Hugo da Silva, CEO at Morphotonics: Morphotonics raised over €40m Series B

0:00Hello and welcome back to Scaling Europe show. I'm Sergio Alisson. Today on the show, we've got Hugo. Hugo is a CEO of one of the most exciting European deflec companies at the time. They play a crucial role in the role that and the build of AI glasses. Hugo, thank you for joining me. How are you doing today?

0:13Hugo da Silva:I'm good. Thanks for inviting me. It's my pleasure. Please tell me for those who don't know, what is it that you've built? So, well, so basically what we do, we do an equipment that's our technology, let's put this way, right? to do nano imprinting lithography. What that really means for people who doesn't understand or are not very familiar with the technology, we imprint nano structure. So somewhere between 20 microns all the way to a few hundred microns. What that really means, so we can create all kinds of different structure in photonics or non-photonics applications that can create great devices like AI smart glasses, for instance.

0:56Hugo da Silva:So in AI smart glasses, we do precise imprinting of structures that will build waveguides. And waveguides are, let's say, the virtual display, if you will. That will create the holographic image in front of you. So our technology will get the light that is channeled from the projector. We'll mix the light and create a virtual image or a holograph image, if you will, based on nano structures or nano undercuts or different designs that can get, you know, something that you can see. Basically, it's more like translating the data of AI devices, something you can actually see. Amazing. And you've just closed this 40 million Euro Series B.

1:38What's happened in the last year or two? You know, it feels like there's been a really explosive moment for both, you know, the company and the technology. What's gone on that's led to this explosion?

1:47Hugo da Silva:Well, yeah, thanks for asking. Well, it's actually a bit of a holocaust, you know, doing fundraising, getting connected to the market, get sales done, get machines installed, get our technology out there. But it's been quite a lot, right? But if I were to divide it in a few buckets, on the commercial side, we're being grateful to be extremely successful deploying the equipment in several customers across. So basically the way this works, a lot of the large companies that make all the great devices we are all used to doing our phones or smart glasses, they are all based in different locations but the entire manufacturing it's in Asia, primarily China, Taiwan and Korea so we were building a network or building a team and having commercial traction in those regions and now deploying machines also creating new technology, we just launched a great new technology which is actually dedicated just to the waveguides for AI smart glasses so what I just described earlier and actually sold the first equipment in the high-volume manufacturing to a customer in Asia.

2:55Hugo da Silva:So we are busy, you know, get busy with customers, helping, enabling customers to do mass manufacturing. One of the important things about our equipment, we can do high precision by scaling this high precision. Other technologies out there will either do precision or scale, so we can combine both. That's what makes our technology great. but we are busy deploying technology busy with customers as well as doing fundraising as you can imagine fundraising is not easy as it looks so we are quite busy finishing the fundraising and you know being busy with customer that basically what took a lot of my time last year how does it feel to be done closed around must be it must be a relief well it's a big relief as you can imagine night you are running all kinds of different balls in the air you know doing fundraising, visiting customers, setting up a team.

3:45Hugo da Silva:Obviously, we're structuring a team. As you grow, there's a higher demand of the market. So we need smarter people to be around ourselves. We need to hire top engineers, people that understand the application, people who understand the technology. And now fundraising is almost a full-time job, but all these other jobs are also expecting someone to help. So basically, it's a big relief not doing fundraising, but the life of a company like ourselves is always in a fundraising mode. Even if we've just closed the round, if there are any investors out there that believes in our technology wants to connect, we're more than happy to entertain a discussion.

4:23Amazing. And what's next for you then? You've just closed this round. You're now, I guess, no longer distracted by this fundraising process. You've got a lot of tailwinds behind. You've got a lot of growth at the moment. Where are you going to be spending your time?

4:36Hugo da Silva:So one is developed. So like you said, we are selling a new technology. So we are shipping this new technology by the end of the year. So make sure everything is correct. Right. So we are in a deep tech, highly precision, you know, not only equipment, but the whole process. So we don't only sell the equipment. So we laid down the entire process to make sure customers are successful doing the entire manufacturing. So we are quite busy making sure that we deliver that among all the other customers that we already deliver. Let's say the first generation of our equipment is the second generation. So make sure they are successful.

5:12Hugo da Silva:That's a large part of my job. We are also quite busy. So some of our customers start to push us to different applications or different use cases. Also in the AI era, as you can imagine, AI glass is one thing. But there's a lot of things happening on the data center where we see what they call co-package optics becoming quite an interesting application for us as well. Our equipment and our technology can pretty much deliver on that as well. And we see as a high potential in this market. So we are now in a way making sure we can deliver everything on the AI smart glasses and preparing ourselves to this next step, which is a large market.

