He does 12M/yr building lasers

Welcome to another CEO Wisdom Podcast. We have Donald Sipes with us. He's a president and CEO of Optical Engines in Colorado Springs. It's a very interesting business. Didn't have many laser people on that podcast, but it's pretty much stuff of sci-fi. So, Don, welcome to the podcast. Tell us a bit more about yourself and what you've been up to.

Uh, thanks for having me. Um, our company is Optical Engines. We're a deep technology company. We've been in business since 2005. A little bit different model in that we're just a bootstrap cash flow company. We do in lasers and photonics kind of the hardest of the hard. So our customers are the Lockheeds, the Air Force, Space Force, Raytheon, all kinds of different companies, Microsoft, uh, they come to us with very, very difficult problems. After about 20 years, we found we could do almost anything with a very common set of parts. So we've created this thing called the Universal Light Engine. That, uh, space, um, that right there is a That gold thing is gonna go into space, uh, for a power beaming experiment. So, um, we're just making a good living and now we're starting to move into more, uh, sizable applications like quantum computing, directed energy, space power beaming, LIDAR, and, uh, ultra-fast laser, um, surface processing and things like that.

And how did you get into lasers?

Uh, I've been doing lasers for, uh, 42 years. Uh, got really interested in them at school at Cal Berkeley. Then I got a great job at the Jet Propulsion Laboratory in Pasadena doing deep space laser communications. Um, and if you ever see those, uh, the little green laser pointers, uh, that people use. I basically invented that. I was like 24, had my 15 minutes of fame, and then we just started laser companies and doing fiber lasers and things like that.

And how does one invent green laser pointers at 24?

Well, you know, it turned out I, uh, I totally BS'd my way into a job at JPL. They said they wanted a 10% efficient laser to communicate from Saturn. And I said, "Sure, no problem." I got to working there and I realized that the most efficient laser at the time was 0.1%. And that just, you know, necessity is the mother of invention. So I just kept working it and working it. You know, you just— a lot of times really good ideas take, takes years of noodling, you know, to just kind of wear down the problem. And then I, I had actually gotten it up to 8%. So, uh, it's just, you know, technical innovation is a, uh, it's an interesting process, right?

And back then you had your moment of fame. Did fortune follow? Because I don't think it was your own company, right? So what happened?

No, it was NASA. And then, um, uh, for a long time I was really good at making other people fabulously wealthy. So we then, uh, started a company that was, uh, bankrolled by Amoco, the oil company, and we developed a new type of fiber and worked that until Verizon said, oh, guess what, We want 10,000 of those for our, um, our fiber to the home network, FIOS, on the East Coast. And a lot of people got really wealthy. Then, uh, we started Optical Engines, which is— we have no investors, we just bootstrap it, and, um, have yet to be, uh, fabulous— fabulously wealthy from this, but, uh I think we're on our way.

And a lot of people don't have a clue about lasers. What's the application of lasers? Where can these things be extremely useful?

The amazing thing is, um, I have probably worked on 500 different laser applications. Um, it's— you can do anything. You know, we did undersea laser radar, quantum computing, directed energy, various space applications. Like I said, a guy even wants to roast coffee with a laser. So it's never-ending, the stuff you could do with perfect light. And for computing, for sensing, for material processing, You know, we're doing ultra-fast lasers to reduce the drag on an airplane's wing, um, or reducing the drag on a ship's hull. Um, yeah, it almost makes your head hurt. There's so many things that you can do. Uh, finding things to do is the easy part. Uh, we did laser fat removal one time. Um, Finding things to do is really easy. Turning them into products with real markets is the hard part.

Interesting. Um, yeah, it's funny that you say roasting coffee. I wouldn't think that'd be a super scalable application. Uh, but before we get to that, what is a laser? You said it's concentrated light.

