorten lengthy development cycles, and which customer and foundry commitments provide credible early validation.
Key takeaways from the episode:
🔬 Materials create value when they improve the system
A novel material is not a business on its own. Customers buy qualified components with defined performance, reliability, and a scalable supply chain. The strongest companies connect materials innovation to a measurable improvement in areas such as energy efficiency, bandwidth density, or integration.
⚙️ Foundry transfer is a multi-year engineering program
Moving from a university lab to a commercial process requires repeated cycles of tape-out, measurement, redesign, and qualification. These cycles can take six to nine months or longer, making iteration speed a strategic advantage. Working with multiple foundries or parallelizing development can help reduce time between learning cycles.
🏭 Foundries evaluate risk, volume, and opportunity cost
New materials can introduce contamination risks, require dedicated equipment, and consume significant engineering resources. A foundry therefore needs to see a credible path toward meaningful wafer volume. In some cases, tier-2 or tier-3 foundries may be more willing to experiment with specialized processes than leading manufacturers.
📈 Strong validation requires real commitment
Letters of intent alone carry limited weight. Paid evaluations, pilot agreements, and strategic customer investments provide stronger evidence because they involve money, engineering time, fabrication capacity, or purchasing intent.
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BEYOND THE CONVERSATION — STRATEGIC INSIGHTS FROM THE EPISODE
Materials Are Reshaping Photonics
Photonics is becoming a critical part of the infrastructure required to move increasingly large volumes of data. Within that stack, three areas stood out throughout our conversation: lasers, modulators, and packaging.
Each depends on materials, but a compelling solution does not begin with the material itself. It begins with the performance constraint the material can remove.
For instance, a modulator converts an electrical signal into an optical one. Conceptually, the function is simple. Strategically, it influences two of the most important metrics in optical interconnects: energy per bit and bandwidth density.
Energy per bit measures how much energy is required to encode information into the optical domain. Bandwidth density reflects how much information can be pushed through the optical pipeline.
This is where innovation can become commercially meaningful. A new material creates value when it enables better performance at a point in the stack where the industry is actively seeking faster and more energy-efficient solutions.
The material is not the end product, it is what allows the component to address a critical system-level constraint.
Performance, however, is only one side of the challenge. The material must also be turned into something that a semiconductor fab can integrate into its process and manufacture at high yield.
Raw Materials, Supply Chains, and Markets
Photonics bottlenecks do not begin only at the device or fabrication level. In some cases, they extend all the way back to the availability of the underlying materials.
Indium phosphide
Indium phosphide is a key active material for producing lasers, which are expected to become increasingly important as industry roadmaps move toward co-packaged optics.
The challenge is that indium is generally obtained as a co-mined material rather than through a standalone supply chain. This means that the bottleneck can extend beyond wafer production to the availability of the raw material itself.
This illustrates a broader principle in deep tech: a system-level bottleneck can originate far upstream. Even when the need for more devices is clear, growth may still depend on access to specialized materials and reliable sources of supply.
Beyond data centers
AI data centers are a major market for photonics, but they are not the only environment in which new materials and components can create value.
Biosensing presents a different set of requirements. Raw performance may be less important than the ability to integrate photonic components into a broader biological or sensing application.
Quantum technologies can also provide an early proving market.
These applications may require extremely low optical loss because every lost photon can affect performance. Volumes may remain limited, but customers can be willing to pay for components that meet unusually demanding specifications.
Defense can serve a similar role for technologies based on specialized processes. This sector may be more willing to support the transition from laboratory production to an early manufacturing process.
From Lab to Manufacturable Component
A working laboratory device is only the beginning of the company-building process. For a photonics startup, the real challenge is turning that device into a component that can be manufactured at high yield, qualified within a process, and supported by a clear data sheet, proven reliability, and a viable supply chain.
First, a startup should not focus on selling an “innovative material.”
Customers buy a laser, modulator, or other component with a defined data sheet, proven reliability, and a supply chain capable of supporting production.
The material may create the underlying performance advantage, but the component is the commercial product.
This distinction shapes the entire business plan.
