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rickclucas
Simon7382
Well, if this is supposed to be a good deal for the VC-s who invested in Icera ...
Icera exit is good news for startups
Rick Clucas
5/16/2011 4:16 AM EDT
Congratulations Stan [Boland, CEO of Icera], you did it again! With the news of Icera being acquired, we are sure to be hearing the biggest sigh of relief for a long time from the European venture capital industry.
If you spoke to a VC executive in the last six years, they were either invested in Icera or glad they weren't. As has been widely reported, so much money had already been put in that none of the investors could afford to let it die. The fact that it has had an all-cash exit providing some return must be a huge relief for everyone concerned.
But perhaps the biggest sense of relief can be found at all the semiconductor startups and potential start-ups that for so long have been living in the shadow of the Icera money-pit. All the VCs who were into Icera were rightly keeping funds to maintain their position at the next round. All those who were not were very concerned about the huge amounts of money that was required just to keep one semiconductor company alive – no wonder they did not want to invest in semiconductors.
Unfortunately for many the Icera news has happened too late and they have already died – in some cases the IP may have been bought by someone else and in other cases not. Let’s hope the market will now free up and that it will have learnt some lessons.
The biggest lesson surely must be that to be a semiconductor vendor is very expensive and getting more and more expensive, and as Nvidia has demonstrated, in order to compete you need to offer more and more of a complete system. However being an IP company is a lot less expensive and something at which the U.K. has been very successful.
In the U.K. we still have two very successful profitable publicly listed semiconductor IP companies: ARM and the often forgotten Imagination Technologies. ARC, the company that I founded, is now part of Synopsys along with other IP from a company I was CEO of called Ignios, which suffered from the Icera affect. It seems that large IP companies must now offer a whole platform portfolio, and this is where startups come in, and why it is so important that investment funds flow in to them.
Even the likes of Synopsys, ARM and Imagination are buying companies to expand their portfolios and to get new innovation. Large companies require a structure to run them, structure stifles innovation but is great for iteration. If we kill the startups, then the innovation dies and the larger IP companies can't grow and without IP the large semiconductor companies can't bring out new products either.
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lcovey
5/16/2011 4:24 PM EDT
I hope you are right but I have my doubts. This was less than a 2x return on investment, which is a less than acceptable return to most investors. this had more of the form of a fire sale.
The only positive I can see out of this is the continuing trend of companies buying technology, to keep it from dying altogether, when they cannot find the innovation within their own organizations to match it.
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rickclucas
5/16/2011 5:30 PM EDT
I hope so as well!
I think that the fact that the investors got a return on this is amazing! It was not what I was expecting or what most of the VCs I have spoken to over the last 7 years were expecting.
My fear had been they would die or get acquired for sub $10m.
My hope is that the lesson that will be learnt is that a good product and with the right business model along with a tightly controlled cost base can produce a good return. It is also much wiser to spread your investment risks across a large group of investments, I think for some Icera was a very large percentage of Funds invested.
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jonathanmay
5/16/2011 7:40 PM EDT
This is not right. Yes, it is great that the funds managed to release the money (and hence cash liquidity) they sunk into Icera, but the idea that they would now reinvest this in semi/chip/related startups given how close they came to taking the bullet is crazy.
You are right, in my opinion, to say that licensing might be a good route to go.
For now, the spotlight of the European semi startup industry must turn to Picochip and XMOS - at different stages but both clearly targeting the $1bn+ IPO.
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jonathanmay
5/16/2011 7:45 PM EDT
In short, I think this is good news for web/mobile startups ;-)
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rickclucas
5/17/2011 7:17 AM EDT
Jonathanmay you are in right in saying that the returned funds are not going to be reinvested into semis, however that is because in most cases the money will be returned to the investors in the funds, which they may decide to invest in new funds.
What it does do is lift a big dark cloud that will free up funds from those investors and give a bit more confidence to other investors to think about investing again in a whole range of related sectors.
I think the days of being able to raise investment for a Fabless Semi company doing a digital SOC without using a lot of external IP are gone. But change any one of those parameters and the risk is less and it becomes more likely.
How long it will take and which sectors will gain time will tell. But I for one feel more confident about UK semis today than I did 2 weeks ago.
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alexio
5/19/2011 3:35 AM EDT
Rick,
first of all, i do not believe that Icera is a good exemple of VC investment in semiconductor that makes the VC happy and willing to invest again in a semicon company (too much money, too much work, too much stress and fear for a weak return...). i did always understand the rational of Icera (becoming the future Qualcomm out of EUrope) and i believe the VCs were great in trying this adventure !
i think you are missing other interesting exit in europe in the semicon area:
- French Sequans COmmunications just did an IPO on Nyse (the first french company going public since 2000) (315m$ mkt cap)
- French Inside Secure just announced the IPO filing at Nyse (mkt cap to be defined !!)
- Gigle Networks sold to broadcom for 75m$
in all these 3 companies the VCs are going to make or made nicer returns than in Icera....
bye
and other to follow.
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rickclucas
5/19/2011 8:23 AM EDT
Hi Alexio
Please dont read my thoughts as being that Icera is a good example of VC Semiconductor Investment, the whole point of the aritcle is that for many years Icera has been having a negative effect on VC Investment in the UK/ Europe in Semiconductors for the reasons that you state, now that they have had an exit that negative effect no longer exists and there are some very important lessons to be learnt.
I am very happy for Sequans and Inside as they are both great companies who have managed to grow steadily, they have not required massive amounts of investment and have been seen by the VC's I have spoken to other the last few years as psoitives for keeping investing in Semis.
I hope 2011 will be a positive year for Semi start-ups after about 10 negative years.
Rick
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Silicon-IP
5/21/2011 2:03 PM EDT
"...a Fabless Semi company doing a digital SOC without using a lot of external IP are gone".
Indeed.
The time and delayed-cost associated with IP acquisition must be minimized to capture these effiecnies. Silicon-IP, Inc is an advisory service founded by industry experts in 3rd party due diligence and licensing. This is one small, but impactfull step for new start-ups to get to profit.
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Simon7382
5/21/2011 5:07 PM EDT
Well, if this is supposed to be a good deal for the VC-s who invested in Icera then I am not sure what your definition of a "good deal" is. The net present value of $200 million invested over 9 years is for sure more than what Nvidia paid. Assuming that Icera had some usable technology Nvidia made a very good deal, while all the VC-s who invested in Icera lost money (based on any reasonable financially sound calculation). If anything this exit will diminish the chances for any future IC start-ups to get VC funding. And, it is hard enough as it is.
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rickclucas
5/23/2011 1:34 PM EDT
Hi Simon
In the UK and Europe Icera has been having that effect for many years. Most VCs I know who had not invested in Icera are surprised that the investors got anything back, if that is someones expectation than this was a good deal.
My article was highlighting the what I hope will prove to be a positive change in the UK/European semi market for start-ups but I dont expect to see another big play like Icera come out of the UK.
The UK has a good record with IP companies (ARM/ Immagination Technologies) and specialised Fabless companies(CSR. interesting ones to watch are XMOS and EoSemi), I hope that they will find things slighlty easier over the next 12 months.
VCs raised there funds based on certain investment criteria, they are under pressure to invest those funds not to just sit on the money and take a management fee.
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