Neal Hunter's new LED play nears funding

September 12, 2006
lighting company founded by Cree co-founder and former Chairman Neal Hunter is close to garnering its first financing from a group of overseas investors.

LED Lighting Fixtures has obtained commitments from several Asian companies to buy chunks of the company, says Hunter.

He declined to name the investors or the size of the investment, but in previous interviews he has said LLF plans to raise $20 million in the initial funding rounds. 'We're bringing in money from strategic partners,' says Hunter. He says the funds are coming from a combination of raw material suppliers and potential future customers of LLF's lighting products. The core of LLF's bulbs will be light-emitting diodes, or LEDs, which are likely to be supplied by Durham-based Cree. 'Each of these partners brings something to the table,' says Hunter. By giving up a slice of LLF to these investors 'it locks up some of our supply chain partners. They've got some skin in the game.' On Aug. 17, the 16-worker LLF amended its articles of incorporation to allow the company to issue 100 million shares, including about 10 million preferred shares. About 448,000 of the preferred shares are being issued as part of the series A fundraiser, according to the filing. The document also sets terms for converting those shares into common stock if LLF raises more than $50 million through an initial public offering of stock.

The fundraising would allow LLF to launch its first product - the equivalent of a 65-watt light bulb that's imbued with miniature LEDs instead of a filament. That launch is planned for the first quarter of 2007.

With a retail price of less than $50, LLF's first product, which is targeted at residential users, would cost much more than a regular light bulb, which can be bought for $1 or less. But the real savings, according to company officials, will come in the form of energy savings.

LLF says its bulbs will consume less than 10 watts of power and cost about $2 in annual power expenses. The cost of powering a 60-watt incandescent bulb for a year has been estimated to be $58.50. 'If you look at the cost over one year, it is not much higher' to buy and power an LED bulb, says Cynthia Merrell a former Cree chief financial officer who left the company to join LLF.

Hunter points outs that LED lights are made of unbreakable polymers instead of glass, don't heat up as do filament-based bulbs, and are not toxic. 'The lifetime of LEDs is measured in decades, not in years,' he says. To take over that market, though, LLF would have to displace giants such as General Electric and Philips, which dominate light bulb sales. Researchers who follow trends in the LED sector say the technology has advanced in sharp spurts since it was discovered in the mid-1960s.

Early LED technology was 'OK for displays but did not lend itself to high-volume production,' says Robert Kolbas, a professor of electrical engineering at North Carolina State University. After finding some early military applications, LED technology is now slowly entering the mainstream. 'It's been a long material science battle of getting the defects out of these materials and to get it to a reasonable cost,' says Kolbas, who points out that some traffic lights on Avent Ferry Road in Raleigh have LEDs in them.