Does RedMere + Fresco = Spectra7?

NEW YORK – By marrying two startups – each solid but neither quite ready for its IPO honeymoon – to form “a new superset company,” Tony Stelliga believes he can ensure that the bride and groom, RedMere (Cork, Ireland) and Toronto-based Fresco Microchip will live happily ever after.

Stelliga is the incoming president and CEO of Spectra7 Microsystems, the eventual “superset company.” Its business is focused on designing a system-level solution for fast-frequency agile interconnects. He likes to describe the deal as “one plus one is three.”
 
Does the math add up? Is the Honeymoon Suite a little too crowded?

According to the announcement made Tuesday, RedMere and Fresco Microchip, two privately-held chip startups that have taken more than $80 million in venture funding, will merge with Chrysalis Capital VIII Corporation to create Spectra7 Microsystems, a high performance analog semiconductor company. Spectra7 plans to raise over $10 million in equity, including investments from venture capital firms, such as Celtic House Venture Partners, EdgeStone Capital Partners and Ventures West.


In an interview with EE Times, Stelliga explained that Tuesday’s announcement on the formation of Spectra7 offers more than meets the eye. He laid out three factors making the Spectra7 story sexier than usual. They include: a brand new market the company is gunning for; a new capital structure the “superset” company is creating; and its proximity to a new product launch
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Fast frequency agile interconnects
First, the market for fast-frequency agile interconnects is “a fundamentally new market that’s about to explode,” Stelliga claimed. “I’ve been keeping an eye on it for a while.”

By leveraging RedMere’s high-speed digital interconnect technology and Fresco’s RF and mixed signal expertise, Spectra7 is set up to develop a system-level RF/digital solution that lets digital chips dynamically tune to a specific radio (or choose the radio on demand).

Making radio agile will become increasingly critical, especially now, when as many as 13 radios are getting crammed into a mobile handset or a tablet, Stelliga said. “We need to do frequency planning on silicon.”

Stelliga asked a rhetorical question. “Why wouldn’t a digital chip be able to dynamically tune to the frequency it needs?” He added that it’s time for a digital chip to be frequency aware.

Meanwhile, he said, RF needs to get more directly connected to a digital chip, without bringing in more switches, filters, and any other additional mechanisms for shielding, channel separation and signal isolation. “This is a new field where a system-level RF-digital solution is required.”  

New capital structure
Second, the formation of Spectra7 is a story about new capital structure.

Traditional VC money dried up for most semiconductor startups over the last decade. Both RedMere and Fresco Microchip, despite multiple rounds of funding, still lacked the capital necessary to diversify their business. “Both have great solid products, but they have remained as single-thread companies,” Stelliga observed.

By combining the two start-ups, “We’ve created a new superset company,” said Stelliga. This, he noted, brings “fuel injection” much needed for Spectra7, easing the trip “up and down Sand Hill Road.”

Further, by turning Spectra7 into a soon-to-be-publicly traded company on the TSX Venture Exchange, Stelliga hopes to raise money from the retail and fund sectors, in addition to traditional VCs.

No need to redesign a product from scratch
Third, having acquired underlying technologies from RedMere and Fresco Microchip, Spectra7 is close to a new product launch, scheduled in 2013. Spectra7 “does not have to redesign a new product from scratch,” claimed Stelliga.

The first offspring Spectra7 is planning next year is geared for consumer devices. Spectra7 is pointing toward the eventual transition for smart TVs, smart phones and consumer cameras to 2K and 4K video, a super high-resolution standard originally set for digital cinematography. “In order to process 40 Gigabit per second pixel data, you need more than just a new version of HDMI. It needs a high-speed interconnect combined with RF solutions featuring frequency agility,” according to Stelliga.

Separately, Spectra7 will be also working on the RF space, by retooling duplexer technology to improve protection from interfering signals.

How big is Spectra7’s target market going to be? Quoting a market research firm Databeans which forecasts analog semiconductor market in 2016 to be $70 billion, Stelliga estimated that 10 percent of that comes from products addressing fast frequency agility – above 5 Gigabit per second. “That comes out to be about a $6 billion market,” he said.

Stelliga expects Spectra7 to get up and running by this fall.  

Until Spectra7 gets officially launched, Stelliga is CEO of RedMere and is a member of the Board of Directors of both RedMere and Fresco Microchip.

Stelliga is no stranger to the startup world. He was formerly the chairman and CEO of Quellan, a  high performance analog semiconductor company until it was acquired by Intersil Corporation in 2009.

Prior to his roles at Quellan and Intersil, Stelliga held senior management and strategic positions at Intel Corp. following Intel’s acquisition of Softcom Microsystems in 1999, a high performance semiconductor company Stelliga founded and acted as chairman and CEO.

Stelliga has also held vice president and general manager positions at LSI Logic and Newbridge Microsystems prior to its spinout as Tundra Semiconductor. Stelliga has served on the Board of Q-Sound Corporation, a publicly traded company, and holds 20 U.S. patents.

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