Q & A with Paul Millman of Chroma
Vermont economic development officials hold up Chroma as one of the state’s leading success stories. Founded in 1991 by co-workers who left their jobs at Omega Optical to start a competing business, Chroma now employs 140 people and has offices in Europe and Asia.
Late last year, Chroma opened a 28,000-square-foot manufacturing expansion at its Rockingham headquarters. The $22 million for the expansion came from nearly $11 million in New Market Tax Credit financing, $1.1 million from state sources including the Windham County Economic Development and the Community Development Block Grant programs, a $9.5 million loan from the Vermont Economic Development Authority, and a loan from the town of Rockingham for $100,000. The company also put down $800,000 in equity.
How did you get into the microscope filter business?
I had been managing the Blue Note Club in New York City, and I had been a sales manager in the furniture and gift industry, and a bartender. I had a cousin near Newfane, so I came up to Vermont and the state employment office sent me to Omega Optical in Brattleboro. It was 1988. I called them and I said, “Look, I don’t even have clothes to wear to an interview for a sales position.” They said, “Don’t worry; just be neat.” So I went to the interview and it was in an old church and people weren’t wearing shoes, and there were a lot of hippies.
That’s where I learned the optical filter business. I was there for three years, and the business increased from around $1.1 million to $3.3 million. Eventually they hired somebody to be my boss who didn’t know anything about the business. He was being paid more than twice as much as I was, and I wasn’t going to train him. So they fired me and gave me a bunch of money for severance, which I used to live on for the first year of Chroma.
How did you start Chroma?
One of my colleagues who was a manager at Omega said, “Why don’t we just start our own company?” We had savings and investments, and I covered the rent for six months at the Cotton Mill incubator space in Brattleboro.
We knew the business; it was simple. There were seven people who covered all the different positions at the company. The seventh person lasted about six months. Of the other six, two retired from Chroma; there are four of us still here.
How did you find customers?
We got into this business just when a technology was developing that became the Human Genome Project. This customer was searching for a supplier of filter sets for the genetic test kits, and they chose us.
In the end of the first year, 1992, we grossed I believe $318,000 and in the second year $1.5 million; that’s how fast we were growing.
We had a mix of customers: Scientists who were in the lab, and salespeople who were selling microscopes and needed to continue to service their customers. In the meantime, there were new applications, there was new science being done.
I would get journals with cards in them, and I fill out the cards and send them off to the microscope manufacturing company distributers in the U.S. They knew me from Omega but I couldn’t call them. They called me and said, “What are you doing?” I said, “We started our own company.” They said, “We’ll buy from you.”
We gave their sales people a tremendous amount of technical support on which filter sets to use and why to use them. My job was sales; the other guys knew how to make filters.
What does Chroma make now?
Chroma’s product line has not changed since our founding. We manufacture optical filters, mirrors, and coatings.
Over time, we were the supplier for most of the microscope manufacturers, including two in Japan and two in Germany. There were no manufacturers in the U.S. We never had a single month after we started shipping filters in October 1991 in which we didn’t make money.
How did Omega Optical respond to this?
Omega sued. They said we stole their their trade secrets, but there was no trade secret law in Vermont at the time. They wanted $20 million, and they got nothing.
We don’t see them as competitors anymore; we have other competitors but not them.
With technology changing, are filters still needed?
The range of instruments for which we make these optics has grown over the last 27 years.
Late in 1994 we became the primary supplier for one of the world’s four major microscope manufacturers. In succeeding years we became the primary supplier for three of the four. Later, we added microscope manufacturers in China.
Now manufacturers of other biotech, and biomedical, instruments have become a greater part of our business. We’ve added to that group companies that manufacture instruments to test food safety, screen potential drug compounds, create robots, diagnose disease, among other technologies.
What were the early days like?
In the early years, we tried to manage by town meeting, which was an absurdity. Business goes on every day, not only when you have a town meeting. Decisions were being made, and some bad decisions were being made, and they were not even being made collectively sometimes.
Small Dog Electronics, many of the people at King Arthur Flour, Gardeners Supply, the breweries: We are all the same. We’re all 60’s hippies in some fashion. We didn’t want to have a boss. I know it’s not just Vermont, but we are the smallest place with the highest concentration of these kind of weirdos in the world.
We had tough growing pains. We were incredibly successful financially, and that glossed over a lot of the pain. At the beginning we all earned the same, for years. Then that changed.
I had to learn how to manage. I don’t think I ever did learn. I manage by example, is the best I can do in terms of management.
Now have people who can manage, and I’m not one of them. I know how to work with the leaders of the company, but I don’t think anybody in the company would say that I was a good manager. They might say I was a good leader. And I’m great with customers.
The company is now learning how to function in an era of constraints. For years, we had extra capacity and that meant that you could make a mistake and just do it over. Now, we don’t have excess capacity. In the old days, we could deliver in four weeks, and now it takes us 12 weeks.
We have more competition, and we have greater expectations on the part of the customers. Our customers are beginning to demand price reductions. Really big customers send you 40-page manufacturing agreements listing the discounts you’ll give them over a period of time. They say, “If you can’t do for us what we want, we’ll come in and manage your company.”
I have been sent those agreements. If we ever wanted to do that kind of work, we would set up another company in Chittenden County. This company is not culturally able to make that transition.
Do you have to get bigger to survive?
That’s a question for which there is a lot of debate. Could we survive doing what we are currently doing? Doing it better? Doing it less expensively? Yes. I think we can grow. This year, we plan to ship about $34.5 million worth of filters. Could we grow to $50 million this way? Yes. Could we grow to $100 million this way, no. Because the $100 million come from self-driving cars, from drones, the $100 million comes from things that use that laser technology that I don’t even know about yet. We have customer who want thousands of filters; those customers want millions.
We’re considering how we would do it if we were going to do it.
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