Huge Prospects for Tiny Switches

To our Valued Investors:

For venture capital fund managers, it’s always exciting to watch a young private company as it builds and fortifies itself in anticipation of prosperous times to come. Such was the case last month when Irvine, California’s Menlo Micro closed its $150 million Series C funding round, bringing its total cumulative funding to over $225 million. The money is earmarked to expand Menlo’s domestic manufacturing for the company’s Ideal Switch, which has been called “the holy grail” throughout the electronics industry. CEO Russ Garcia suggested that the raise “underscores the confidence our investors have in Menlo Micro’s transformative technology to fuel the electrification of everything and modernize the $100+ billion market for RF communications, power switching and protection devices in the 21st century”. The new manufacturing site will position Menlo to deliver on its promise to upgrade the world’s aging power grids and eliminate inefficiencies in the electrical infrastructure. No final decision has been made in regard to where the new facility will be constructed. New York senator Chuck Schumer, for one, is lobbying the company hard to consider a location in the Empire State, as it would revitalize the local economy with hundreds of manufacturing jobs and bolster Menlo’s established presence in New York’s robust tech industry.

Why, you may ask, is Menlo Micro “gonna need a bigger boat”? The answer can be found within all that “holy grail” talk. Most of today’s electrical switches are built upon a fundamental architecture that was actually established about two hundred years ago. They tend to be very large and slow, relatively speaking, and over time they wear out and eventually fail. In 1947, the invention of the point-contact transistor opened the door to the modern semiconductor era, representing a nice step forward in switching technology at the time, but the evolution then progressed at a snail’s pace for the next seventy years or so. Semiconductors come in a much smaller package, but they are not true conductors, so they are prone to inefficiencies that adversely affect the performance of the end products for which they are designed. For decades, engineers have been confronted by the dilemma of choosing electromechanical relays for their heavier workload capacity or the smaller and more scalable solid-state switches. For all their respective benefits, of course, compromises came with either one of those choices. Menlo Micro’s “holy grail” has dismissed the unpleasantness of choosing between the big, clunky, and expensive option or the device that can’t really call itself a respectable conductor. The Ideal Switch delivers all the benefits of a mechanical relay and a semiconductor switch, with no compromises. It combines the attributes of a mechanical switch’s moving parts with a solid-state switch that acts more like a computer chip, resulting in a highly efficient, extremely small switch that is much more powerful than a traditional switch. Ideal Switches withstand extreme temperatures, are ultra-low loss, and can handle thousands of watts. They can be engaged more than three billion times before showing any signs of degrading, so they will almost certainly outlast the life expectancy of their human users. Ideal Switches are assembled with conventional and extremely low-cost semiconductor manufacturing equipment, so the construction of the new factory is at less risk of being slowed by unique supply challenges or the unpredictability of novel machinery.

The significance of the Ideal Switch’s innovation is nicely explained by what Menlo Micro calls the “Rule of 99”. In comparison to electromechanical relays and solid state switches, the Ideal Switch is more than 99% smaller, and it consumes more than 99% less power. Furthermore, it is 999 times faster and its life expectancy is 999 times longer. Whereas semiconductors couldn’t claim the title of switching technology perfection, the Ideal Switch comes within micrometers to flawlessness. Speaking of micrometers, the Ideal Switch also has its infinitesimal size for bragging rights. In a world where “less is more”, the Ideal Switch measures in at about fifty micrometers, or about one third of the diameter of a typical human hair, on each side. In this “race to the smallest” and the accompanying increases in efficiency and durability, it’s easy to understand how such improvements have made household technology better. In 1984, most people didn’t own a mobile phone. The devices were available to the public, but at $4,000 a pop (roughly $11,000 in today’s dollars), their audience was limited mostly to very wealthy gadget connoisseurs and show-offs. What’s more, the mobile devices of those times weighed about two pounds on average, and they died after about 30 minutes of talk time. To top it all off — get this — the phones could be used only for conversation. Forget about uploading a TikTok video, playing a few rounds of Angry Birds, or even solving the daily Wordle. Today, of course, smartphones are an entirely different animal. What has made them smaller, more useful, more efficient, and affordable are the very brains inside — the semiconductors.

With this context, consider how vast an improvement the Ideal Switch is over today’s semiconductors. In a few short years, people will be marveling about the quaintly limited functionality of those clunky phones from the early 2020s, and how one battery charge lasted less than a month. Now, take a moment to imagine how many electrical switches have already made today easier for you. If you made coffee, listened to music, drove a car, sent a text message, or began reading your Iron Edge newsletter, you have already used countless electrical switches. These devices are everywhere; they are inescapable in the developed world. The list of things that depend on them — planes, trains, ships, air fryers, defibrillators, police tasers, traffic signals, blenders, Operation games, drones, Apple Watches, and so on — would be way too long to recite in a single day. The Ideal Switch will increasingly be used to replace the now-outdated semiconductors. As this happens, the whole world will be significantly impacted. Menlo’s website provides some astonishing examples: There are over 1 billion ceiling fans worldwide. Using the efficient Ideal Switch in fan controllers would save enough energy to take 17 coal-fired plants off the grid, as well as: Thanks to a 1000x increase in reliability from conventional relays, replacing all switches in the control of industrial processes and equipment can save over $7 trillion in operating costs by 2050. The company also projects that with its dramatic improvements in energy efficiency, the Ideal Switch could potentially eliminate 20% of global emissions by 2050.

Which means more to you, the breathtaking improvements to every existing modern technology, or the Earth-saving reduction of contaminants in the atmosphere? Unlike the electrical engineers of the last seventy years who had to decide on electromechanical relays versus solid state, you needn’t make the difficult choice. Menlo Micro’s technology improves life on all fronts, and their story is just beginning. For those who have studied the technology, Menlo Micro would be a great stock to buy in an E*TRADE or Morgan Stanley brokerage account. Unfortunately for most, though, it’s not in the cards because as a private company, Menlo is unavailable on the stock exchanges. Iron Edge VC can, nonetheless, provide you with access to our Funds that have ownership interests in this company that will reshape every technology with which it comes into contact. When we first acquired a position in this company at the beginning of this year, the inventory sold out very quickly. Today, we have access to a limited number of shares, so those interested should contact an Iron Edge representative as quickly as possible. If you would like to learn more, or if you know anybody else who would, please don’t hesitate to contact us by clicking “Get in Touch” below.

If you have enjoyed this article, visit the Iron Edge Blog for past updates on our pre-IPO opportunities and for general commentary on investment in the private marketplace.As always, shares of Iron Edge investment funds are available on a first come, first served basis.

All the Best,

Paul Maguire

Founder & Managing Partner

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Paul Maguire

Founder And Managing Partner