5:54Hugo da Silva:it can also help a lot on reducing dramatically the need of energy in data centers, basically making the connection between chips through light. And we can play a role in that sense as well. And tell me a bit about that because that sounds really exciting. Where's this coming from? What's the size of this opportunity? To be honest, right, if I would see in the market, everybody's telling us this is huge, right? So I would not put numbers into that at this moment. is too early to tell. But what we do, the tricks we do basically on waveguides, which is, you know, we are getting lights from a projector and, you know, mix this light and creating a virtual image or a holographic image with extremely high precision that a human eye can see basically display out of it.

6:42Hugo da Silva:So we see that on data center is a similar necessity where they need to translate what's coming out of the chips into a coming from, let's say, electrical or signals into light to transport the light between one place to the other through fiber optics. And there is a connection or interconnection or translation from that physical to light. And that's where we can play a role, which is basically carrying light in a very precise manner, creating like multiple channels, one on top of the other, and very precise small channels that will carry light through. That's precisely what we do on WaveGuide.

7:19Hugo da Silva:So in a way, the technology is very similar. You create this so-called micro lenses array that will translate and then, you know, should light from one distance to the other and basically to fiber optics as a final goal. So we are, in a way, we are new to that, to be honest. We are investigating, but a lot of our customers actually are already sampling customers into this new market. And we decided to also put a little bit of effort on that as well. And you joined a CEO two years ago. In the last two years, the world has changed so much and the explosion of AI and there's a lot of more deep tech in Europe.

7:57How has the business changed to react to the changing world?

8:03Hugo da Silva:Well, first, when I joined, I think one of the biggest challenges was to structure the company in a different way. At that time, we were doing 10, 15 different applications. There was a lot of balls in the air. I think first step, okay, let's laser focus on one and two applications where our product and our technology really brings the value and makes ourselves unique. That was the first step. And basically then create a whole commercial team around. While we were creating a commercial team, just to let you know, right? So we started, OK, well, maybe we should have a team in the US. And then we realized, you know what, we also need a team in China.

8:36Hugo da Silva:And now with the, you know, the way the geopolitics dynamics work is that we know what, we also need a team in Taiwan. And now we realize maybe we even need a team in Korea. So I think every, you know, every month, I just came back out of China at CIOE. And it's unbelievable how things are moving fast in this photonics industry, right? So a lot of brands are launching their AI smart glasses. There's all kinds of flavors, all kinds of models, all kinds of technologies. And then with that, like you said, this whole market on CPO, it's also moving. But you see, there's a lot of dynamics in the market, the geopolitics playing a role.

9:17Hugo da Silva:So we are trying to capture all that and make sure we have a team. But more important, what I believe is that having local people can really help us move fast. doing everything from Europe is becoming extremely difficult. So we are setting up a team in different regions so we can really, you know, learn fast the dynamics of the market. Why is it becoming difficult in Europe? It's not if I'm saying Europe because we are based out of Europe and a lot of things are happening outside Europe, right? If I only have my team sitting in Europe and the whole supply chain for a certain market happens in Korea or in Taiwan, then being here is not really helpful.

9:56Hugo da Silva:Right. So obviously we do have a lot of partners in Europe, a lot of ecosystem partners, but the market that we are in a global market, a global setting. Right. So that's why we need to have eyes on the market. And it doesn't work if you are just traveling back and forward all the time. If you are like two months away from a region, lots of things are happening and we are not capturing that dynamic. And you're working with companies from, you know, the US, Europe, China. Are you noticing a difference in the regional attitudes to this technology? Are you seeing some regions move a lot faster? I think in general, right?

10:32Hugo da Silva:So I think the dynamics of our industry is very similar to any other industry in high tech. There's, you know, major brands out of US or big companies out of Europe. And a lot of the manufacturing happens in Asia somewhere. It could be China, Taiwan, or somewhere else in Asia. And I think obviously there is the speed of the Asians that moves extremely fast towards finding a solution, right? Trying to use our technologies or whatever technology can suit because they are in a way committed to deliver a product on the market as quick as possible, right? And that's, I think, something we can really learn from it that we are trying to learn by also have people from their teams also here.

11:17Hugo da Silva:Then a good enough is a good enough. Sometimes a perfect solution is never going to be achievable, but a good enough solution can be achieved much faster. And that's how we can learn, especially if you aren't a startup. I'm not a huge company. I can try things out. And that's, I think, the nature of being in different locations so we can capture the learnings in each one of those rather than just be too much engineer-minded where I would say it takes 10 years to make something perfect, but maybe it takes a year to make something good enough and you go ahead and learn from the market, from the customers and then improve and do it again.

