a presentation for
MIT ENTERPRISE FORUM
June 2002
George G. Mueller - Chairman & CEO
Outline
• My Background
• Color Kinetics Overview
• Challenges & Methods for Winning in the Marketplace
My Background
• 32 years old from an entrepreneurial family in Michigan
• Carnegie Mellon University (CMU)
Dual major in Electrical and Computer Engineering, Fine Art minor
Researched in the CMU Field Robotics Center
CMU Business School – left to start Internet Securities (ISI) in 1994
• ISI: 240 people in 19 countries. Acquired by Euromoney
• Raised 9 rounds of private equity and venture capital ($65+M)
• 5 business school case studies on ISI and Color Kinetics
• 6 US Patents, over 80 filings pending
A Quote…
“If you had it as a kid it’s an appliance and if it
was developed since then it’s technology.”
Market Opportunity
• US illumination (bulb, tube and fixture) market
estimated to grow from $22 billion in 2000 to $26
billion in 2005
• In addition, ancillary markets such as power
supplies and controllers also represent multi-billion
dollar markets
• Rapid market penetration*
20% of all illumination by 2010
90% of all illumination by 2020
* Source: Arthur D. Little study for U.S. Department of Energy
Color Kinetics
• Founded in 1997; Leader in Intelligent Solid State
Illumination Technologies
• Creator of Chromacore® a patented technology which
generates millions of colors and colored lighting effects via
microprocessor-controlled red, green and blue LEDs
• Dominant intellectual property position
8 US Patents; 80+ filings pending
• Provide products and solutions to market through own brand,
private label, OEM and licensing
• $48M in private equity financing
• Projected 2002 revenues of $30+ million
Color Kinetics–Technology
• Key benefits of our technology include:
Microprocessor controlled intelligence
Simple networking of illumination systems
Easy reproduction of Color (>16.7 million colors)
• Based on LED technology:
100,000 hours source life 11.4 years of use
Low power consumption Lower energy costs
Low heat output No heat damage
No moving parts Virtually no maintenance
No UV emissions Safe for artwork and fabrics
Core Markets
• Initially targeted Theater & Entertainment
• Later moved into Retail & Visual Merchandising
• Recently entered Commercial & Residential
Architecture, Consumer Products and OEM
Winning in the Marketplace
• CK Customers:
Disney, Saks Fifth Avenue, Sony Loews, Nine West, Macy’s, NYS
Bridge Authority, Ernst & Young, W Hotels, Rainforest Café,
Northwest Airlines, Ford, Volkswagen, Marriott Corporation, Sands
Casino, Royal Caribbean, Harrah’s, Limited Too, Brookstone,
Metropolitan Museum of Art, General Motors
• CK Retailers:
Target, Toys “R” Us, Discovery Channel Stores, Radio Shack,
Spencer Gifts, National Record Mart, Martha by Mail, Newbury
Comics, Electronics Boutique, REI, Sam Goody, Longs Drugs
• CK Awards:
Smithsonian – Permanent Exhibit
2002 MIT Tech Review TR100
D&T New England Fast 50 – Rising Star
Finalist, E&Y Entrepreneur of the Year
CK’s Future
• World-wide Lighting Market = $40 B to $60 B.
• Electric lighting consumes about 20% of the
electricity used in US buildings.
(2001: US Department of Energy)
• Solid State Lighting can create a new lighting
industry of over $50 B/year worldwide.
(2001: Optoelectronics Industry Development Association Tech Roadmaps)
• Estimated that by 2025 SSL could reduce the
global amount of electricity used for lighting by
50%.
(2001: Optoelectronics Industry Development Association Tech Roadmaps)
History of Lighting Innovation
• Between 1800 – 1992, there has
been a 900x decrease in the cost
of light.1 Major shifts have
occurred with the introduction of
new, disruptive technologies that
replaced incumbent
technologies.
• Over the last 4 decades, there has
been a 1,000x increase in the
output (in lumens) of LEDs.
• Flux per package increased at
30x/decade, cost/lumen decreased
at 10x/decade.2 This trend is
accelerating!
Cost Of Light
Cost of Light
$30 $28
$ Per M illion Lum en-Hours
$25
$25 $23
$20
$15
$10
$5
$5
$-
LEDs Halogen Incandescent Fluorescent
• LED Fixture Assumptions: 500 lumens, 48W, 75K hour life & MSRP $300
• Fluorescent does not include ballast costs
• For All: $0.10/kWh and $15 per hour replacement labor
Projected Cost of Light
$50
$45
$ Per M illion Lum en-Hours
$40
$35
$30
Inca ndescent
$25
x
x Ha logen
$20
$15
$10 Fluorescent
$5 x
$-
2001 2002 2003 2004 2005 2006 2007 2008 2009
• Gas & Glass bulbs only without ballasts and fixtures
• LEDs performance and price as per trends & 75k hour life.
• $0.10/kWh and $15 per hour replacement labor
Developing a niche in a market with
significant competition
• Color Kinetics competes in a big industry with billion $
players. (GE, Philips, Osram Sylvania)
• Lighting is a commodity market – it’s slow and boring with
little technology advancement. It’s filled with “Brass, Gas
and Glass” companies.
• Speed is imperative.
• Intellectual property is key. Own the future market space.
• Start in a market segment where the industry giants are least
likely to go and with customers that they can afford to lose.
Marketing a Disruptive Technology
• Revolutionary change = opportunity
• Disruptive technologies are discredited by the
professionals, therefore education is imperative.
You have to become an evangelist and educate the market through intensive
marketing efforts. Tradeshows, seminars, press.
• “Cross the chasm” in a market where there are early
adopters who will buy your beta technology.
Listen to the early adopters for product feedback and guidance.
Latch on to “champions” assist them in communicating to the market.
Get industry professionals talking: Influence the influencers.
Sales and Positioning Challenges
• Focus on smaller market segments where you can learn and
make mistakes, then leverage successes to enter new
markets.
• Start with a direct sales approach as only you and your
company know and are passionate enough to bring to market
something new.
• For a totally new technology, market education is key
Re-define the rules / metrics of competitive comparison
People resist change. Customers resist change. It’s human nature
to say “no” first.
Educate customers to “yes”.
Summary
• Solid State Lighting (SSL)
Breakthrough technology in the lighting market
Disruptive technology
Color Kinetics is leading the way
• Selling and Marketing a Disruptive Technology
Professionals discredit new technologies
Market Focus
Education
Direct Sales
Intellectual Property
Entrepreneurial Speed
Here’s to a bright & colorful future!
“Success is getting what you want, but
happiness is wanting what you get.”
Thank You!
