Rajeev Madhavan: The Road Not Taken

There’s good news and bad news, in my opinion, with regards to Rajeev Madhavan, founder and CEO of Magma Design Automation, a company that was acquired by Synopsys on February 22, 2012.

The good news it that Rajeev is available to the press for candid interviews like the one included below. The bad news is Rajeev is not going to be part of the EDA landscape as he explores various options for the next phase of his life – and that means the industry will be just that much less interesting, at least for a while.

We spoke by phone in late February.

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Peggy: Hey, Rajeev, how are you doing?

Rajeev: I’m doing pretty much okay as I think about what’s next. I’ve got opportunities, and I’ve got other interests I can now pursue – most people rarely get this kind of opportunity in life, so I’m grateful.

Peggy: That’s great, so are there things we can’t talk about in this interview?

Rajeev: No, we can talk about anything: Do I have a non-compete agreement? Why did I sell?

Everything and anything is open to discussion, which is important to me because there’s been [some level of] misrepresentation in the press of what’s happened here. You can also ask me about my relationship with Aart [de Geus]. I’m happy to answer publicly once and for all any of these questions.

Peggy: Okay, then let me ask you. Do you have a non-compete agreement?

Rajeev: No, I have none – although in the short run, I do not intend to run an EDA company. I have received a lot of help from angels over the years, EDA investors who helped me out by putting investments into my previous start-up. Now, I intend to do the same thing. I’m open to doing that kind of investing, although I’m not planning [anything along those lines] at this time.

Peggy: Okay, so why did you sell?

Rajeev: Why did I sell Magma? The reason is, a good CEO has three responsibilities [related to that job] of increasing priority, all of which are important. First, a responsibility to the shareholders, and in the case of Magma, the shareholders did well [with the sale].

Second, we fostered a culture at Magma where technologists were rewarded for their achievements. The employees didn’t just develop new technology, they delivered it as well. Third, in terms of the customers – at Magma, we have always had the philosophy of no tapeout left behind, and that continues [with the acquisition by Synopsys].

So, the sale was great for our shareholders, our employees, and our customers, and now I give these responsibilities over to Synopsys. They have the scale and they will certainly do everything in their power to make sure that their customers – our customers – receive these products, and that the powers unleashed on the problems of the customers by these products will be there. Everyone will therefore benefit from our having creating these technologies.

So again – as a CEO, I know I can check off all three of my responsibilities, delivering the technology at a time when Synopsys management can take it all to the next level.

Peggy: And what about the relationship with Aart de Geus?

Rajeev: I have a very cordial business relationship with Aart, which is one of the reasons that the transaction happened. We were indeed fierce competitors, but certainly over the last two-to-three years when we have worked together more closely. Obviously we fought and have had technical competitions on the business side, but there’s also a lot of mutual respect and I have felt nothing but that respect during the transaction.

Peggy: Did you ever consider being part of the Synopsys team?

Rajeev: Again, in the short term I do not want to be doing anything in EDA. I see this as a great opportunity to pursue something else, so there’s not been much of a discussion there. In the short term, I have no plans to run an EDA company, but you never can tell in the long term. Right now, I have a once-in-a-lifetime chance to reset myself

Peggy: So how is your extensive rose garden doing?

Rajeev: Over the last year, with all of the mergers and acquisitions – over the last two years, really – it hasn’t had a lot of attention. Having said that, I’m not about to start spending time smelling my roses. I am at the stage now, as I mentioned, of starting to think about the next thing. I’m very much into sorting it out, and working harder than ever on it. It’s actually a lot of fun, because there are many opportunities.

Peggy: How do you go about deciding what to do next?

Rajeev: I’ve always known what I wanted to do next, actually for the last 7 years. This is something I have wanted to explore, have had on my mind for a while.

[Currently], I have 2 or 3 people bombarding me with ideas, and I’m clearly listening to all of them at the same time. I know I have to make a decision and move on, including things [I’m hearing about] from different venture firms, so I will go about deciding by defining the problem I want to work on.

Peggy: Changing topics – what has been the feedback from the Magma customer base regarding the acquisition.

Rajeev: Quite honestly, the customers have been worried about what’s going to happen to the technology. You could see that in the poll in Cooley [ESNUG February 2012].

Obviously, they’re fearful about the technology, and the technologists, and they’re worried about whether Synopsys will make sure that all of those technologies survive, are fostered, and can grow. Especially since we’ve introduced a lot of technology. I’m sure that Synopsys is concerned about all of this, but nonetheless, the customers are worried and I’m sure they’ll express those concerns to Synopsys.

Peggy: Changing topics, again – if you had to give credit to someone over the last several decades for mentoring you, or giving you valuable advice, who would come to mind?

Rajeev: Obviously, Andy Bechtolsheim gave me a lot of confidence, and that clearly helped me.

