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Should More Semiconductor, EDA Startups Look to Kickstarter?

Posted on | September 16, 2013 | 2 Comments

Unless you've been trekking in the Himalayas the past
decade, you've noticed a big change in the nature of semiconductor and EDA startups. (And if you have been out wandering, welcome back! There's some cool new mobile technology you're going to want to know about).

Semiconductor and EDA startup companies are being funded differently, and, in a
lot of cases, for a lot less than back in the day.

Venture investment in semiconductor startups, for example,
is roughly half what it was in 2002. That's usually the mark of a maturing
industry, yet ours not only matures but the technology gets more complex every year. That creates an unusual tension: Startups are developing amazing new technologies and need funding to do it, but just what level of funding? 

Semiconductor Startup Malaise

Cadence CEO and longtime venture capitalist Lip-Bu Tan is by
his own description
"doubling
and tripling down"
on his own semiconductor investments. That's great but he's
the exception rather than the rule
.

That said, semiconductors and EDA startups are nothing if not adaptive.

The industry has spent the past decade giving itself an
expectations haircut. On top of that, new forums for investment have sprung up
in just the past several years that fund more than just music and
movie creation.

Some recent highlights:

So there's momentum building for crowd-sourcing some
technologies. But the news is not as rosy as Kickstarter or its fans would have
you believe.

Project Fail

Independent analysis suggests that more than 40%
of Kickstarter projects fail
to achieve their funding level, although
investors overwhelmingly tend to back the right horses (see the related info
graphic below
) with their overall dollars.

On top of that, technology projects rank second-worst in
terms of success on Kickstarter, with just 39 percent achieving goal. What
works? Dance and theater projects (liberal arts majors, rejoice!!).

Dance, by the way, had the fewest number of projects (758)
submitted for the period covered in the infographic, followed closedly by
technology (806). Dance projects sought an average of $2,374 each, while
technologists were asking for $12,282, which may have contributed to
technology's high failure rate. (Then again, the average film and video project brought in $40,000).

All that said, crowd-funding is here to stay. Kickstarter reports that 2.2
million people contributed $319 million last year, funding more than 18,000
projects.

kickstarter technology projects

And right now, you'd be wise to jump on the Arduino-Raspberry Pi-Android and wireless bandwagons if you're looking to fund a project, at least according
to the visualization (right) of the successfully funded technology projects on
Kickstarter today.

Co-existence?

The larger question is not whether crowd-funded and
venture-funded projects will co-exist but in what proportion?

Right now the technology projects skew toward the easy,
understandable and consumer-friendly, but as people get savvier, conceivably
smaller investors could be investing money into new and interesting
semiconductor and EDA strategies (a la Andreas Olofsson and Adapteva).

What do you think?

Brian Fuller

Related stories:

Interview
with Lip-bu Tan, Part 2: Energizing the Electronics Industry

Cadence
CEO at DAC 2013: 'I've Doubled, Tripled Down on Semiconductor Investment'

 

Kickstarter failure stats

via Cadence The Fuller View Blogs http://feedproxy.google.com/~r/cadence/community/blogs/fullerview/~3/1rPfq6p3uVY/semiconductor-eda-startups-look-to-kickstarter.aspx

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Comments

2 Responses to “Should More Semiconductor, EDA Startups Look to Kickstarter?”

  1. Angel Orrantia
    September 18th, 2013 @ 10:45 am

    Thanks for this posting. There is definitely a shift in the way semiconductor and EDA companies are being funded these days. VC’s have largely abandoned the space for a few reasons, but mainly: capital requirements are extremely high, the time-to-money is on the order of 8-10 years, the IPO market has all but disappeared, and there are not many acquirers left due to consolidation.

    At a recent GSA Entrepreneurship Conference, both the industry leaders and entrepreneurs were in agreement that the first stop for a new semiconductor or EDA company should be with strategic investors, and not on Sand Hill Road. Perhaps Kickstarter provides an even earlier source of capital for these new ventures.

    However, with the cost of development tools, office space, and the initial legal and professional services required, the first $10k is but a drop in the ocean of the capital required. Perhaps in the EDA space, it may be possible for an individual or two to start development and get to a demo version at this funding level. Realistically speaking, starting a fabless semiconductor company is not feasible with a $10k investment.

    That said, incorporating the company and filing the initial provisional patent is possible using crowd sourcing. That’s certainly a leg up for entrepreneurs prior to approaching strategic investors.

    Alternatively, entrepreneurs could make their first stop an incubator. Generally speaking, incubators or accelerators are equipped to help entrepreneurs get their venture up and running. While the level of professional services and funding thresholds vary, there are quantifiable advantages for this path. The key is matching the accelerators offerings and requirements with the needs of the startup. That’s easier said than done.

  2. Brian
    September 23rd, 2013 @ 8:53 am

    Angel, great insights in your comment and thank you! I don’t disagree but I sure hope we find ways to lower the barriers to entry if for no other reason than to spur my innovation in electronics (Arduino / Maker is a glimmer of that future).
    On the other hand, we’ve had this discussion now for many years in the semiconductor / EDA space. It happens to coincide with (but not be solely influenced by) the Great Recession and the rise of social network and mobile startups. As that rises and falls in the eyes of investors and the economy improves in the next couple of years, I have to believe investment will flow more energetically into our business (maybe not to ’99 levels, but in some way).

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