UK Technology Startups

IET/GSA Semiconductor Forum: Optimism for VC-backed chip start-ups

2008-05-16T14:02:22Z

Check out this story straight from the IET/GSA Semiconductor Forum.

David Manners writes about the future of VC-backed semiconductor start-ups. In spite of the fact that there is some pessimism in some quarters of the industry, there are some industry insiders who paint a much brighter picture about the sector.

You can view the article here.

Valley View: Vertical Integration is Back

2008-05-07T09:04:51Z

Richard Irving, a partner at venture capital firm Pond Venture Partners, considers the purchase of PA Semi and Montalvo's technology assets, by Apple and Sun respectively.

The big surprises last week in Silicon Valley were Apple's purchase of PA Semi, and Sun buying Montalvo's technology assets.

Why did these OEMs buy their own processor? How much did they pay and did that constitute a good exit for the entrepreneurs and investors?

Until recently the conventional wisdom was that the x86 architecture reigned supreme in the computing space (all PCs and most servers), ARM-based processors led in mobile and low-power apps, and only comms infrastructure and industrial control remained CPU battlegrounds. Then Qualcomm launched Snapdragon and Intel its Atom, and the embedded space suddenly faced competition.

]]> Apple's PC shift to Intel made many think they would either use Atom for higher-end mobiles or continue with ARM-based chips for phones. Their move to acquire PA Semi is therefore surprising: with their excellence in software and industrial design, they would not seem to need their own CPU to win and maintain market share.

But Steve Jobs has always liked proprietary hardware, so this may have been a key driver. And Dan Dobberpuhl's ability to crank out low-power, high-performance CPUs of any architecture should not be underestimated. After all, he's already done Alpha, ARM, MIPS, and Power. Sun's purchase of Montalvo is a lot less significant.

The term "asset purchase" means they picked up the pieces after the company blew up. Montalvo's technology may appear as part of a future Sun core, but the acquisition does not suddenly give Sun a whole new level of CPU design capability.

Reflecting this contrast in the prices paid, $278M for PA Semi will give the VCs modest multiples and should provide a decent reward for the employees, since the company was successful at raising venture funding at high valuations.

Meanwhile after investing $100M in Montalvo, VCs will be taking away single-digit pennies on the dollar - not a happy ending.

The lesson learned: starting a CPU company is a very tough investment proposition. Successes are modest and failures are very costly, likely leading most VCs to avoid them in future.

So if you're an entrepreneur, focus your startup on something other than building a new CPU.

See also: Electronics Weekly's focus on x86 microprocessors, a roundup of content related to x86 microprocessor technologies and developments.

See also: Electronics Weekly's focus on non-x86 microprocessors, a roundup of content on microprocessor technologies and developments not related to the x86 architecture (from ARM, Texas Instruments and MIPS).

UK tech investment rises in 2008

2008-05-06T08:44:01Z

Check out David Manners' piece on investment in UK technology firms in 2008: UK tech investment rises in 2008 - Ascendant Technology

The technology-focused investment group Ascendant Technology carried out the research and it reported that technology investment in the UK and Ireland started strongly in 2008 with an increase in both the value and volume of deals.

"Although the number of active number of active investors declined, VCs and private investors increased the capital they invested in Q1 by 15 per cent to £357m, backing 13 per cent more companies which rose to 72 businesses", said Stuart McKnight, CEO of Ascendant.

]]> Internet/Wireless services companies (£160m) took the biggest share of investors' funds, followed by Software (£79m), Cleantech (£38m) and Other Technologies (£30m).

Breaking that down on a company basis, The ten biggest deals, taking over half the total funds invested, were:

* Spinvox (£50m)
* Money Expert (£25m)
* Realtime Worlds (£25m)
* Complinet (19m)
* Badoo (£17m)
* Seatwave (£13m)
* Velocix (Cachelogic) (£13m)
* ORECon (£12m)
* Quartix (£12m)
* Gas2 (£10m)

Read the full article: UK tech investment rises in 2008 - Ascendant Technology

Valley View: Credit crisis and technology

2008-04-14T07:18:12Z

Richard Irving, a partner at venture capital firm Pond Venture Partners, considers the impact of economic slowdowns, both in terms of VC investment and the prospects for employment.

Recently, we finally had confirmation of what most of us have known for a while: the US economy is in a downturn.

The credit crisis is clearly the cause, and we have not hit bottom yet, but how will this slowdown affect those of us involved in technology?

Let's start with venture capital. While I have heard from some venture capitalists that they intend to sit on the sidelines for a while, this is unlikely to result in a major funding slowdown unless the environment deteriorates significantly further.

]]> One reason is that good deals are always hard to find, and any VC I know will jump on such an opportunity regardless of the economy.

