I'm increasingly optimistic about the electronic design automation (EDA) market segment, especially after observing three recent trends. The first is the entrepreneurial activity. Since early last year, an incredible number of startups has emerged, all with fresh new ideas to support a variety of applications useful to chip designers. Gartner Dataquest's Gary Smith keeps a running tally and counts approximately 51 EDA startups. This number is in stark contrast to 2002 when there were few EDA startups and far less optimism.

While some of these startups are bootstrapped, many have gotten funding from venture capital firms. Venture capital is not yet flowing as freely as it once was, though in the last six months, a startup's chances of getting funding have improved significantly.

Whether bootstrapped or VC-funded, entrepreneurs have learned valuable lessons from the freewheeling dot-com era and that means a renewed emphasis on price consciousness and budgeting, which leads me to trend No. 2.

Many startups focus on their competency, what they think differentiates them from other EDA companies. They increasingly use the benefits of commercially available, commodity EDA component software for crucial, but nondifferentiating parts of their EDA tool. This strategy helps to reduce their startup cost and increase their time to market prospects.

Some examples: Verific develops and licenses VHDL and Verilog language parsers, analyzers and elaborators for EDA applications, an immense activity that would be a long, arduous process for a startup to do on its own. Another EDA company has built a solid reputation developing and marketing schematic readers. And who can overlook Macrovision Corp., which provides the industry-standard license manager?

Trend three is related to the complexity of new standards and how companies will support them. Let's use SystemVerilog as the illustration. It is a robust, but complex, language that's hard to learn and harder to implement for a developer not accustomed to using it. By outsourcing it to a company that's built an emphasis, as well as its core competency, on language-based software, a startup has budgeted time and cost-effectiveness into its product schedule. Its product pricing can be competitive, too.

quantum state. From my perspective, the EDA segment is exciting and constantly changing and that may be considered a quantum state. These three positive trends reinforce my view that EDA will always be an interesting space to explore technologically. We have incredibly talented people who are always looking for ways to better enable chip design. These talented people are optimistic and are behind three trends that are pushing the electronics industry forward.

Rob Dekker, President, Verific Design Automation, Alameda, Calif.