March 14, 2005
Interview with Vic Kulkarni CEO of Sequence Design Inc.
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Jack Horgan - Contributing Editor

by Jack Horgan - Contributing Editor
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We were about 120 people, if I remember right. We were in the range of $24 to $25 million revenue and profitability was very high. With HSPICE we pretty much had a monopoly at that time as a circuit simulator. We had about 27% to 30% operating income. One of the highest in the industry in fact.

How hot was the stock market at that time for EDA firms going public?

Not like the 2000 timeframe. We were one of the smaller small cap companies trying to make it big in terms of the Wall Street Market. There was some fascination about the EDA world but people were not used to what EDA was. There were very few bankers and analysts that could track the industry. It was too complicated for them. If I recall, there were about 3 or 4 analysts as opposed to 10 today who are tracking our industry. So it was nice to be in the pioneering group there along with the big guys.

Avanti acquired Metasoft and you ended up as president of one of their business units? What was the experience like of being acquired? You were helping to run a company of a certain size one moment and the next you are swallowed by a bigger company. What was the transition like?

In fact at time we were acquired Avanti, it was not that big a firm at all. They were only a $30 million company. I was there until it became $300 million. So it was a terribly good ride in terms of expanding the company and learning about the operational side of the business. Initially I was VP of Product Marketing for all Avanti products but then I became VP of a business unit which had two acquisitions under it. We acquired TMA (Technology Modeling Associates), a public company at the time, and then we acquired Compass, which VLSI sold to us. Those two acquisitions became what we called the Silicon Business Unit for library IP as well as process simulation. The experience there
was very good in terms of managing world wide R&D operations and managing the P&L. Jerry was very strict in managing the Profit and Loss and Operating models. They did that very well as a company culture; managing the operation model constantly, so you don't have to go through big ups and downs. Constantly grow the business while at the same time watch the bottom line on a daily basis. That introduced me to whole concept of world wide R&D. I fell in love with the globalization issues which I have been tracking even in our own company. As you know we have world wide R&D now. The whole motto was: "Go where the brainpower is and go where the customers are". That is now engrained in
my mind as the best way to manage the business.

How is you current company's R&D operation organized?

Today we have Santa Clara folks, then we have R&D folks in Westford which is about 20 miles from Boston, then we have a few key individuals in the Austin, Miami, Portland and Seattle areas and we have a large group in Denby, India. We have 23 people in India on the R&D side. We have one person in the UK near Maidenhead.

In total how many R&D people?

We have about 40 or so people. In Sales and Field operations and G&A we have about 35. So a total of 75 or so people.

Returning to Avanti. Were you still there, when Synopsys acquired them?

I left in December 1999 to join Frequency Technology. At that time Avanti was about $300 million. I was not there in term of the Synopsys acquisition.

When you joined Sequence was it a startup operations or had it been in operation for some time?

When I joined it was called Frequency Technology. What prompted me to join were their fundamental patents and their understanding of the silicon interconnect model. That fascinated me as the future of EDA. You have to know silicon etc and these guys had done quite a bit of advanced research on resistance, capacitance and inductance models. Within a couple of months of joining the firm I put together the whole strategy for the company's expansion plan for taking on a bigger problem which customers were facing, the so-called design closure with timing and signal integrity. For that end we acquired Npower and then a small company called Sente located in Boston. That's how we now have a
Boston group. The combination of Frequency and Sente created Sequence in June 2000. Almost 5 years ago we created Sequence. I was one of the co-founders of Sequence, if you will. But the original component founders came from Sente and Frequency. After about a year or so we acquired another small company called Sapphire Design Automation to fit into that whole vision for signal integrity. They had a top notch signal integrity and timing tool. So the combination of these three created the new Sequence with all the new products.

Let me clarify. Was there a company already in existence that hired you as Chief Operation Officer or were you one of the founders.

There was a company already in existence called Frequency Technology with Dr. Marty Walker and Dr. Rob Mathews. It was very small, fifteen people or so when I joined in late 1999 or early 2000.

How long had they been in existence?

Prior to my joining they had been in existence for about 2 years or so. They had obtained a few patents in extraction technology. But they were kind of stuck in one small sliver of the total EDA solution.

Did they hire you with a view to defining a new strategy or were you simply persuasive after you joined the firm?

Both. They hired me to create the new product strategy and take advantage of the new emerging opportunity. Their existing employees and management were not quite savvy enough to know how to do that. The board was in search for a person for four months or so to define the product strategy and expand the company. So I was both. I convinced the board which strategy to adopt. That was a good experience, to do complete market research, customer research and all that in just two months. I was intent in first few
months to create a new strategy for the company, so-called design closure.

Had Frequency raised any venture capital before you joined?

Frequency Technology had raised $13 million in Series D. When I joined they had already closed that round. After another two years we raised Series E for $20 million more. So Sequence and its precedents have raised a total $55 million in VC money including $4.5 million just last week.

A lot of companies would like to understand how to raise venture capital. What was the key to your company's success in this area? What attracts the VC's?

A couple of the things I could advice people about. One is that the market opportunity has to be very clear in the CEO's mind or the management team's mind. That has to be clear in terms of what opportunity exists and what core competency we have. That first equation we have to solve in our own minds before we can convince anybody else for that matter. People look for those two things. The important thing just below that is the management team. They look for a track record, they look for the ability to take the company from point A to point B and the strong belief in knowing how to go about doing that. The market size, technology and management team are the key ingredients. Beyond
that there are more details about the R&D team, inventions and those sorts of things. But most important are the first two or three things. That attracts VCs. In our most recent round we were able to convinced them. This round was from the insiders. We did not go to outside VCs. There are about 14 investors in the new round we just closed. People like Menlo Ventures, Focus Ventures, GM Capital, Sigma Partners, and IVP Ventures are the leading investors. Since there were the earlier investors, they initially felt "Why should I invest again?". The convincing point was low power. They saw that emerging market
and all the work we have done in the last 5 years. We have put 230
man-years to create this product and create a good barrier to entry. This, the customer base and relationships convinced them to invest more money. This gives us that roadmap to profitability.

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-- Jack Horgan, Contributing Editor.


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