Irvine-based Menlo Micro Inc. has already hit a few milestones that often take fellow startups years to accomplish.
The company has redeveloped one of engineering’s most basic components, and enters the market with the financial backing of four global businesses—including Aliso Viejo-based chipmaker Microsemi Corp. —and a cornerstone customer.
Menlo Micro was born only a few months ago through an $18.7 million investment from Microsemi, GE Ventures, Corning Inc. in New York and Washington, D.C.-based Paladin Capital Group.
Its key offering—a modern take on the electronic switch—took GE engineers more than a decade to fine-tune. The technology, groomed over the years through tens of millions of dollars in research and development, was spun out of GE’s venture arm into a stand-alone company.
Menlo Micro’s scalable microelectronic machine system, known as MEMS in engineering circles, has been billed as a solution to a long-standing shortcoming with contact switches when it comes to reliability. An electronic switch’s beam eventually fails due to metal fatigue, a common symptom of wear and tear.
The switch eventually stops springing up, which causes a short—or prevents a system, such as lighting, from turning off.
“What GE did was invent a material that solves that issue,” Menlo Micro Chief Executive Russ Garcia said. “This is the reinvention of the switch. It’s the most basic fundamental building block of all of electronics.”
Garcia held a similar post at Irvine-based chipmaker WiSpry Inc. before its 2015 sale on undisclosed terms to AAC Technologies Holdings Inc. in Hong Kong, and spent nearly five years leading worldwide marketing for Microsemi.
GE, which posted revenue of $117.3 billion in 2015, has already deployed 35,000 of the devices into magnetic resonance imaging, or MRI machines. The Fairfield, Conn.-based company is among the world’s biggest suppliers of MRI machines.
“We basically have a big brother that’s also a customer,” said Garcia, who projects that the company will generate several millions of dollars in sales this year.
Strategic Alignments
The deal highlights the strategic alignment of investors.
Microsemi, a frequent backer and acquirer of companies, gains fundamental technology complementary to several initiatives under way today and others in the pipeline.
“This technology itself has enormous potential impact in medical, communication and industrial markets,” said Steve Litchfield, Microsemi executive vice president and chief strategy officer. “There is a close collaboration between the Menlo Micro and Microsemi teams, as is typical in investments that Microsemi makes in early-stage companies.”
The technology is built on glass. Corning, which posted 2015 revenue of $9.1 billion, is one of the world’s largest glass suppliers, particularly in electronics.
Litchfield took a board seat at Menlo Micro, joining Garcia, Paladin Capital Managing Director Paul Conley and Risa Stack, general manager of new business creation at GE Ventures.
Menlo Micro is targeting several other potential applications for the technology, including military radios and other wireless communication equipment, and the high-powered radio frequency market. The company has had initial discussions with several large network equipment manufacturers, but Garcia declined to name them, citing the early nature of the talks and longer lead times to production.
Next generation 5G mobile networks, battery management, electric vehicles, medical instrumentation and wireless base stations present other opportunities, along with home automation and industrial Internet of Things, given the device’s ability to remotely control circuit breakers.
“That’s a huge deal,” Garcia said. “There was no technology that was well suited for that.”
Road Back
Following the WiSpry sale, Garcia returned to consulting, including a role as executive in residence with GE ventures. He had deep connections with other VCs, including Paladin, and wanted to get back in the industry, but not with a company starting from the ground up.
He had attended a conference a few years ago where he heard a panel of GE executives discussing the company’s MEMS technology. The conglomerate’s VC arm was looking to spin out the business.
“They were trying to get some customer traction, trying to raise money,” he said.
The stars were aligning.
Only a few engineers were working on the project, including Chris Keimel, who became co-founder and chief technology officer at Menlo Micro. Chris Giovanniello, a vice president of business development at GE Ventures, is also listed as co-founder and runs product development and marketing.
Jeff Baloun, a fellow executive in residence at GE Ventures, is Menlo Micro’s senior vice president of manufacturing operations.
The company is looking to hire product managers, and application and test engineers in Irvine.
Garcia, who signed on for the top job late last year, was attracted to joining a startup with an inside track to success.
“Everything lines up so well,” he said. “I’m a big believer if it’s very simple and it has a lot of applications—the probability of success goes up.”