But while the definition of a good early-stage deal has not changed, later stage opportunities with ramping revenues will be scrutinized much more closely - should investors factor down revenues by the usual 50% or so, or assume a more aggressive discount?

That and the poor state of the IPO market will put pressure on late-stage valuations. But as always, companies with good momentum will still shine, still get bought and still go public.

Harder to call is the technology employment picture. Slower or negative growth almost always means that larger companies shed jobs. Historically larger companies produce negative employment growth over the long term, shedding more jobs than they create. The cuts almost always happen in a downturn.

Looking at all the downside earnings warnings is a clear herald of further layoffs. But startup and small company job growth is often resilient, with many small companies growing even in a recession, especially when they target high-growth emerging markets.

So my conclusion as a VC is to keep investing despite the downturn, and my advice if you work for a high-tech company is that you're safer right now in a start-up.

Scottish start-ups to drive UK innovation

2008-04-07T12:48:48Z

Check out an in-depth article looking at Scottish start-ups, as part of series on career development.

As well as looking at a number of companies - such as SFX Technologies, Design LED Products and D-TACQ - it highlights one Perth-based inventor. Tanya Ewing won the top female inventor prize at the Biggart Baillie Innovation Awards last year with Ewgeco (pictured), her energy monitoring device.

The article begins:

]]> Pragmatic economist Professor John Kay, a member of Scotland's Council of Economic Advisers, is convinced that countries should develop on existing strengths. "They should ask themselves: 'Why would we be better at that industry than anyone else?'," he says.

So what about invention? As that frequently involves the morphing of two or more disciplines, a pragmatic view of Scotland's recent Technology Showcase in Glasgow would indicate that electronics has quietly embedded with the best...

You can read the full article here: Scottish start-ups to drive UK innovation

Valley View: Developments in the mobile world

2008-03-25T19:06:59Z

Richard Irving, a partner at venture capital firm Pond Venture Partners, sees that making all the exciting consumer advances work together is a big challenge for the CE industry.

This month saw the annual Mobile World Congress (MWC) in Barcelona, formerly known as 3GSM. Along with the Consumer Electronics Show, these shows are probably the main events for the global electronics industry.

As everyone knows, the cutting-edge of the mobile world is in Europe or Asia, and while MWC has about a third of CES’s attendees, Barcelona is also a much nicer place than Las Vegas (receptions in an 11th century monastery certainly beat anything in Vegas!), so there is an amazing number of US VCs and entrepreneurs who head over each year.

And while it seemed a little more subdued than last year, there were several things worth noticing.

]]> Leading edge companies were already demonstrating LTE, the next big thing beyond 3G and WiMAX, though it’s unlikely to deploy before 2010. 2008 is looking more and more like the year of serious WiMAX deployment. Femtocells or home base stations were very much in evidence and with field trials well advanced these too should roll out this year. And mobile video was everywhere.

But there are still some very obvious mobile applications which either have yet to appear or do not work very well.

While more and more phones have GPS built-in, even over EDGE maps load slowly and there is little integration with phone address books, an obvious gap. Mobile browsing is a slow, unhappy procedure which even the big boys have yet to solve – Yahoo’s new announcement at the show was not accompanied by a demo. And the much-vaunted Google phone at ARM’s booth was fun to play with till you tried to get on the web – no dice.

Meanwhile mobile advertising whether useful or annoying, has yet to evolve beyond text except in demos. So I’d expect VCs to start paying a lot more attention to companies offering better mobile experiences than to simply backing the latest gadgets, however cool they might look.

London Technology Fund Competition launched

2008-03-17T10:24:14Z

The London Technology Fund, the capital’s specialist investor in new technology companies, has introduced the London Technology Fund Competition 2008.

The competition offers London-based technology start-ups the chance to share up to £1m in investment, participate in exciting workshops worth more than £100,000 and also confer with leading players in the technology world.

]]> Open until June 30, all shortlisted companies will be given the opportunity to join a program of specialist workshops and make their case to LTF for a share of up to £1m of investment, which will be subject to LTF’s usual investment criteria.

These workshops will help start-ups improve their businesses by hearing from experts in sales and marketing, raising capital, legal documentation, intellectual property rights and presentation skills.

An opportunity will also be offered to meet multinational technology companies at a “speed-dating” event and present to a panel of judges who will pick the finalists. These finalists will be able to polish their proposal and receive further coaching before their presentation to the final judging panel who will select the most promising businesses.

Winners will be announced by Ian Pearson, Minister for Science and Innovation, at an Awards Ceremony in October.

Valley View: CES - Interoperability still the domain of technical experts

2008-02-14T13:08:33Z

Richard Irving, a partner at venture capital firm Pond Venture Partners, sees that making all the exciting consumer advances work together is a big challenge for the CE industry.

