Reinvigorating semiconductor startup funding

For those in fabless semiconductor or IP startup mode (or even thinking about how to start up and get funding),  take a look at Paul McLellan’s  report on a couple of panel sessions at the annual GSA Entrepreneurship Conference, held last Thursday, July 18 at the Computer History Museum.

Of note is that the first session’s panelists brought a variety of funding models to the table – from a traditional VC to Intel Capital to a brand new incubator on the scene – SKTA Innopartners.  In fact, any of you fabless guys really should talk to Angel Orrantia at SKTA.  They are focused on fabless semiconductors and enterprise software.

Below is an excerpt from Paul’s write-up:

GSA Entrepreneurship: Getting Money In and Out

Paul McLellan

by

Paul McLellan

Published on 07-18-2013 11:32 PM

This afternoon and evening I was at GSA’s entrepreneurship conference at the Computer History Museum. The first two panel sessions were essentially on getting money into companies to get them started (or growing them), and getting money out when you have built the business.

The first session was officially titled Fueling Success and Innovation with panelists:

• Shankar Chandran of Samsung Catalyst Fund’s Samsung Strategy and Innovation Center
• Amer Halder of Cavium
• Keith Larson of Intel Capital
• Angel Orrantia of SK Telecom America’s Innovation Center
• George Pavlov of Tallwood
• Moderator: Gunjeet Baweja of Needham

Gunjeet opened by talking about what turned out to be the theme of the session: investment in semiconductor companies continues to fall, driven by lack of IPOs and consequent lower M&A valuations. Need to think about strategics since that’s where the money is. Strategics are companies in the ecosystem that have other reasons than financial for investing, like half the panel.

Shankar said Samsung has created a strategy and innovation center in Menlo Park with $100M fun to invest in core technology. There is a big capital cap for core technology since VCs stay away from anything requiring time and too much capital.

Amer of Cavium echoed the strategic message. They are the alternatives for funding GSA’s cap lite group has just put together a list of strategics willing to take your call.

Keith didn’t have a cake but it was Intel’s 45th birthday today. Intel has been the largest strategic for 20 years, having invested over $10B with over 600 exits. There is lots of innovation but not so much in the traditional ASSP/component business. Materials, EDA, IP. Strategics can now add more value that traditional VCs. And the other way around so don’t forget to emphasize the non-financial aspects to a strategic investment.

SKTA decided to get into the business since they noticed a fundamental shift in semi, which is now much closer to equipment and materials companies with the complexity of modern processes. They help find a strategic match with a goal to reinvigorating the semi funding model.

George of Tallwood said the old days are gone, you can’t do it any more the way you could. Chips & Technology were making more money in a PC than Intel after just 2 years of development at a $6-800M run rate. Only mobile is big enough and growing enough but you think you will just displace Qualcomm, not going to happen. Semiconductor industry is mature (almost nobody in the room was under 40). It is not just returns for semi IPOs that are not there, VC overall has worse returns in the last 10 years than investing in public markets. But he is worried that semi will go the way of EDA where innovation can only now be done in an exceptionally capital efficient way, and he doesn’t think that works for semi. Development can be done better but it still costs real money.

Gunjeet had a ray of hope that exit valuations are going up if the company is build in a capital efficient manner. There is chance that the Jobs act will make smaller IPOs possible again versus the mess that Sarbanes-Oxley made of the market.

Read the full article on SemiWiki.  

Tags: Computer History Museum, Enterprise Software, Entrepreneurs, Global Semiconductor Alliance, GSA, GSA Entrepreneurship Conference, https://www.facebook.com/pages/Lee-Public-Relations/201964499825219?ref=hl, Lee PR, Lee Public Relations, Paul McLellan, Semi, Semi funding, semiconductor funding, semiconductors, SemiWiki, SKTA Innopartners, startups, VC, Venture Capital

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