Analog startup goes old school, gets funding
6/23/2011 12:01 AM EDT
The $12 million in funding, which Touchstone actually received last year but did not announce until Thursday, came primarily from Silicon Valley venture capital firms Opus Capital and Khosla Ventures. Fox said he is almost certain that Touchstone was the only semiconductor company to receive series A funding from Silicon Valley VCs in 2010.
Venture capital funding—once the lifeblood of semiconductor innovation—has nearly dried up for chip firms in recent years. The skyrocketing costs involved in designing and bringing to market a leading-edge technology SoC have made VCs who once lined up to invest in chip firms with hot new technology cautious about investing.
Ironically, Touchstone scored funding not by enticing VCs with intriguing digital IC technology—which used to be the recipe for landing funding five to 10 years ago—but with a retro business model and analog technology implemented at 0.18 micron—hardly exciting process technology wise in a world where leading-edge digital IC vendors are preparing to offer 22-nm chips.
Will Touchstone's funding usher in a wave of VC investment in analog chip vendors and others that are less capital intensive and have business models seen as safer? Gil Cogan, founding general partner of Opus Capital, isn't sure.
"I don't know if there is a trend," said Cogan, who was an original investor in Maxim in the early 1980s. "I think it is an older school business model and capital efficient and that's exactly what our fund and some other funds like about it. You start a digital IC company now, you have to raise a lot of money."
Fox credits Cogan and Pierre Lamond, a partner at Khlosa Ventures who was an original investor in Linear, a founder of National Semiconductor and formerly chairman of Cypress Semiconductor Corp., Microchip Technology Inc. and Vitesse Semiconductor Corp., with seeing that Touchstone was a compelling proposition. Many other VCs did not, he said.
"Both investors knew that our model worked because of what they had done in the past," Fox said. "There are only two people like that in the VC world."