Another consequence of a pre-negotiated sale price might be to inhibit other funders from joining in an investment round. Conventionally multiple funds usually share the risk of investing in a startup. Lawler said that was possible but that some VCs may want to take advantage of the Silicon Ventures approach as a way of diversifying their own risk profile. A lower return but with an exit buyer already signed up might look good to some players, he said.
"I am reasonably confident we will be at a point for an initial close of the fund early fall. The response has been tremendous," said Lawler. He added that the he hoped the initial close could be for half the fund's final value.
Lawler did not rule out investing in Europe although Silicon Valley would appear the natural soil for Silicon Ventures. "It's a way to revitalize the industry. The highest likelihood of success is going to be close to where we are resident," he said, before raising the possibility of Silicon Ventures taking on a Europe-resident partner.
While the conference showed great interest in Lawler's proposition some reservations were expressed during a panel discussion that Lawler moderated immediately after his presentation.
The point was raised from the floor that startups away from the digital leading-edge in the broader classification of electronics appear to be getting funding. It is also the case that chip development is now a large team activity and perhaps less suited to entrepreneurs. One delegate, a bio-engineer who was described as being the youngest person in a room of more than 100 people, told the conference: "You've lost your edge. You are no longer sexy. I can see the problems in biology. I can't in semiconductors."
Panelist Claus Schmidt, managing director and executive vice president of technology at Robert Bosch Venture Capital GmbH, observed that internal R&D and startup R&D are equally successful and that maintaining the semiconductor ecosystem is not necessarily what entrepreneurs are good at. "Start ups are good at taking innovation and running with it. If you just outsource product development don't expect anything."
The buyout portion of the plan is also tricky. A truly entrepreneurial company will always figure they are worth more than what the sponsor is willing to pay as a pre negotiated $$$ amount.
The sponsor has to already be interested in the company to be acquired, otherwise why sponsor. I can see the sponsor as considering Silicon Ventures sharing the risk somewhat for a "3%-5% return". It seems to me that the real value to the sponsor is off balance sheet development which they may have to absorb (the "buyout") later down stream.
To work, there would have to be many ways locked in to do the deal, and not many ways to get out of it - for both parties.
The semiconductor business has changed, the glory days appear to be over and are not likely to come back. It is a different world now and no amount of nostalgia is going to change that. In particular, the old business model of fabless semiconductor companies is, for all practical purposes, dead, when it comes to start-ups and emerging companies (you can find more about it in this presentation: http://www.design-reuse.com/exclusive/kaben/). There is a need for new approaches that have a chance to bring significant ROI justifying investments.
Just because the old ways of doing business are no longer applicable, this does not mean there is not a need or a demand for semiconductor start-ups and their innovation - quite contrary! But the way we go about it has to be different. To avoid repeating myself, I refer you to this article: http://www.eetimes.com/electronics-news/4074052/Letter-to-the-editor-IP-cars-share-common-ground