What it is, is I call the laser trillion X light. You have your normal sunlight. With a laser, you could make it a trillion times more intense. You can turn a flashlight on and off. With a laser, you can make that pulse a trillion times shorter. You can make the color a trillion times more pure, or you can make the beam a trillion times more pure, so it stays collimated further. If you started Saturn with a laser beam, it's only about a third the size of the Earth when it gets back to Earth. So lasers, you can just make amazing— we have stuff at Fermilab, uh, doing the particles. We're building laser particle accelerators with Lawrence Berkeley Lab. It just never ends.

So, what are the properties of a laser and that would answer the application question? Is it temperature? Is it why most people want lasers? It's just like this thing is super hot and concentrated and it's precise?

Well, yeah, because you can put such intense light, in such a well-defined place. A guy one time won the Nobel Prize for using a laser as a pair of tweezers to move a cell around. Um, they use lasers. The heart of most quantum computers is a laser to trap an ion perfectly, almost still in space. So you can do all these amazing things. First and foremost, for us, we're engineers. We really take it— it's that last 5% of the engineering that really kills you. And that's what we do, you know, crazy temperature ranges, vacuum of space, underwater. Saudi Aramco wants lasers to send them 6 miles underground. To heat water to help with fracking.

So the laser can go through the water and can frack, uh, is that what you're saying?

Or it heats, it heats the water, it's absorbed by the water, it heats it, water has no place to go, so it cracks the rock, it fracks the rock.

Got it. Um, Okay. And the application from an economics perspective, is it in fields like that that have extreme margin, like oil and gas? Is that the best application of it? Because we see it in medical as well. We know that the cost of health is extremely high. Defense as well, right? Where do you see that the core industries where that can have the best of application?

Well, yeah, we're always looking for things where someone could tolerate a high price and a high number. They're high volume. There's a lot of people who can tolerate a high price, but it's just 1 or 2 of them. And those are a lot of fun. They pay the bills. They've kept us in business for 20 years. So we're looking for applications of lasers that are moderately priced but high volume. One of those is quantum computing. A typical quantum computer might require up to 1,000— 1 million of our products in a single quantum computer. The directed energy lasers, you're looking at tens of thousands of those to shoot down drones. So yeah, the key thing is to look for applications that have— that can tolerate a high price and a high volume.

Okay, um, and your clients right now, what does it look like, the roster? Uh, you've been doing that since, what, 20 years? Uh, Optical Engine?

Yeah, 20— 2025 we started.

How much lines do you—

2005, 2005, sorry.

Okay, how much lines do you have right now? Do that clients come back to you? What, what does the business backend look like?

What it usually looks like is a customer comes to us kind of with this Don Quixote dream, the impossible dream. They go through what they want to do, and then in a very sheepish voice go, can we do this? And that's— we had Microsoft come to us that wanted to store data on pieces of glass, Project Silica. They had a laser that took up a room to do it, and they wanted to make it, you know, something that could go in a data center. So then a lot of our work is, okay guys, here's what you got to do. And that's like with Microsoft, that's how we started with them, just say, Here's, here's what we propose to do your system. Then a week later, Microsoft comes back and says, yeah, that's, that's what we want to do. So it's usually that, that's how it— I'd say 80% of the time, that's how it works out. So there's this, this joint discovery that goes on with the customer with their application in hand.

And these contracts, there's— they're consulting contracts, right? You, you go in and then first you have to scope the project, lots of brainstorming with their employees, your employees, or yourself, and eventually they get what, a prototype after a year or two?

Yeah, usually our typical sales cycle is 6 to 8 months. Of kind of architecting, problem solving. Usually we might do like, we have a, um, a laser going up later this year, early next year on the side of the International Space Station. And it's going to send pulses down to Earth and it's gonna map the Earth in 3D. You know, so yeah, there's a few months of kind of brainstorming You know, then we'll turn it into a small study contract, scope it out, give them a flavor of a vision of what it could be. And then we start building a series of prototypes to get it to a point where it's like, okay, now, now let's build the laser that's going to go in space. Wow.

Okay. And How many contracts like these can you handle per year? And are these each like multi-million dollar contracts?

