A startup can shave 12 months or more off the development cycle by outsourcing non-essential elements of product design.
I’m hearing from different sources that investments in electronic design automation (EDA) and semiconductor startups are picking up around the globe and not just in Silicon Valley. That’s welcome news –– and long overdue –– as we move through 2017. With funding come new and innovative products and the cycle of growth to acquisition or other successful outcomes endures.
The news is tempered somewhat by the lack of experienced startup leaders, a result seemingly of the dearth of capital flowing into our industry for so long. New entrepreneurs, who bootstrapped their companies to get them started, are in dire need of mentors ready to join on and advise on a range of operational decisions.
Almost any good advisor would start with identifying the company’s core competency, an area that needs close scrutiny for any corporate entity to be strategic and differentiated, and definitely for a startup.
A startup that focuses solely on its core competency is better able to develop its products more quickly and cost effectively. In some cases, a startup can shave 12 months or more off the development cycle by outsourcing non-essential elements of product design. It also doesn’t need to recruit additional developers, a consideration when finding the person with the right experience, skillset and personality match takes precious time and resources.
Outsourcing can conserve capital, especially when product development is expensive and getting more so. While we may see new companies get funding, they are not getting healthy chunks of funding as previous startups. They need to budget wisely and economically.
Another benefit of outsourcing is an ability to reduce sales barriers. When a reputable, well-known vendor provides the service, tool or IP block, the buying process is moved along because the potential customer has confidence in that known vendor. In some cases, the customer may use that vendor as well.
All of this could mean an increase in an exit valuation, when the time’s right. Often, an acquiring company is familiar with the vendor who provided the particular service to the startup. In the small world of EDA and semiconductors, an acquiring company may have purchased another startup who worked with that vendor. During due diligence, that vendor may be credited for the reducing risk of the acquiring company.
Outsourcing is not without risk, however, for not all vendors are created equal. Startups who identified their core competency and are ready to outsource a specific part of their product should carefully evaluate the vendors. They need to look for a proven track record and good customer support. Endorsements are helpful as well.
Of course, I can point to many examples, but the intellectual property (IP) space may be the best one to highlight core competency. IP suppliers provide essential building blocks of a system-on-chip (SoC) design. If a startup attempted to build an already commercially available block itself, it could take upwards of a year or longer and the IP would be immature.
Some would-be entrepreneurs may not have the appetite to undertake such task and simply never get take-off. If the company worked with an IP provider instead, it could focus on projects more in line with its core competency for a better outcome all around. All this applies equally well for hardware IP as software IP.
Core competency aside, the welcome investment news bodes well for the EDA and semiconductor industry in 2017. I expect to see some interesting IP or maybe some advanced EDA tools in the coming months.
Rick Carlson is vice president of worldwide sales for Verific Design Automation. He is a 23-year EDA veteran of the EDA industry, joining Verific from AccelChip, where he held a similar position. Prior to AccelChip, Carlson held positions as vice president of sales for Averant, Synplicity, Inc. (now part of Synopsys), Escalade (now part of Mentor Graphics Corp.) and EDA Systems. Carlson also founded the EDA trade organization the EDA Consortium (now the ESD Alliance) in 1987. He holds a Bachelor of Science degree in Mathematics from Illinois Institute of Technology (IIT) in Chicago.