Guest Post: More on EDA Startups, Behemoths, Corner Stores, and Zombies

Three weeks ago on The Breker Trekker, we published a post on “The Return of EDA Startups, Behemoths, Corner Stores, and Zombies” and saw a nice uptick in viewing. Zombies are always popular with our audience. Our post prompted some interesting observations from today’s guest blogger, Excellicon’s Sales and Operations VP Rick Eram. He has some thoughts on this way of dividing the EDA industry and suggestions on how customers should treat the different players:

The concept of corner stores is interesting since they pave the way for development and deployment of newer analysis and implementation technologies addressing today’s design challenges that are either not addressed by majors, involve much manual work despite available products, or are addressed by products that create a huge amount of data without means for interpretation. The startups develop new technologies and, while deploying their technology on their way to becoming corner stores, they master ways to deploy such new technologies. What differentiates corner stores from zombies is the deployment of the technology. These companies are the engines of innovation in today’s EDA industry and help the behemoths to cover the gaps in their traditional technologies after the newer technology catches on and adds value for customers.

For example formal technology was developed for use in tools nearly two decades ago. It was promised as the future of simulation. However the initial product offerings never caught on simply because the startups and behemoths did not fully anticipate the learning curve and the effort level required to come up with assertions and write customized scenarios through assertions for analysis. The majors kept pushing the more traditional technologies of that time, or attempted to sell half-baked technologies, selling what they had, until there was a shift created by startups and corner stores. For example, Chrysalis changed the way formal verification was done, and Jasper pushed the boundaries of property checking and enabled formal technology for a much larger audience.

Fast forward several years, as the customer need for better technologies grew. Companies such as Excellicon, which rose from a design background addressing timing constraint challenges, have well positioned products to offer specific applications built around formal technology, enabling wider deployment accessible to more designers and verification engineers. In fact the first wave of such companies, such as 0-In, Atrenta, or even Jasper to some extent, focused on functional verification and were acquired by behemoths to cover the gap in what I call “big boxes” in the flow.

In the meantime several zombies always played catch up to those startups while they were being transformed into corner stores, and mid-tier minor leaguers. The zombies have been around for a decade or so generating enough revenue to survive. They are usually characterized by being “me too”–the third or fourth player to the market, but never growing significantly, offering incremental modification to existing and similar tools/flows, and never able to capitalize on the opportunities to cover the gaps in the majors’ tool flows.

The reality is that the major functionalities required in a typical design flow, the big boxes, are already occupied by Synopsys, Mentor and Cadence. These big boxes are technologies involving synthesis, static timing analysis, place and route, etc. So any innovation in those areas is typically incremental, and startups that attempt to go after such majors’ markets with innovative products face many obstacles presented by the behemoths: huge capital requirements, legal issues, and associated risks.

The opportunity for the startups and corner stores of today is then in their technical and detailed understanding of the designer’s pain while innovating new technologies to address such pain. These companies realize that there is a significant advantage in optimization of various tedious tasks performed by designers, or managing and analyzing the large amount of data produced by the majors’ products, or even in the data exchange between the big boxes in the flow.

For example, Atrenta was successful at building a $50-million-dollar-per-year business by addressing what the majors did not do. In fact linting technology was already available, and widely ignored in the market by most major companies. It was “free” but required hand-written pragmas, and sorting through information and design rules was a major pain for designers and not repeatable. The majors never recognized the market potential until Atrenta implemented two things that changed the landscape: separation of the rules from the linting engine and the ability to provide waivers outside of the engine.

In the past 10-15 years, innovation has been simply purchased by the major leaguers. The innovation cost, risk, lead time to revenue, and building a user base for the most part has been replaced by the outsourcing of innovation to startups and corner stores, where the behemoths can pick and choose from various categories of acquisition targets to strengthen a particular gap in their offering as opportunities present themselves in a reactive response to customer demand and pressure.

Often, the majors’ response to startups is defending their turf in the marketplace using delay tactics to derail customers from acquiring new technologies in the hope that the problem–the startup–will somehow go away. At times, slideware, and promises for a similar offering, replaces actual innovation as a delay tactic and perhaps an attempt to prevent upcoming startups from gaining ground or threatening the behemoth’s market share. All such tactics are counter-productive to the growth of the industry, customers, and startups and corner stores.

At the same time, many customers prefer to purchase from one vendor, despite superior technology from corner stores and minor leaguers. However, such an approach eventually works against the customers. By eliminating competitive products, and not supporting startups and corner stores, which may end up being minor leaguers, most customers end up paying more in the long run through higher costs and use of perhaps inferior technologies in the short term. In fact, the behemoths have been successful at eliminating the middle tier of EDA companies for the most part and pressuring customers for higher dollars, simply because only a few rise to that stage.

In conclusion, in order for the EDA industry to remain healthy and productive, both the customer side and behemoths must support the growth of innovation and help to turn startups and corner stores into mid-tier companies, which can thrive on their own and continue to drive the innovation that is mainly lagging from the majors.

Rick Eram

Tags: acceleration, acquisition, applications, Atrenta, avant, behemoth, Breker, Cadence, corner store, coverage, debug, EDA, functional verification, jasper, M&A, major leaguer, mentor, merger, minor leaguer, portable stimulus, reuse, SoC verification, startup, Synopsys, uvm

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