No, they're, they're usually in the, um, uh, $300K to $2 million. And how much can you handle?

How big is the team right now?

We're just about 30 people, uh, We've had, uh, 300 customers in the last 5 years.

That's a lot.

You know, that's a blessing, but it's, it's a curse. Yeah. Uh, we did, um, $5.4 million last year. Uh, we're set to do $12 million this year and hopefully over $20 million next year. So we're just starting after, you know, 20 years of grinding. We're just starting to hit, you know, some, some payback.

That's crazy. Um, and how do you hit 2x? Is it just the compounding of your efforts and building relationship with time, or—

Yeah, that's, that's it. Um, a lot of stuff, you know, we have, uh, new technology going into new applications. Which I refer to as misery squared, because not only do we have to solve a lot of technical problems, the customer has their own technical problems and market problems and price. So about 20 things have to happen, and it only takes a couple of those not happening to scuttle the whole thing. So we've had a lot of things that we thought, rawr, here it's gonna go, we're— it's, it's going now. Like, we had qualified in Samsung, Apple, and LG's plants to weld a ribbon cable to the back of a smartphone display. But right at that time, smartphone production leveled out and nobody wanted to invest in their factory. So we can do everything right, right price point, right everything. And it's the nature of what we do. You know, we sit at the hard, hard, hard, hard end of things.. And where we don't have competition, which is great, but we have a lot of other things that can scuttle, you know, a program fully going to market.

And what's the stressful part of your work? Like, you're in the business of precision, right? And you need perfection, and sometimes that's really, really hard to achieve technically, right? Is that the main stressor?

It can be, especially when it's up against— when you take somebody's money You take somebody's money to do something that no one's ever done before, and it's come time to deliver. Only twice in our history have we thrown in the towel and just said, "Look, we can't do this." But that's the stressful part when you're trying to ship and you're still solving, you know, technical problems.

Is there some discoveries in your space? Do you sometimes make like important discoveries that you or the client can patent?

Yeah, I personally have 50 to 60 US patents. Uh, I just filed a provisional yesterday. Um, so yeah, there's always things. That's the great thing about intellectual property. There can be two properties and you can create a new property right in between those two or things like that. So usually the application and the vision drives the invention because it says, oh, and to do this, I've got to do this other thing. And oh yeah, no one's ever thought of that before. And then, okay, I think we can get a patent here.

And is your patenting strategy mostly defensive, or do you think you can actually make some money off those down the line?

You know, I think it's what we say is we don't defend our patents, but the person who will one day purchase us will defend those patents. So it's, it's mostly defense. Um, we have, um, a laser that's being evaluated by a company that has the largest market share in the wafer dicing market. And they are using this, they've qualified it, we're looking to go into production. And the patents are the only thing keep them from just going around us.

Are you top of line, top of innovation in your space? Like, are competitors lurking?

Well, we think in this, in this area called, um, advanced glass processing, where we work with glass to create fiber optic devices, we think we're literally one of the best in the world. That microscope over my shoulder cost $150 grand. Um, you know, so we think we are one of the top people. Of all the people in the world, Microsoft came to us. So that area is where we think, coupled with our knowledge of applications, makes us a very formidable— we punch way above our weight.

Why is it so costly to build a laser? What are the economics? Can't you make these like infinitely cheaper, just like Elon downgraded the cost of launching rockets to space?

Yes, that's what volume does for you. So yes, we think we have a technology that will, when implemented, reduce the cost of ultra-fast micromachining by 70%. And it— when you build them in volume, the price can really go down. Substantially.

Uh, is it just a matter of volume? Like, is— or are lasers inherently costly to, to build and make happen?

