It's taken nearly a decade, but a lighting tech company — backed by nearly $30 million — is on the verge of a profit. Will the juice last?
In the early 2000s, Silicon Valley veteran Eric Higgs opted for a change of pace, moving to St. Petersburg to pursue a career as a sculptor. He aspired to create large-scale pieces suitable for corporate headquarters and public spaces in a booming economy.
Yet there was a big problem: He struggled to find the right lighting for his projects, particularly an ambitious six-story installation at the parking garage attached to The Element, an apartment building in downtown Tampa. Higgs wanted to light the work with LED lights, which consume less energy than the metal-halide bulbs that were more commonly in use at the time for architectural lighting purposes.
“But because of the problems that were widespread with LEDs — the cost, the light quality and, ultimately, the way they were run and powered — they made very little sense,” says Higgs, now 53.
Another problem: The 2008 financial fiascoes that led to a prolonged economic downturn. “When the banking crisis hit," he says, "that pretty much killed the market” for the kind of art Higgs wanted to create.
“LumaStream is changing the way things have been done in the past … it is disruptive technology.” Dan Hench, a representative of LumaStream’s LED lighting technology to audio/video dealers in Florida
Turns out, what Higgs thought would be a change of pace — sculpture — led him back to the tech sector. It also led Higgs, who worked as chief information officer at CitySearch, which would go on to merge with TicketMaster, in 1998, to launch an new company, proving the old adage necessity is the mother of invention. Another lesson he learned along the way is every successful company, no matter how cool its products are or awesome its services are, needs an outside champion to penetrate a market.
Higgs' new outlet? The lighting industry.
At more than 130 years old and dominated by a few large players, the sector, says Higgs, was ripe for disruption. Big companies, he says, “are typically not the ones who innovate — they innovate through acquisition. It’s the small, nimble companies that take big risks.”
The result is LumaStream, headquartered in St. Petersburg, which manufactures low-voltage light-emitting diode fixture technology Higgs pioneered while experimenting in his garage. Since being founded in 2009, the company has raised nearly $27 million and is pushing for another $5.2 million in capital, of which about $726,000 has been raised so far, according to SEC filings made in November. It has 25 employees at its facility in St. Pete’s Grand Central district and will be hiring several more, mostly engineering and sales staff, as a result of the additional investment.
Higgs declines to disclose LumaStream’s revenue, but says in 2019 the company is on track to turn a profit for the first time. That's thanks to breakthrough deals with the likes of automakers Tesla and Volvo, who’ve chosen LumaStream’s unique low-voltage LED lighting solutions for their showrooms, as well as a rapidly expanding dealership network that’s pushing its products out across Florida, the United States and world. LumaStream’s technology is also utilized by restaurant chains such as Tampa-based PDQ, which was an early adopter and now features the lights in 60 of its restaurants.
FLASH OF INSPIRATION
Like the classic caricature of an inventor, a light bulb went on in Higgs’ head with LumaStream.
LED fixtures not only offer a much wider range of color, hue, temperature and dimming options, but they can run on low-voltage, direct current energy, meaning they can be installed using what basically amounts to an amplifier and speaker wire. And that, in turn, means LED systems don’t have to be installed by licensed electricians, opening up LumaStream’s product portfolio to a new market: audio-video dealers.
“At a much lower voltage, you don’t need to have all of that copper infrastructure,” says Dan Hench of Orlando-based L.P. Hench Co., which represents LumaStream to AV dealers throughout Florida. “LumaStream is changing the way things have been done in the past. Radical is probably too harsh a word, but it is disruptive technology. I don’t ever encounter resistance [to the product]. Everyone who sees it is immediately impressed.”
Hench says LumaStream’s LED lighting systems don’t just look great — they carry a host of other benefits to the customer. Lower voltage (12-18 as opposed to 110) means there’s less risk of fire, which lowers insurance costs. Also, because there are no light bulbs to burn out, reliability is maximized. Real estate developers and builders like the product, too, because it requires less wiring infrastructure, leading to labor and material cost reductions.