Also, I think I tend to take money from investors only when I know I can return it. I don’t like to take investment money just to explore how to use money. I know when I take anyone’s money that I feel an indebtedness. I know I have to go and make the right investment. So in that sense, I’m grateful to everyone in the investment community [who has helped me out].

Peggy: And what do you say to angel investors?

Rajeev: Within EDA, clearly my belief is that angel investors should be looking at breakthrough technologies with differentiation at under $2 million [in seed money] where you can sell that company for $10 million to $30 million. There’s actually a lot of opportunity for that kind of growth – the big glamor play is not there, but there is an opportunity there for simulation, innovation, or a lot of different things.

The industry doesn’t know this, for instance, but I sold a company a year ago – a small start-up, which raised very small amounts of money. I sold the company to Synopsys for a price in the $20 million range. Not a lot of money, but it was very successful for the founders, the 9 or 10 people in the company, and a great exit for them, especially the opportunity to be part of the Synopsys team.

The acquisition was not announced in EDA before this, but I had actually been involved in selling the company to Aart and his management team, so I had a chance to see [the process] and it gave me the chance [to work with Synopsys in this way].

Peggy: A kind of trial run of selling Magma to Synopsys?

Rajeev: No, that would be like comparing apples and oranges, because the [Magma-Synopsys deal] was a lot more complex. But the sale [of the small start-up] is the model of a start-up coming to me, and wanting to do something new.

The idea for their technology focus was actually from me, and then they did that and got bought by Synopsys. It was a unique opportunity to play angel, and we made a good return on that investment. So, that’s the kind of opportunity I’m talking about, a breakthrough algorithm, and then moving on to be come part of a bigger [organization].

Peggy: Where does the start-up breakthrough idea come from?

Rajeev: Today, the EDA academic community is not producing a lot of new ideas. Yes, at one time they did, but not today.

Ideas originate from someone who’s actually working in the area, or a user. Sometimes when you’re in a big company [it’s not easy to pursue an idea], but Magma was very good at understanding those [new] ideas, at fostering them and creating technology. We were very good at that, something that is very difficult at other, bigger companies, but we never lost the ability.

Sometimes those guys [with new ideas] in big companies may do start-ups. That’s why there are still ideas that need less than than $2 million, and you can have an exit of $20-30 million in a year and a half. Those are great for the investors and for the employees.

Peggy: You know Jeremy Lin of the New York Knicks? Some sports analysts say that there are lots of other young players with equivalent amounts of talent in the NBA, but they didn’t get the huge amounts of game time that Lin got, so they remain undiscovered. Is that the same for ideas that might be really good in EDA, but don’t get enough exposure for whatever reason, so they don’t get pursued?

Rajeev: If you’re building a company with a $20 million round of financing, you may need to get the limelight. But you also may only need an angel investor, and a relationship with somebody who can look at your software, and then you might get bought by one of the bigger players. [In that case], you don’t need limelight.

But in the case of Magma, we had to go up against an established set of customer relationships [with more established EDA vendors]. In those circumstances, you cannot expect EDAC or any others to help you – you have to find your own way, and that may mean being very vocal and loud battle in EDA.

Of course, that doesn’t mean you’ll be successful. If we had been acquired [early on] and had great technology, no one would have heard of us. Because again, for going forward with an EDA company, you don’t always need the limelight.

For a start-up, however, that needs a lot of money – and I’m not talking here about breakthrough algorithms that may only need small amounts of money – for a company that’s going to take on the big [players], capturing the limelight may be very important [to the success of the company].

Peggy: What’s the outlook for EDA over the next few years?

Rajeev: First of all, Wally Rhines would have loved to have Mentor stand alone forever. He did not sell to Cadence in 2008, or sell the company to private equity about 9 months ago. He simply did not sell the company because it’s Wally’s perception [to keep Mentor stand alone]. My bet is, if the best interests of the shareholders were taken into account, this might not be in their best interests.

Despite that, I am on record that in 5 years there will only be two EDA players, not four. Maybe that prediction’s a year more than I need, but in 5 years the EDA industry will be only two players plus a lot of little start-ups. And there’s nothing wrong with that.

Peggy: And what happens in that case to whichever company is No. 3?

Rajeev: They get bought by one of the other two companies.

Peggy: Would one of the foundries buy one of the big EDA companies?

Rajeev: I don’t think so. There’s no gain for them in doing that today. The EDA players are already providing for free what the foundries need. Every time TSMC wants any IP, the EDA guys do it for them. Why would would TSMC want to buy one of the EDA companies, and only have one vendor [supplying that stuff]?

Peggy: But Intel bought Wind River, which is kind of the same.

Rajeev: Yeah, but that’s a different game. Intel needed the embedded operating system experience, and that required talent within Intel to accomplish. Again, much about hardware is really hard to do, while the challenge around software is unlike the hardware, software goes through faster changes and hence needs [special] expertise. Intel bought Wind River because they needed to have more in-depth expertise than they had, so the purchase made very good sense.

