Open side-bar Menu
 The Breker Trekker
Tom Anderson, VP of Marketing
Tom Anderson, VP of Marketing
Tom Anderson is vice president of Marketing for Breker Verification Systems. He previously served as Product Management Group Director for Advanced Verification Solutions at Cadence, Technical Marketing Director in the Verification Group at Synopsys and Vice President of Applications Engineering at … More »

An EDA Industry of Startups, Behemoths, Corner Stores, and Zombies?

August 27th, 2013 by Tom Anderson, VP of Marketing

From the blog stats it seems clear that late August is a slow time with lots of folks on vacation, so I’ll take a break from the heavy technical topics to chat about the industry. Long before I worked for an EDA company, I was an active participant as a user of EDA tools and as a CAD manager tasked with evaluating them and integrating them together. In that role, I loved working with interesting startups that had new ideas for electronic development.

It was part of my job to follow the EDA industry closely so that we could choose our tool investments based on both strength of technology and likelihood of vendor success. It seemed to me that the industry was divided into only three categories: major leaguers, minor leaguers, and startups. I observed that nearly all EDA startups disappeared after three or four years, with three possible endgames: acquisition, initial public offering (IPO), or bankruptcy.

The most likely outcome was acquisition by one of the major leaguers, which included Daisy, Mentor, Valid, Cadence, Synopsys, Avant, and others at various times. These companies grew in part by acquisition, mining the startups for new technology, smart people, and sometimes expansion into new market segments. Most of the time this worked out to the benefit of the startup’s investors and founders, and quite often the rest of the employees made out as well.

How well the acquisition worked for the major leaguer varied, of course, depending upon its ability to absorb and retain new folks with a different corporate culture. A recent article on SemiWiki, “An EDA Acquisition that Worked,” addressed some of these challenges and was one of the spurs for me to write this particular post.

Of course, the holy grail for a startup was to go public itself and become a minor leaguer. Back when Wall Street paid much more attention to EDA, the dream of parlaying $10-20M of revenue into a $100M IPO was fulfilled again and again. In fact, all the major leaguers had once been post-IPO minor leaguers, after which they grew partly by acquisition into the big league.

I can’t recall very many EDA startups that ended in bankruptcy and complete failure. If they had any sort of interesting technology or a following among key customers, a major or minor leaguer would acquire at least the intellectual rights, possibly the source code and some key employees as well. They didn’t necessarily make a full company acquisition that would entail taking on debt and other obligations. And so, good ideas tended to live on even when the startup didn’t.

It seems to me that the EDA industry as it stands today has four categories of players: startups, behemoths, corner stores, and zombies. Startups are still startups. Given the lack of interest in EDA among the financial community, startups are more likely today to be funded by angel investors than venture capitalists. However, there are always good ideas arising and often someone willing to place a bet.

The major leaguers have consolidated into three behemoths: Synopsys, Mentor, and Cadence. A billion dollars in revenue is pocket change in many industries, but the fact that three companies have made it that far is a major milestone in EDA. The behemoths continue to acquire interesting startups, although often at valuations that benefit only the investors and founders.

There are two new categories of EDA companies because the “3-4 year” rule doesn’t apply anymore. There are dozens and dozens of EDA companies (former startups)  that have been around for 5, 10, 15, even more than 20 years without being acquired, going public, or disappearing. Most of these have established a modest business that pays the bills, keeps a small crew gainfully employed, and can continue that way for a long time. I call that the “corner store” model since that’s how many other types of companies actually run.

Establishing a solid, ongoing business should be a source of pride, even if there’s no immediate hope for a lucrative acquisition or IPO. If everyone is getting paid well while being intellectually challenged and having some fun, that’s great. Jasper is one of my favorite examples of a corner store. I have no idea what their endgame may be, but in the meantime they’ve built a solid company with an impressive business in a market where they’re clearly number one.

What about the zombies? They’re still in business after years as well, surviving but not really thriving. Some keep the doors open only because everyone is still working for a startup salary or because they have a bit of new money trickling in from an investor who still has faith. Often their revenue is way down from its peak, as is their staff and facilities. Zombies can walk around as the living dead for a long time, but eventually they either disappear or get acquired for a pittance. No, I’m not going to name any EDA companies that I file in the “zombie” category.

So what do you think? I’m interested to hear from other EDA veterans, but also from customers. Do you agree with my categories? How much does that influence your decision to use or not use a product? Do you worry about startups or zombies perhaps going away? Do you like the fact that corner stores can exist just fine for years without having to be acquired and buried in a behemoth? Your thoughts are most welcome!

Tom A.

The truth is out there … sometimes it’s in a blog.

Related posts:

Tags: , , , , , , , , , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *



Internet Business Systems © 2018 Internet Business Systems, Inc.
25 North 14th Steet, Suite 710, San Jose, CA 95112
+1 (408) 882-6554 — Contact Us, or visit our other sites:
TechJobsCafe - Technical Jobs and Resumes EDACafe - Electronic Design Automation GISCafe - Geographical Information Services  MCADCafe - Mechanical Design and Engineering ShareCG - Share Computer Graphic (CG) Animation, 3D Art and 3D Models
  Privacy PolicyAdvertise