SAN JOSE, Calif. The merger of ultrawideband chip startups Staccato Communications and Artimi Inc. shows a way forward for others in what one executive recently called a venture capital winter. The combined companies now have a broader portfolio and funding through 2010 at which point they believe the economy will be resurging and UWB technology gaining traction.
Venture capitalists are reserving cash for existing investments, refusing to fund new startups, said Howard Bubb, chief executive at processor startup Ambric which closed its doors this week after failing to find a new investor to lead a series C round. The Staccato/Artimi combination created a new $20 round by pooling investments that only needed to tap current investors in the two companies.
"The money that would have been committed by Staccato investors was a reasonable amount, but we wanted a runway through 2010 to be capitalized well into the period where this economy starts to recover," said Jeff Chang, vice president of marketing at Staccato.
One downside to the move is the combined company will trim staff to 85, laying off people from both startups. Staccato alone employed about 75 people before the merger.
In early September, even before the troubles on Wall Street unraveled, an analyst said the ultrawideband chip area was ripe for a shakeout with as many as a dozen players and a high bar for success. Since that time WiQuest Communications folded, Stonestreet One sold off its small UWB software business to startup Alereon and Intel said it ended an internal effort to design UWB chips.
More shoes are likely to fall. "I think you'll see more news [from UWB companies] over the next six months, then the noise will go down and we will get back to getting products out," said Chang.
The UWB sector is something of a canary in the mine for many other venture sectors that will come under pressure in tight economic times. Any startup that needs funding in the next 12 months may not survive.