Peggy: And what does Synopsys get for purchasing Magma?

Rajeev: That would be a very long list, but first is the opportunity to take the absolute lead in digital technology. And why is that?

Because it includes lots of newer technologies, a distributed place-and-route system, new timing and extraction, and new sign-off [capabilities]. Now platforms from Synopsys with Magma give them an unchallenged position in the digital area.

Second, in analog implementation, it gives Synopsys an opportunity to actually create the first credible competition to Cadence in the analog implementation area. We were growing very fast in that area, and now the Synopsys acquisition gives them the opportunity to take on the competition.

Third, in the analog simulation market, it gives them the opportunity to have fast, accurate SPICE simulations.

So, these three together are what Synopsys has achieved with the acquisition – things of very high value. Obviously, it requires that Synopsys makes sure that customers’ requirements continue to be met, and that our employees are fostered for the power to be unleashed.

Peggy: And those employees? Is this also a merge of technologists between the two companies?

Rajeev: That’s where I would like to say that, except for one acquisition, at Magma we were very successful in bringing in 1-plus-1 and making it greater than 2. That’s something that I’m very proud of.

It’s about how to create the best value – if someone in my organization [versus the acquired organization] has the biggest NIH, and therefore there’s a problem to the integration, we at Magma stepped in and changed our management team to ensure that the acquired technology does not perish.

Peggy: Any chance Synopsys is buying the technology just to put it on the shelf, just to put it out of business?

Rajeev: I do not honestly believe that is why Synopsys has done this, but there are big challenges, nonetheless, in [merging technologies].

Peggy: Here’s a random question: Do you think a non-technical person can ever lead a technical organization like an EDA company?

Rajeev: There’s really no reason to have to understand all of the details of an EDA algorithm to lead an EDA company. You need to know your limitations, and accept it, and surround yourself with people who know and understand the technology. You yourself don’t necessarily need to know it. If a person has great strengths in leadership, you could succeed as long has you have [the right] people around you.

Peggy: If you could do the last 20 years differently, what would you do?

Rajeev: There were lots of negatives, we went through some very tough periods. Yes, there were lots of negatives. But frankly, where I was 20 years ago – perhaps I would have had different licensing models and tried different things [in that area], but the real negatives are my trade secrets. In the product area, there are [always some things you wish you’d done differently], but again those are the secrets that I need to work on. Things I will do differently next time around.

Peggy: What have you done spectacularly well?

Rajeev: There are things I’m mighty proud of, and setting some priorities about which I feel very good.

But the second coming of Magma is among the things I’m most proud of. We had come to a terrible situation at one point, and I stayed on to do this because of my responsibilities to my customers and my employees. And there was a sense of real happiness that we could turn things around, create new technology, reinvent the company, and create new sign-off and place-and-route products. Create the second coming of the company.

This [process] was not something that I had trained for. I was a start-up guy, who came from nothing and had to learn this. And here, I had to deal with a lot of issues, but we succeeded, and saved a lot of jobs. It was a very big achievement – that second coming – instead of just calling it quits. We stood up, and did what had to be done to come out on the other side. I’m very proud of all the unique technology that came out of that.

The third thing – I’m proud of outgunning all of the competition. Technology wise, we out-executed them.

Also, we built a very unique culture at Magma, which is the fourth item. We built a culture which started with customer success. At the end of it all, we never had to remind our employees about that culture. They took it all upon themselves, and delivered way above and beyond the call of duty.

The fifth thing – I had a fantastic team, and towards the end, a great leadership team – a team that I was very proud off.

Peggy: You have a lot to be proud of.

Rajeev: It’s about what you have within you. It required me to go way beyond the strength I had to do a start-up, and required a strength I never knew I had within me. I’m thankful I had the opportunity. Never thought I would have to stay and fix the litigation and recession issues that we had to face.

Peggy: Sometimes I think it’s exhausting for leaders in Silicon Valley to know what they know, and see that what they do so clearly impacts such a large portion of the world.

Rajeev: I don’t see it at all that way. I feel that I’m the luckiest person in the world, surrounded by people who are wiser than me. There’s no better place to be than that – in a place where you can excel – and that’s the best thing about Silicon Valley.

Every morning, you go to work and find people who are much wiser and more capable than you are. You’re waking up in a place where there are lots of people who know a lot, who want to work hard, and want to work with you. I’m very happy to live for that.

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Two roads diverged in a wood, and I –
I took the one less traveled by,
And that has made all the difference.

… Robert Frost

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Tags: Aart de Geus, Andy Bechtolsheim, Cadence, EDA, Intel, M&A, Magma, Magma Design Automation, Mentor Graphics, Rajeev Madhavan, Synopsys, TSMC, Wally Rhines, Wind River

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