Well, they can be. Our technology, we think, will really drop the bottom out of the cost. Uh, we had built a laser amplifier once that we would sell to Bell Labs and places like that. And it was, uh, 95 grand and it put out 100 milliwatts and it was a big giant box. And then we kind of just worked it. It's a lot of it is simplifying assumptions. And if you look at a lot of like the SpaceX stuff with the best part is no part, they are really good at those simplifying assumptions that can really drop the cost out of things. So, you know, we took this $100,000 amplifier and then sold it to Verizon at 3 watts and $6,000 in a little tiny package. Just improving, working it, simplifying, you know, that's— that it's a process for getting costs out of things.

And what are the components in the machine that we see behind you? For example, like, what, uh, is it opt-in Is there GPUs in there? What are components in that machine?

Oh yeah, that's a very special microscope that can measure nanometers. If I would— let's see. Right here, you see a laser. It looks just like a bunch of fiber. These two little boxes down here, those are laser diodes. They take electricity and make light out of them. And those go for $1,500 apiece, you know, less in, in volume. That's on a big cold plate because this thing makes a lot of heat. And then you see all that spaghetti all over the place, that's the fiber. And so that's typically what these look like. You know, where you can, um, uh, you know, and then we couple of electronics and software and things like that to, um, you know, to do that. Uh, you know, SpaceX, they took satellites from $20 million down to $1 million, but they're still $1 million. So it's, it's, it's cheap but not that cheap. But it's cheap enough, it's revolutionized the market. And that's what you're kind of looking for.

Is it— isn't SpaceX a good, uh, SpaceX, isn't it a good potential client for you?

Uh, yeah, yeah, they're, they're, um, especially in one area that's really starting to take off is this space power beam. Where when you have a constellation of satellites that you can save a lot of money by putting a big laser sending light to, um, smaller satellites, and you can reduce the cost of the solar panels by using this laser power beaming. And we actually have the highest power laser right now going into space. It's a 1-kilowatt laser. Ultimately, people are going to want to put 30- to 50-kilowatt lasers. So if you look at, um, some of these drawings of the data center in space, similar kinds of dimensions and power levels, but instead of powering CPUs, they're powering lasers.

Space applications could be growing, right?

Yes.

Medical for sure. Defense we've talked about as well. How would lasers revolutionize warfare?

Okay, it's very— the lesson has been very clear in Iran. You have, uh, air defense currently is a CapEx problem, okay? You take a two— I mean, an OpEx problem. You take a $2 million missile and you shoot down what could just be a piece of foam, a decoy. Uh, lasers can shoot down drones for $5 each. Because you're just using diesel fuel to create electricity. So lasers solve the OPEX problem, but they replace it with CAPEX problem because the laser could be $30 million and it has a reach of 4 kilometers. So we've been working on putting lasers on drones and drone helicopters where we could reduce the cost of defending an area by a factor of 1,000. So that's the kind of things that, you know, we're looking at on the defense side.

And so you wouldn't have to spend on bullets, right?

Uh, right, and that's right, they— that's right.

And you can take down a missile, an incoming missile, incredibly cheaply, right? Because it's a war of money ultimately. It's like paying $5 million to take down a $100 missile or drone, right?

That's, that's right. Yeah, a lot of times they refer to the laser as the deep magazine. You don't have to bring bullets, you just need to bring fuel.

And what if the— yeah, I guess you need like a very smart system, guiding system that accompanies it, right? Because what if you shoot them, laser in the sky, and you take down a commercial plane? It's like you find yourself in these problems.

You know, that's, um, Uh, that's a very good question in that to fire laser in the United States above the horizon is very, very difficult to do. It's called deconfliction, and you have to do a lot of work to do that. They fired a laser at a drone in El Paso and shut down the whole airport. For that very reason. What was it, 6, 7 months ago? So yes, this is a real issue. In war zones, a lot less so, but yes, that's a real, real issue.

And then when you start doing that, people are gonna call you Don Snipes.

They already do that. There you go.

Where can people find out more about you, Don?

www.opticalenginesinc.com is our website. Our motto is "prove the possible," and, you know, that's what we do. We get all kinds of crazy requests, and then we turn them into reality.

I love that. I was Don and Charles Cormier for another