Walden's $100 million fund comes at a time when the central government has also announced new initiatives for the semiconductor industry.
BANGALORE, India — Global venture fund Walden International is launching a specialized fund to invest in Indian semiconductor startups.
According to a report in Economic Times, the $100 million fund will begin investing later this year and has already identified four startups, two each in Bangalore and Hyderabad.
Walden's new fund comes at a time when the central government has also announced new initiatives for the semiconductor industry.
Last month the Indian government gave an "in-principle" approval for two international consortia to establish India's first semiconductor fabrication plants with a set of incentives and subsidies. One consortium comprises Israel's Tower Semiconductor, India's Jaypee group, and IBM, while the other has Franco-Italian STMicroelectronics, Hindustan Semiconductor Manufacturing, and Malaysia-based Silterra as members.
"It [semiconductors] is a very valuable space and exits are generally large, over $300 million or more," said Lip Bu Tan, chairman and co-founder of Walden International. "But not many companies get made in this space due to risks involved and lack of competent backers."
The firm is looking for companies with innovative solutions in the low power consumption space, and expects to invest around $2 million in each startup. It will also back ventures in the consumer Internet space, the report said.
Interestingly, Tan had invested in one of the very few successful Indian semiconductor startups, Cosmic Circuits, a provider of analog and mixed signal IP cores, in 2011 and joined the company board. Earlier this year Cosmic was acquired by Cadence Design Systems, of which Tan is also President and CEO.
Despite all the hype that has been built up in India around the semiconductor domain, entrepreneurs have struggled to raise capital for new ventures in electronic design and semiconductor software. Several venture capitalists I have interacted with clearly state that they are are not interested in the semiconductor space, and this had stifled the growth of successful semicon startups in India.
But Sharad Sharma, former CEO of Yahoo India R&D and co-founder of iSPIRT (Indian Software Product Industry Roundtable) Foundation, where about 30 companies and individuals have joined hands to transform India into an innovation hub, believes there is enough talent available in the semiconductor space in India but there's a lack of startups due to limited venture capital. "The Walden fund announcement is bound to act as a catalyst for startups in this space," he told me.
Only a few technology firms such as Tejas Networks and Cosmic Circuits have successfully raised capital. "In India, funding of semiconductor startups which are in chip and systems designs is [quite rare]," says Sanjay Nayak, founder of telecom products maker Tejas Networks, which first raised angel funding of $5 million from investors including technology entrepreneur Gururaj Deshpande. Tejas later received around $73 million in risk funding from global investors such as Goldman Sachs, Battery Ventures, Sandstone, and Intel Capital.
"A venture fund for the semiconductor industry will be really helpful as the next generation of entrepreneurship will revolve around new devices such as tablets," says Nayak.
According to a report in the Asian Venture Capital Journal, in 2011 Walden launched the first semiconductor industry-focused fund in China. The RMB500 million (US$81.6 million at the time) Shanghai Walden Venture Capital Enterprise Fund raised capital from ARM, Taiwan Semiconductor Manufacturing, Samsung Venture Investment Corp., Ag Investors (affiliated with Silver Lake), and SDIC High-Tech Investment, among other investors.
Although Walden's other India investments have been in the outsourcing sector, such as Quatrro BPO Solutions, MindTree, and Anantara Solutions, this April it funded a DSP firm, Ittiam Systems, with $350,000.