Like any disruptive technology, though, “there’s a learning curve,” Hench says. “Builders traditionally have been slow to embrace new technology; it’s new; it’s different; subcontractors aren’t used to working with it. So in that regard, we have to employ a lot of education (about LumaStream.)”
PROVEN TRACK RECORD
LumaStream holds 23 patents, Higgs says, with several more pending. “The patents we have keep people from getting into doing [low-voltage LED lighting] efficiently,” says Jack Weisser, LumaStream’s vice president of national accounts. “There are competitive products, but they’re not as easy to implement.”
That doesn't mean LumaStream’s lighting solutions are cheap. The cost can range from $4 per square foot for basic warehouse lighting to more than $20 per square foot for high-end architectural lighting.
“We’re not competing against products that are the cheapest on the market,” Higgs says. “We are going after applications where light quality makes sense and is valued, and where maintenance can be extremely expensive and difficult, because we eliminate maintenance and we have a track record to prove it.”
With their open, cavernous spaces, difficult-to-access vaulted ceilings and desire for dramatic, adjustable lighting, churches and houses of worship have become reliable customers for LumaStream’s dealers. Also, Higgs says LumaStream has solved the problem of “LED flicker” — the phenomenon that causes lighting to fluctuate when captured in video recordings. Thus, houses of worship, which rely on revenue from private events such as weddings and christenings, appreciate LumaStream’s flicker-free lights because it keeps their customers happy and coming back for more family milestone celebrations.
The company, in addition to its current momentum, is charged up for other innovations.
For one, it plans to allocate more resources toward tunable white light, which can accurately mimic how natural light changes from cool to warm throughout the day. Higgs says tunable white light represents an improvement over the harsh light of the fluorescent fixtures that dominate offices, schools, hospitals, prisons, factories, assisted living facilities and other settings where people spend vast amounts of time indoors. Tunable white light, he adds, also promotes physiological and psychological health and makes people more productive throughout the day because it prompts the release of melatonin, a hormone that regulates sleep and wakefulness.
“In prisons, it’s been proven that a pinkish light calms down prisoners,” Higgs says. “There’s less agitation, fewer fights. And in workplaces where you’ve got people working at night, to be able to inject a bluish, cool light to wake them up at certain periods … that’s been proven to result in fewer injuries, because it keeps people more alert.”
Tunable white light technology could also help LumaStream make further inroads into the lucrative residential market.
While direct competition might not be much of a challenge for LumaStream, access to capital remains an obstacle. That's even with the success it's already had, raising $27 million through in a decade, primarily from local backers such as George Gordon, who's now the company's president and CEO, and angel investors affiliated with the Tampa chapter of TiE Global. “If you ask any startup in this area, the biggest constraint is capital,” Higgs says, “access to the growth capital you need to grow at the right pace and take advantage of market opportunities.”
But there’s a positive flip side to that, Higgs says: Less capital can mean less pressure to turn a profit as soon as possible, and more time to fully explore potential markets. “There's a balance between becoming cash-flow positive and profitable and growing, he says. "The capital raise element of it is incredibly time consuming, but we deliberately intend to become cash-flow positive this year, and profitable.”
Another lesson Higgs has learned in his search for investment capital amounts to this: As soon as you can, find an advocate, a champion — and impress the hell out of them.
For LumaStream, that champion arrived in Bob Basham, co-founder of Outback Steakhouse and PDQ. The latter chain asked LumaStream to create a uniform, brightly lit LED environment. But Higgs insisted on showcasing the technology’s color and dimming capabilities that could change the look and feel of the restaurant in accordance with the time of day.
“I said, ‘Let’s really create an atmosphere that’s going to set you apart,’” Higgs recalls. “And they said, ‘No, we’re fast casual; we want it to be super bright so you can see inside from the street.’ Well, we started [dimming] anyway. And now that’s a branding element for them, part of their overall dining experience. It’s a model that we roll out [at PDQ locations] throughout the whole country. That’s where Bob Basham was very progressive in this thinking.”
PDQ, Higgs adds, “was a huge break, a turning point for us. Bob believed in what we had to offer the market. For someone as prominent as Bob Basham to take a risk with a company that’s doing something innovative … we will always be grateful for that. It launched us into a number of other chains.”