The fabless path
A startup will generally aim to follow a fabless model, except in the rarest cases, when it secures the resources required to build a specialized fabrication facility.
However, fabless does not make process transfer a simple external expense. Transferring a process to a foundry is a multi-year engineering program that should be treated as a central part of the company’s roadmap.
The journey often begins in a university research facility, where the first device is fabricated.
The next step is usually a multi-project wafer run at a commercial foundry, where components from several customers are pooled to reduce the startup’s tape-out cost.
This gives the startup its first chip from a commercial foundry, which it can measure and iterate on while improving foundry compatibility.
Iteration speed becomes a strategic advantage
The difficulty lies in the time between iterations.
A startup may wait six to nine months, or longer, between tape-out and the return of fabricated material. Once the device is measured, the team must revise the design and begin the cycle again.
These long cycles can cause a startup to get stuck, particularly because it is unlikely to be a priority customer for the foundry.
One way to reduce the turnaround time is to parallelize development.
The company may tape out at two different foundries or organize parts of the engineering process so that several activities advance at the same time.
The goal is to shorten the turnaround time between tape-out, receiving the fabricated material, measurement, and redesign.
For a photonics startup, the ability to shorten this manufacturing feedback loop can therefore become a strategic advantage.
The Foundry Needs a Credible Volume Story
A foundry does not evaluate a startup only on the quality of its technology. It also evaluates process and contamination risk, future wafer volume, and the opportunity cost of committing engineering hours and tool time.
From the foundry’s perspective, the central question is whether the startup can eventually translate into meaningful wafer volume.
The foundry ultimately wants to understand whether the process could translate into wafers per month, how many, and whether it could eventually use a significant share of the line’s capacity.
This is why relationships and industry credibility matter. A professor, advisor, or early executive with foundry experience can help the startup gain attention and become a higher priority for the foundry.
New materials can create contamination risks
A new material can threaten the integrity of an existing process. For instance, a metal in one layer may diffuse into an adjacent layer and degrade the device’s performance.
Materials such as gold, lithium, or other metals that could contaminate a CMOS-adjacent line may trigger a detailed contamination review.
Where a contamination risk is identified, the foundry may require quarantine tooling, separate wafer carriers, and strict handling protocols.
In other words, for a foundry, the concern is that a contaminating element could compromise the broader manufacturing process and affect the performance of the resulting chips.
This is why few foundries may be willing to accept the risk of introducing such materials into a CMOS-adjacent line.
The right partner may not be a leading foundry
A tier-2 or tier-3 foundry may be more willing to experiment, particularly if it can dedicate an older line or separate equipment to the process.
Such a foundry may accept the risk in the hope of commercializing a technology that could become an important future opportunity.
Even then, the commercial logic must be strong.
Every hour spent supporting an experimental process is time that could have been allocated elsewhere.
The startup must therefore present a credible path toward meaningful wafer volume that can justify the foundry’s engineering hours, tool time, and process risk.
Building an Investable Roadmap Before Full-Scale Production
In photonics, development cycles can last many years—potentially around five years before a qualified and yielding process reaches production. During that time, competing technologies continue to improve.
A startup therefore needs more than a marginal advantage. A useful rule of thumb is the potential to deliver at least a tenfold improvement in a metric that matters to the customer.
The relevant metric will depend on the specific use case. Ideally, the improvement should be even greater.
The technology must still be compelling by the time the process is qualified, yielding consistently, and ready for production.
Early validation must involve real commitment
A letter of intent may indicate interest, but on its own it provides limited evidence of demand. Stronger validation appears when a customer or foundry commits resources.
A paid evaluation or pilot agreement is more credible because it involves payment or the dedication of engineering hours and fab runtime. A development agreement with defined milestones, clear success criteria, and a well-scoped statement of work is stronger still.
A strategic investment from a customer can reinforce that signal further.
The common element is a customer with the skin in the game. The most credible early agreements show that the partner is willing to commit money, engineering hours, fab runtime, or a conditional purchase commitment.
For investors, this demonstrates more than market interest. It can show that the technology is beginning to connect technical progress, manufacturing execution, and a credible path toward commercial adoption.
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