When Will LED Lighting Vanquish the Light Bulb?

Last year Jason Matlof, a partner at Battery Ventures, claimed that 2011 could be the year of the solid state lighting crossover -- when incandescents give way to LEDs. Matlof, like many VCs is an optimistic sort. And while Matlof might be off on the exact year, he's probably accurate with regard to the decade.

Similarly, Alan Salzman of VantagePoint Venture Partners has told Greentech Media that he sees a transformation occurring in lighting, with everything switching out to solid-state lighting and causing "a $100 billion industry to flip." In Salzman's view, the mammoth lighting incumbents like Philips, GE and Osram "might catch up -- or might not."

The facts are that while human flight has progressed from the Wright Brothers to space travel, our world continues to be illuminated by the incandescent bulb, Edison's bulb.

And those incumbents like Philips, GE, Osram, and Sylvania are not going to let this mammoth market slide from their hands without a considerable fight.

Mrs. Dorsheimer

When asked what's holding back LED adoption in the lighting industry, Jed Dorsheimer, a Managing Director at Investment bank Canaccord Genuity, blamed his wife.

While the soon-to-be-former-if-Jed-doesn't-apologize Mrs. Dorsheimer is not single-handedly preventing the LED lighting revolution, it's people who care about light quality that are slowing down LED adoption. The initial cost of LED lighting doesn't help the cause, either: light bulbs show tremendous price elasticity.

But LED light pricing is dropping fast.

Fred Maxik, the founder and CTO of the 900-employee Lighting Science Group, doesn't feel that cost is holding the industry back. He told me recently that in commercial and retail applications, LEDs can today be justified on an energy efficiency basis. What's needed, according to the CTO, is consumer education.

Industry pundits, investors, and entrepreneurs have propagated the "flipping of a billion-dollar industry" meme for a while now, but that's not the way most hardware industries shift. The movement away from incandescents is occurring, but it will happen more slowly and more painfully than VCs or entrepreneurs expect it will.

What's driven the market in its current phase is not general illumination but more specialized consumer products such as mobile phones and flat-screen TVs.

LEDs have not yet made it into the home on a large scale. However, they have started to make it into the enterprise. Groom Energy and Greentech Media Research predict that the LED enterprise lighting market will grow by 30 percent in 2011 and surpass $1 billion in annual revenue by 2014. The 2010 U.S. market for commercial and industrial LED lighting is sized at $330 million in annual revenue.

The lighting market is a complicated ecosystem with an entrenched and fragmented supply chain and sales channel. This is the power of incumbency and perhaps one of the biggest challenges facing SSL startups. Mike Dauber, a VP at Battery Ventures, has said, "The lighting value chain is very complicated and highly controlled; a startup must show incentives to everyone in the value chain."

The SSL ecosystem has many moving parts; below, we list some of the prominent startup players in each of this market's many sectors.

Networked Lighting and Lighting Controls: New Opportunities for Startups

Lighting remains one of the last frontiers for energy management in office buildings. Imagine if your heater only had two modes: full-blast and off. That is what lighting is like in most buildings.

Dauber highlighted Battery portfolio firm Redwood Systems. He said, "Redwood excites us because they're creating an entirely new category of lighting -- building performance lighting -- that will allow building owners to get value out of their lighting in ways that they never would have conceived of a few years ago."

One retailer is looking at Redwood's ceiling networking as a way to monitor traffic in stores and at check-out counters. Office building owners are also looking at ways of exploiting the technology to make better use of their conference rooms, such as using motion sensors to determine if a conference room is currently being used. Johnson Controls, the building management behemoth, has installed Redwood’s technology at its headquarters. Other customers include SAP and real estate developer Equity Office.

Redwood's core product is a centralized computer with 64 controllable channels. If a building owner puts LEDs on those channels, the centralized console becomes a tool for managing lighting in buildings. If motion and/or temperature sensors are added, it becomes a combination light network/facilities monitoring service.

Adura Technologies was one of the early entrants into lighting networking. The company’s technology controls the lights illuminating more than 2.7 million square feet of commercial real estate. Adura’s technology uses ZigBee modules with individual modules attached to fluorescent or LED light fixture; these speak to other gateways, controllers, and devices to orchestrate lighting in a building. Google is a customer.

EnLighted recently won $14 million in funding from Kleiner Perkins Caufield & Byers, Draper Fisher Jurvetson, and Intel Capital for intelligent lighting and energy management in offices and large facilities.

Lighting Science Group is developing a 60-watt-equivalent LED bulb with Google that is controllable from an Android phone. The idea is to allow users to control and program their bulbs remotely. The bulbs will communicate through a Wi-Fi network anchored by a home router.

Lumenergi provided dimming and networking capabilities for fluorescent lights.

Daintree Networks has created a ZigBee-based lighting platform called ControlScope that it wants to sell to established lighting makers.

Digital Lumens has built an industrial-scale LED lamp and a ZigBee mesh network for controlling them. Applications are in high-bay commercial buildings as a replacement for HID lamps (see their 11,000 lumen light in the video below.)