LONDON -- A few weeks ago, Moshe Gavrielov, president and chief executive officer of FPGA vendor Xilinx Inc. (San Jose, Calif.), said it was all over: Venture capital would not return to the semiconductor industry--not even after the current recession--because of the heady sums required to launch a chip startup and the more than five-year lag before VC investors see a return.
If he's right, it signals dark days ahead for what has always been one of the most dynamic technology-based industries, dark days for Silicon Valley and dark days for this publication's own "Silicon 60" list of emerging startups (see story, page 26). That lineup, more formally known as the EE Times 60 Emerging Startups list, is looking strong for now, with 23 newcomers having made the cut after a few years of pioneering work.
Xilinx shareholders, of course, might hope Gavrielov's prediction holds true, because then semiconductor startups would increasingly become intellectual property plays, with the IP burned into FPGAs.
At first glance, Gavrielov's logic seems solid. Return-on-investment times have stretched over the past decade, while semiconductor market growth has diminished. And plenty of IP companies are already working with Xilinx. For example, startup Omiino Ltd. (Newtownabbey, Northern Ireland) is working on telecom network circuits that will go to market on Xilinx FPGAs. But then there's also Tpack A/S (Herlev, Denmark), a vendor of Altera FPGAs programmed to implement communications functions.
Indeed, Gavrielov's argument implies opportunities for rival FPGA startups. The industry has seen the emergence of Achronix Semiconductor Corp. (San Jose), targeting the high-performance market, and SiliconBlue Technologies Corp. (Santa Clara, Calif.), focused on extremely low-power FPGAs.
So venture capital investment is more complex than Gavrielov may have suggested. Nonetheless, with the global economy mired in recession, few would dispute that these are tough times for many VCs and their portfolio companies.
"It is a case of 'back to basics' in venture capital. A lot of VCs are increasing their interest in cleantech, but the overall trend is toward capital efficiency," said Sven Lingjaerde, cofounder and managing director of VC firm Endeavour Vision SA (Geneva). Lingjaerde is also president and founder of the European Tech Tour Association, a not-for-profit group that helps put VCs in touch with investment opportunities.