Aug 06, 2012 – SAN DIEGO BUSINESS JOURNAL – AUGUST 6, 2012

The economy’s sluggish recovery is boosting the fortunes of Rancho Bernardo- based Daylight Solutions Inc., a maker of laser-based molecular detection instruments used in defense, medical diagnostics and environmental monitoring.

Molecular detection instrumentation is a disruptive photonics technology that has broad application in many markets. The company has developed a platform of products using an advanced laser module to detect and differentiate various molecules. The instruments detect changes in reflected light. These changes can be quantified and the resulting data used in various processes for sensor and detection equipment. The technology is unique to Daylight Solutions and gives them a clear competitive advantage in the marketplace.

“As molecules rotate, vibrate and spin they absorb different frequencies of light, so if you can tune light from a laser across a spectrum like you tune a dial to pick up a radio station, you can identify different molecules,” said President and COO Paul Larson. “Each molecule has a distinct fingerprint under light.”

He and co-founder Timothy Day have been able to downsize the size of the lasers from big devices requiring thousands of watts of power to one that fits in the palm of the hand.

Day, an expert in photonics, is CEO and CTO. Larson is an expert in semiconductors.

Using the resized quantum cascade lasers, the two have been able to charge into various industries. Quantum cascade lasers are semiconductor lasers.

“In the laser world, we did the equivalent of what IBM did by going from a mainframe to a laptop,” he said.

Enthusiastic Investors
Investors have been enthusiastic about the company’s prospects.

Daylight Solutions has received $31 million in venture capital since 2006, including a $15 million Series C round completed in July 2011 led by Northrup Grumman Corp. with participation by Carlsbad-based VC firm Moore Venture Partners.

Company sales have buoyed investor enthusiasm. According to Larson, the company has doubled sales every year from 2006 until last year when the company experienced a pause in growth, largely from the commercial side of their business, from which they are now recovering. Larson declined to reveal actual sales.

Larson said revenue on the commercial side is now catching up with the defense side just as Congress-induced funding cutbacks are impacting the Pentagon and sales.

“The two should be about even in one to two years,” said Larson. “We’re picking up very strongly on the commercial side.”

The commercial slowdown was offset by defense contracts, as the company teamed with big SoCal-based defense contractor Northrup Grumman Corp. to develop an infrared laser to protect helicopters from incoming missiles fired from shoulder launchers.

In February, the U.S. Army awarded Northrop Grumman a $31.4 million contract to defend helicopters against shoulder-fired missiles.

Daylight Solutions and U.K.-based Selex Galileo are industry partners in the 2 I-month contract, said Larson. If successful, a larger procurement program would be worth $4 billion to the participants.

It’s a better defense than that now used on helicopters, he said.

“Because it is such a disruptive technology, it is very intriguing to the Department of Defense,” said Larson, noting that the devices would fit into the military’s efforts to fight battles in the dead of night using thermal vision.

Next-generation of Technology
“It’s the next level of technology, indeed the next-generation of technology,” he said.

Larson is also very enthusiastic about diagnostic devices for front-line medical care.

For example, he said that market potential is measured in the billions of dollars if hospitals and clinics replaced the ubiquitous blood test with a breath analyzer using his technology.

“Much like blood pulled from the body, you can draw breath in a tube, then sample and test it to see what molecules are causing an illness. That’s because as you breathe, blood interchanges with your lungs and you exhale C02 as well as every other molecule,” he said. “So rather than draw blood, imagine blowing into a tube, and analyzing the breath to tell you what molecules are there, and based on those molecules, what ailment your body might have.”

“It’s a noninvasive way of diagnosing a patient’s condition,” he added.

Still other devices built from Daylight Solutions modules can be used in the pharmaceutical industry for quality control in manufacturing, another market worth tens of millions of dollars.

Daylight Solutions has no direct competitors because the company developed all components in the platform, now protected by 14 different patents. They have 20 patents pending, with 60 disclosures behind those applications.