STARTING HIGH-TECH ENTERPRISES: A TALE OF A CASUAL ENTREPRENEUR

Transcription

1 Alberto Sangiovanni-Vincentelli The Edgar L. and Harold H. Buttner Chair of EECS University of California at Berkeley Co-Founder and Member of the Board Cadence Design Systems Co-founder Synopsys Comitato Esecutivo, Istituto Italiano di Tecnologia Presidente Comitato Nazionale dei Garanti della Ricerca Consiglio Scientifico CNR STARTING HIGH-TECH ENTERPRISES: A TALE OF A CASUAL ENTREPRENEUR Presidente, Comitato Strategico, Fondo Strategico Italiano Advisory Board (Walden International, Sofinnova, Innogest, Xseed (MDV)) Investment Committee (Fondo Atlante, Fondo Next)

2 Silicon Valley: The land of Innovation

3 Factors in Innovation Success: Infrastructure Legal and financial services Excellent Universities and Research Centers The simultaneous presence of large, medium and small companies Private Equity (Angels, Incubators, Seed Investors, Venture Capital, Mezzanine Investors, Investment Banks,...) The network : both inside and outside company boundaries 3

4 Basic Rules for a VC The best VCs adhere to "simple" fundamentals: world-class leadership and team (People, people and people) large, growing market defensible big idea rigorous application of best innovation practices

5 Risk Factors in Evaluating Start-up Opportunities Execution Risk Market Risk Technology Risk Variable Factors (dependent on sector or specific opportunity): Future Financing Risk Regulatory Risk

6 Liquidity and Returns Exit options IPO vs. M&A Bankruptcy vs Shut-down Typical venture portfolio performance: Historical data: Out of every 10 investments Half do not return capital 1 returns >10X Rest return 1-10X Source: M. Borrus, Xseed

7 Portfolio Progress 8 companies past seed stage 1,700+ ideas/ researchers canvassed ~950 resulting start-up ideas analyzed in detail 18 Companies funded 16 Live 2 Shut Down DigitAB StemCor [ 7 ]

8 What Drives Venture Returns? Market growth not absolute size Efficiency of capital deployment Irrational exuberance in exit markets A handful of big winners And most of all Fundamental Innovation The (Tech) world isn t flat (next slide) Source: M. Borrus, Xseed

9 The (Tech) World Isn t Flat: Distribution of most referenced patents Oregon, Washington (Microsoft, Intel U. Wash, Toronto) Michigan (GM, Ford, Chrysler, U. Michigan) Illinois (Motorola, U. Illinois) Boston (Medical, HiTech Harvard, MIT) Silicon Valley Source: ATP and George Mason University LA, S. Diego (Qualcomm, Defense UCLA, UCSD) Texas (Houston, TI, Freescale U. Texas)

10 Trend in Investment

11 Factors in Success 1 People and Technology: Scientific and Technology education Centers of excellence in research Talent pools (people form Universities and companies interested in high-risk high-reward activities) Ability to attract the best to the region (infrastructure for families and continuous learning) but attention to moving social and financial costs 11

12 Pasteur s Quadrant NO Considerations of Use? YES Quest for Fundamental Understanding? YES NO Pure Basic Research (Bohr) Use-Inspired Basic Research (Pasteur) Pure Applied Research (Edison) D. Stokes

13 University-Industry Relationships Professors are promoted on the basis of their contributions in all areas, including professional activities Reciprocal respect and attention to respective roles Unrestricted grants: speed not patents Transfer of technology as viral infection!!! Visiting professionals and summer students Formation of new companies favored 13

14 Case Studies The Cadence and Synopsys story Today the two largest EDA companies Market capitalization: CDN 3.51 Billion US$, SNPS 4.75 Billion US$ Revenues: CDN 1.3 Billion US$ SNPS 1.69 Billion US$

15 The Research Phase Funding began with ARO/ARL. Leading firms in the US semiconductor industry established the Semiconductor Research Corp. (SRC) in The CAD/EDA national efforts were funded by DARPA No one expected the university could be the long-term provider of industrial-strength software, support, documentation, training, and service. Semiconductor manufacturers recognized it would be wasteful for every user of CAD software to build an internal development and support capability Consequently the EDA business was born with companies like Daisy, Valid, Mentor Graphics, Cadence, Synopsis 15

16 1983: Intel 386

17 Cadence Design Systems: the Story Founded in 1983 by UC Berkeley (2 professors (ASV and Newton)), and Jim Solomon from National Semiconductors Key technology and market approach: Workstations will dominate UNIX operating system will be the OS of choice Unified Design System for all aspects and phases of electronic system design Software ONLY company (selling hardware has lower margins) 17

18 Cadence Design Systems: the Story Funding ($5Million) provided by Technology Partners: Harris, GE, National, Ericsson and, in smaller amount, by Venture Capital (4 to 1 ratio) Technology Partner to obtain early access to vital technology (Harris made more than 150Million from investment!) Venture Capital stock price 1/2 than Tech Partner Company retained 67%+ of company stock 18

19 Cadence Design System: the Story Successful technology partnership program with SGS-Thomson, Toshiba, Kawasaki Steel After three quarters of positive results, IPO considered Choice of Underwriters (banks to bring company public, Goldman-Sachs, Alex Brown) Road Show: visit financial markets (New York, Boston, London, ) to present company Due to go public on NASDAQ on Black Monday (Nov. 1987)!!! IPO withdrawn 19

20 Cadence Design Systems: the Story Merged with public company in 1988: ECAD Initial evaluation $7/share Initiated series of mergers and acquisitions Expanded markets to become leader in IC design Four stock splits! 20

21 Synopsys Started in North Carolina in 1987: Optimal Solutions Inc. Team: Aart de Geus (GE), Professors (ASV and R. Newton) and students Moved to California in 1989 CEO Harvey Jones 2001 IPO and change of CEO (Aart de Geus) Big change when Synopsys bought Avanti Trading first place with Cadence on a regular basis...

22 EDA Market Growth EDAC reports 12% growth for most recent 4 quarters Source: EDAC Market Statistics Service 22

23 Recent EDA Acquisitions Acquisition Deal Acquirer Agility Design Solutions, Inc. Jan-2009 Mentor Graphics SercoNet Inc - Patent Portfolio Feb-2009 MOSAID Technologies LogicVision May-2009: $7M Mentor Graphics MIPS - Analog Busineses May-2009: $22M Synopsys 23 Windriver Jun-2009: $884M Intel

24 Conclusions Collaboration is key to Innovation Research in new domains fuels novel enterprises VCs essential to fuel innovation VCs need exits, IPO in particular VCs assess value of enterprise based on risks and potentials To found a VC-based enterprise you need: Defensible technology and market (value of IP and patents) Favorable ecosystem Favorable climate (business and financial) Proven track record VCs are not funding good ideas not they act as R&D support! Various sources of funding exist but they have to be carefully evaluated