In second or third rounds of financing, CynApps Inc. received $8 million, Sycon Design Inc. received $12 million, and Virage Logic received $10 million. All of these deals involved venture capital firms. Aside from a few high-profile startups like Magma Design Automation and Monterey Design Systems, most EDA startups have had to rely on self-funding or on individual "angel investors" to raise capital.

The most recent of the three deals involved CynApps (Santa Clara, Calif.), a provider of C++ design tools, which announced its $8 million in funding on Tuesday (Feb. 8). Infinity Capital kicked in $5.6 million of the total, with the rest coming from U.S. Venture Partners and from several individual investors.

"This is a special case," said Atul Kapadia, managing director of Infinity Capital and a new CynApps board member. "I don't think there is more venture money [for EDA]. I see every EDA deal that starts up, and I'm only going to invest in companies in which I can get at least a $100 million return."

As Information Technology Ventures, Infinity Capital was a first-round investor in synthesis startup Ambit Design Systems Inc., but the company has generally shied away from EDA despite its success with Ambit. That's because the market potential just isn't there for most EDA startups, Kapadia said.

"I think CynApps is one of those companies that will rise above the typical EDA valuation of a couple hundred million dollars," Kapadia said. He said he based that judgement on his respect for CynApps president and founder John Sanguinetti; on excitement about CynApp's upcoming product plans; and on discussions with customers who have indicated a need for a high-level design methodology.

Staying power

The second-round financing brings CynApp's total to nearly $10 million, Sanguinetti said. "It's a big event. It pretty firmly establishes us as a company that has some staying power," he said. Sanguinetti said CynApps will use the new $8 million to accelerate product development, promote C++ design methodologies, and boost the current staff of 19 to perhaps 40 or 50 within a year.

Sycon Design (Santa Clara, Calif.), a provider of full-custom IC placement and routing tools, received part of its $12 million second-round funding from Intel Capital — the investment arm of Intel Corp. Other venture capital firms participating included Gardenia, Ridgewood Capital, and Weiss, Peck and Greer. Sycon's first round netted $2.5 million.

"Our primary goal is to invest in companies that align with a strategic goal of ours," said an Intel spokeswoman. "This [Sycon] investment is consistent with our support of emerging EDA technology for designing microprocessors." She declined to reveal how much of the $12 million Intel contributed.

Including Sycon, Intel Capital has invested in ten EDA vendors, but that's a small part of its $8 billion portfolio comprising some 350 companies.

Sharon Zohar, president and chief executive officer of Sycon, said his company will use the windfall to grow its sales force and develop new methodologies. Specifically, the 40-person company wants to move more into the ASIC design area. Its current Tempest-Block and Tempest-Cell tools target the full-custom market.

While it's "challenging" to raise EDA funding, Zohar said, there's a reason venture capitalists are supporting Sycon. "What we have is very different," he said. "Today we are one of the only companies offering a solution for 250 MHz and above. You can see other startups developing place and route, but as far as I know, nobody delivers this performance today."

Virage Logic (Fremont, Calif.), a provider of embedded memory solutions, received most of its $10 million in third-round financing from Crosslink Capital. That's actually the first venture capital firm to invest in Virage; previous rounds were from employees, individuals and private companies.

Maybe crazy

Michael Stark, managing director at Crosslink and a new member of Virage's board, acknowledged that little venture capital funding is going to EDA or intellectual property [IP] companies. "Either I'm ahead of the pack, or I'm crazy — I'm not sure which," he said. But Stark said Virage is a good bet, because he believes it will become the dominant player in embedded memory IP.

"Companies that do electronic design are really tired of EDA companies selling bits on a disk — what they want is solutions companies," Stark said. He said he views Virage as a "solutions" company in the IP area rather than a traditional EDA vendor. Crosslink invests in one other company, startup Barcelona Designs, that fills a similar niche.

Adam Kablanian, president and chief executive officer of Virage, said the new funding will help the company grow its sales and marketing organization and develop technology partnerships.

Gary Smith, chief EDA analyst at Dataquest Inc. (San Jose, Calif.), said that more venture capital money is slowly becoming available to semiconductor and EDA companies. "But keep in mind, nowadays $30 million is lunch money," he noted.