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Monte Carlo simulation is a well established method for simulation in engineering models - including ray tracing and tolerancing of optical systems. Monte Carlo simulation, Real Option, and other advanced mathematical methods are being applied more and more to financial modeling and valuation of high risk, intangible assets such as intellectual property, R&D, and venture capital financed businesses.

When start-up or growth capital is not available or at a very high cost, bootstrapping is a feasible strategy – even for high technology ventures requiring significant assets, a highly specialized and expensive workforce, and years to bring its first products to market. It is often, however, a last resort – considered only after burning through many months shopping business plans to venture capital firms, lenders, or those at established corporations managing the R&D budget. Instead, consider bootstrapping and harvesting your most valuable asset – your technology – for cash, strategic customer relationships, market intelligence, application know-how and more.

According to research from SPIE, there are about 2750 companies worldwide supplying more than $150billion of photonics components and materials. Of these companies, more than 2000 realize revenues of less than $10million, accounting for less than 4% of worldwide sales. With photonics components at the core of most modern technologies, this is an exciting time for the industry.  So, have the stars aligned for more photonics companies to transcend the $10million plateau?  If so, what can a small business do to become a larger market participant?

As M&A activity heats up, optics and photonics companies are increasingly looking across borders for a good strategic fit — and that creates both challenges and opportunities.

Additive Manufacturing, also known as 3D Printing, is an innovation grounded in photonics. It is a process for making a physical object from a 3D digital model, typically by laying down many successive thin layers of a material. The technology is diffusing from prototyping to large scale manufacturing of final parts. Today, early adopters including GE, Siemens, Google/Motorola, and Boeing are 3D printing intricate, high mix, low volume, and weight-sensitive final parts.

Photonics is the science and technology of generating, controlling, and detecting photons, which are particles of light. The 21st century will depend as much on photonics as the 20th century depended on electronics. A core enabling technology, photonics applications include: drug discovery and early diagnosis of disease, cell phone displays, energy-saving LED lighting, solar energy, 3D printing, fiber optic communications networks, and more.

2015 was an extraordinary year for M&A. There were 16,837 transactions worth $4.3trillion announced globally. Although a drop in volume from 17,397 transactions in 2014, the total value rose 31% from 2014, breaking 2014’s previous record of $3.3trillion. Compared to the M&A market as a whole, the photonics industry and vertical markets employing photonics technologies as core differentiators realize higher average valuation multiples than other sectors.

Photonics has been at the core of many modern day inventions and economic growth for decades now. However, the environment for photonics technology and component providers remains highly fragmented and fiercely competitive with their OEM customers and end-users further up the value chain realizing more of the value. Is that changing? It appears the public market leading photonics companies are catching up with their customers and capturing more value in 2016.