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adapteva
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Manager
High risk and bad exits
adapteva   9/13/2013 8:15:33 AM
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Angel,

Great article and a wonderful effort. Can you point to any success stories to date? I heard rumours of an option/call setup like this being used by one of the few startups that have been able to raise significant amount of funds, but of course I don't have the details..

Based on my own painful 5 year fund raising journey, there have been two challenges that have stood out.

1.) High Risk: Most VCs I have interacted with believe it's going to cost >$20M at minimum to get to an exit and there is a real risk that it will cost upwards of $100M (based on historical data points). I have been standing on my soap box for years shouting that these numbers are inflated, but it's an uphill battle. My point is that thanks to IP availability, EDA tools, and the general "virtual startup" trend it's cheaper than ever to design chips. Adapteva created four silicon tapeouts for less than $2.5M.  The risk equation changes completely if the funds needed to exit is less than $10M.

2.) Bad exits. It pains me to say that many semiconductor companies are..cheap. Hah I said it.:-) Maybe conservative is a better word. If only there there would be a few bubble exits like the $4.7B Chromatis exit to Lucent back in 2000. Things would get better in a hurry! There have been a few decent exits recently, like the $500M sale of Anobit to Apple, but in general exit valuations have been pretty low. System-On-Chips are the tails that wag the dogs. A key chip technology can actually move the needle by billions of dollars for large system companies. Samsung, Apple, Huawei, and Orcale are examples of companies that "get it". 

Look forward to your feedback on these two issue.

Andreas

Matthieu Wipliez
User Rank
Rookie
Couldn't agree more
Matthieu Wipliez   9/13/2013 4:21:36 AM
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Especially as I am the co-founder of an EDA start-up company :-) At Synflow we are reaching out to semiconductor companies to find our first client/strategic partner. This company will be the first to experiment with our product Synflow Studio, and they will have the opportunity to give us important feedback and help us improve our product, before others start using it. Take a look at our blog and our YouTube channel to learn more!

Max The Magnificent
User Rank
Blogger
I'm not an expert, but...
Max The Magnificent   9/12/2013 4:07:11 PM
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I'm not an expert (and I don't even play one on TV), but this all seems to make a lot of sense to me.

Jslee0
User Rank
Rookie
100% agreee
Jslee0   9/12/2013 12:31:21 PM
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Something needs to be done. otherwise the fundamental of the SV will be hit a bubble burst.

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