Twenty years is a long time in this industry. In February Tanner EDA celebrated their twenty birthday in EDA. The company offers high performance tools for analog/mixed signal ICs, ASICs and MEMS. They count 25,000 installed seats (around 4,000 customers) in 67 countries and two planets. The company has had an average annual growth rate of 20% and has been profitable for 8 of the last 9 years, an enviable track record. If you have not heard much about Tanner over the years, they intend to do something about that in the future.
I recently had an opportunity to talk to Dr. John Tanner, founder and CEO of Tanner Research, about the company, the products and the future.
Would you give us a brief biography?
I graduated with a Ph.D. from Cal Tech in 1986. Carver Meade was my advisor, the author of one of the well known IC design books. I co-founded a company at that time to do chip design. While we were graduate students, we wrote software that helped design chips. But when we graduated and tried to build a real company, the solutions that were available were expensive requiring dedicated workstations and software to run on it. The PC had just come out. We tried writing software that would run on this PC to do chip design and we found that with careful software design, we could get a reasonable tool. As we used that tool ourselves to design chips, other people came by and saw it. I convinced my partners that we should start selling it to others. Eventually that grew to be enough of a business and a distraction to my partners that I spun it out in 1988, two years later after I graduated to become Tanner Research. It has been privately held since then, 100% employee owned. It has grown organically at a rate of over 20% per year since then.
How does Tanner EDA relate to Tanner Research?
Thank you. Tanner Research consists of two large divisions and some smaller things. Tanner EDA is the biggest division and represents two-thirds of the company. Most of the rest of it is another division called Tanner Labs that does a lot of advanced R&D based upon government contracts, mostly from the Department of Defense, some NASA, NSF and DARPA. Some of the projects that go in the labs include chip design and micromachine design. So we have users of our tools just down the hall from the folks who provided the tools. That has worked out very well for us. But the primary focus, about 2/3 of the business is Tanner EDA.
How big a company is it today?
In terms of revenue or people?
Both, if you will tell me.
We are running about $10 million a year with about 65 people worldwide.
When you started the company, some people approached you asking to acquire the tools. How did you build up the awareness of these tools? Why were people interested in tools from a recent graduate?
It was certainly a challenge in the early years but then we did not have many mouths to feed either. We started with a tool that was $500 and catered primarily to the educational arena. Those were the folks we knew very well. But as time went on people tried to do real work with the tools. We enhanced the tools over and over again, made their capacity greater, their speed greater, built in standard industry interfaces with other tools. Just word of mouth accounted for much of our growth. In terms of “how did we make others aware of us?”, we have not done a great job for ourselves. We are on the verge of making a significant change that I think will help with that. That is with the hiring of Greg Lebsack. He is on the road today. He became the new president of Tanner EDA a few weeks ago. I am still the CEO and Chairman and of course founder. But Greg is the first outsider that we have brought in. He has a particular focus on marketing and sales. We have developed a lot of good products. We are engineering heavy. We have more support people than we have sales people and more developers than we have support and sales people. But it is time we started making more efforts in getting the word out about the tools that we have, so that we can grow even faster. We expect Greg to help with that change.
You said that initially you had a $500 product. What is the ball park price for your current offerings?
That same product is now $5K or $6K. We have added a whole lot of new modules that we have bundled together in various ways. The initial product was L-Edit, a layout editor, a polygon physical design tool. Now we have added verification and simulation, sort of the baseline suite of products that does a fairly complete job with mixed signal chip and is in the neighborhood of $10K to $15K for the suite. A few years ago we introduced a new line called HiPer for high performance. A complete suite of tools there goes for $5K and up depending upon options. We are still, of course, well below Mentor and Cadence that we sometimes compete with. Our goal is to deliver high value.
Is it still the educational market?
No! As of 15 to 18 years ago, we shifted over more and more into the commercial side. The educational arena is very interesting. There is a lot of cutting edge stuff going on but they demand as much from the tools as anyone else but do not have very much money. So we shifted over a long time ago to the commercial market. We have customers that range from one person in their garage, all the way to the biggest companies. For example, a couple of years ago Intel was our biggest customer. Now I think that we have some others that have surpassed Intel in terms of ordering our software. Our sweet spot is really sort of a 5 to 50 person chip design company or MEMS design company. Cambridge Silicon Radio in the UK accounts of 60% of all Bluetooth chips in the world and used our product to design them. Proteus Biomedical is an emerging company just getting their products in the market. They are using our products to design some ICs and some MEM devices that do very interesting things. I could elaborate on that.
They are a very creative company. One of their products coming onto the market is a chip that gets implanted between the controller for a pacemaker and the electrodes that go to the tissues of the heart. After the implantation the doctor can electronically switch which electrodes are used to minimize the crosstalk into the nervous system and deliver as much of the signal as possible to the heart tissue. Another product that I think is particularly fascinating is a tiny chip that is embedded in a pill that a patient takes. The problem that they are trying to solve is that some patients do not take their medication. They forget it or for whatever reason, they do not take it. The medication is in a pill that has a chip in the middle from Proteus Biomedical. When the chip is swallowed and the coating dissolves, it activates a tiny battery and the chip starts sending a signal throughout the body with a serial number on it that tells what the medication was. The patient wears a patch that picks up the signal, transduces it, and transmits it to a cell phone and from there to the doctor’s office. The doctor can see that the patient took the medicine at say 8:30 and took another medication at 9:00. So even if someone is forgetful, they can monitor the medication they are taking. This is an example of how our customers are using our software, a really creative thing. Some of the other customers include an image designer that originally worked for JPL and is now out on his own. He designed the imager for Spirit and Opportunity Mars Rovers. So there are now several copies of imager chips on Mars that were designed using our software. Some others are currently orbiting Mars in the Mars reconnaissance orbiter designed by the same guy.
Very interesting! Tanner is a private employee owned company. If an employee wants to leave or needs money for say college tuition for his children, how does the employee get cash for his stock?