11:56Hugo da Silva:A fantastic example. I always use those examples in the iPhone, right? The first iPhone was not really a great phone, but while we are now on the 17, I guess, or 18 even, You know, there's 18 generations of products, but you are learning by using it. And that's, I think, the beauty. I think you can apply that. Obviously, in the deep tech, it's slightly different, but you can apply the same concept, if you will. And, you know, you've just closed this to the ground. What gave the investors conviction? You know, was it the market opportunities and some of this new stuff that you're working on? Was it the AI glasses work that's going well?

12:32What was it that gave the investors the conviction to come on board?

12:36Hugo da Silva:I think at the end of the day, it's a combination of our technology being mature and validated by customer. But the best validation you can have is by having commercial traction. And especially the last 12 months, we did quite a lot of commercial traction with sales, with filling the pipeline. And honestly speaking, now we don't need any new customer. Actually, we cannot afford any new customer. We just need to convert what we have in the pipeline. That's our goal here, is to convert the pipeline, not really going after new customers. That's an amazing position to be in. Yeah, it's great to be, right?

13:09Hugo da Silva:But like I said, right, the market dynamics change. It can be that in six months from now, the situation changed dramatically. But while we build over the last 12 months and also, like I said, by having people in the region, so we can really be very close to this dynamic change in the market, I think allow us to be in a way a bit of a luxury position that can play with the pipeline we have today rather than go ahead and because it costs a lot to have new customers right so in our case we have already the big brands we work which are the owners of the devices as well as their supply chain and i think this is enough for us at this moment so i think we can have fun and do a lot of business with the pipeline we have so far how big do you think ai glasses are going to be and when can we start to see them everywhere that we go?

14:00Hugo da Silva:You know, fundamentally, I mean, there's two lines of thoughts here. Some people believe this AI smart glasses will be everyone's device. So if you think about the population that wears regular glasses, if I'm not mistaken, about 4 billion people worldwide. So if you think about like 10 % of that population, that's already, you know, quite a lot of devices, right? And the industry believes that the size of this market will be somewhere under 500 million devices in five to 10 years from now. But in order to get there, I think everything is lined up to get there. And one of the key challenges was still a bit on the cost, like any other technology.

14:42Hugo da Silva:If you think about LCD TVs, the first TVs on the market was about 10 ,000 euros. Now you can buy a TV for 500 euros. right? If you think about the cost of the funds in the past. So I think there is still a gap on the cost, which has a lot to do with... So what we try to bring to the market is a precise technology that can scale. But these industries suffered over the last five years with a lot of super highly engineered products that is not able to scale or to get the cost down or finding this good enough point. And I believe we are very much in that area or that neighborhood of a good enough product.

15:21Hugo da Silva:So a combination of a good technology, good pricing that it can scale, which means a lot of people would believe in three, four years from now, there will be in a range of 100 million devices, which is a large enough market to start scale and get cost. So that would suggest then that dream of a lot of people would be that everybody that wore a glass could potentially add smartness to their glasses. I think that can pretty much come true in a few years from now. What are going to be the key bottlenecks that the industry faces as it tries to scale to that size? I think, like you said, one of the things is the cost.

16:03Hugo da Silva:And also there's a lot of debates whether these devices will have all the computing power you need or the computing power will be sitting on your phone. So there is, like you said, different companies or let's say different brands have different beliefs on that. The companies that already have a phone as the source of your data will believe that the glass is just a carrier and it is just for visual and for communication. The audience will say, well, all the computing power needs to be in the glass, right? But obviously more computing power in the glass, it means battery life, you know, lightweight and difficult to adapt to because again, right?

16:41Hugo da Silva:If you go to a population of 4 billion people, there might be millions of different designs. Everyone wants one design. This is a personal item. This is not a phone that keeps in your pocket, right? The design has a lot to do with yourself, right? It's like we'll buy clothing, you buy a glass. You need to feel good with the glass, right? It's not just a phone that fits everyone. You just have five colors and that's it. So I think those are, it's more like how people would adapt to that, how people would understand how to use the technology. Most likely we'll go to some regulatory challenges. You see already some challenges about the technology itself.

17:18Hugo da Silva:I think there's some steps that are bottlenecks and needs to be solved in order for this to be a mass market product. Well, it's very exciting and you and the team are absolutely crushing it. So thank you for taking the time to chat and congrats on the fundraiser. It's amazing news. Yeah, thank you very much for inviting and hope that help your viewers to understand better what we do and what we are up to.