The vast Consumer Electronics Show held in Las Vegas each January is always a crowded, frenzied affair - hundreds of thousands of people swarming over literally thousands of exhibit stands scattered all over the city. And of course there is the surreal insanity of Las Vegas, about as different from a normal city as could be imagined, only adds to the frenzy.

]]> After all, where else will you pass retirees at 9am drinking free scotch and sodas and smoking cigars (indoors!) as they dump their life savings into one-arm bandits.

From a gadget viewpoint, this year lacked much originality: literally thousands of mobile phones each almost identical to the other, masses of flat panels, and so on. The most original products also seemed rather nichey, such as Panasonic's 150 inch flat panel - cool to look at but a little large for most living rooms and you would probably get a suntan watching it; or the motorised roller skates, just what every parent wants to buy their kids.

The real challenge facing the CE industry remains making all this stuff work together and usable by ordinary consumers. TV, DVD, PVR and digital camera interfaces are notoriously hard for all except true propeller-heads to understand.

Some companies have solutions: Hillcrest Labs showed a very cool ring-shaped remote, and 4HomeMedia's very intuitive and attractive software interface showed up in numerous booths and garnered no fewer than six awards at the show.

So stuff is coming which will make our lives easier, but it takes a while to trickle through the consumer electronics food chain. Until that happens, surfing the web on an ordinary TV, connecting your TV and PC, or mobile/PC/TV interoperability, all compelling consumer needs, will remain the domain of the highly technical. Too bad, since such attractive user interfaces would mean real new markets today.

Public grant money: the case files (part1)

2008-01-22T13:44:12Z

How much public money has gone into backing technology firms and is it well spent? I currently have an enquiry pending with the National Audit Office about this and whether they look at SMART and Faraday-type grants to assess the value of such investments.

]]> Rather than waiting for a response from the NAO, I have also started to track down and talk to recipients of such awards. If I can write about one of these grants a week, describing how that project ended, it may be a valuable look at how public money is spent in this way. Of course, I expect it will be easier to track down the projects that were successful and possibly created a spin-out rather than the projects that came to an end.

I suspect I may be whittling a stick with which to beat myself with. There have been so many changes to the way grants are handed out in England that tracking down historical Government data of grant spending when it has most likely been stolen or lost, is not going to be easy.

However, with this intention in mind I have been speaking with David Hamilton, founder of Ateeda, which has EDA tools and services for the mixed signal semiconductor industry.

The company had a Proof of Concept (PoC) award from Scottish Enterprise of £197,408 and an additional PoC Plus award of £86,949. There was also university money between these two awards.

Ateeda spun out of research that Hamilton oversaw at the University of Strathclyde. “I had a PhD student which I took down a certain route in analogue testing. I realised it was commercially promising and applied for a first tranche of PoC funding,” says Hamilton.

With this money, Hamilton brought in a couple of staff from industry and worked on the technology for two to three years with the Scottish Enterprise backing. “Clearly there was an interest early on so it was straightforward to engage a few companies from industry,” he says.

The funding took the research to a point where Hamilton had to decide if he was going to licence it or set up a firm. “At a certain stage you are constrained by PoC funding because under their rules the money is not meant to be spent on actually making your first product.” However, the firm is now engaged with a dozen IDMs (integrated device manufacturers) at different stages.

In this case the PoC money seems to have been wisely spent, it took the fledgling company to the point where it realised it had to make a decision about how to commercialise its technology. The firm is young of course and its success is hard to gauge at this point but the PoC money did what it is intended for.

And Hamilton’s experience of the PoC experience? “It was very good for us. It was administered sensibly. They are straightforward and pragmatic at Scottish Enterprise. It is a unique fund in Europe.”

Figure fiddling as the City burns?

2008-01-22T10:31:51Z

You can fiddle with statistics to make them say what you want and now the Government has been accused of fiddling business start-up figures.

]]> The Federation of Private Business (FPB) claims the Government has included an increasing number of sole traders in overall figures for business starts, thus distorting the figures. But there is some political point scoring going on here as well.

The FPB pointed to a report by the European School of Management – which was commissioned by shadow chancellor George Osborne – that says small business growth has been in decline over the last five years. That means they’re still growing but more slowly.

But is continuous, high growth really desirable? Grow the population, grow business, grow profits… where is it headed and what will happen when we start to outgrow?

The credit crunch and all the cascading worries now spilling down the economic chain are all due to a lack of confidence, Greg Wood said this morning on Radio 4. Is that it? Confidence? Are our systems really so fragile and why did we make them so?

Anyway, there certainly seem to be fewer technology start-ups ever since the boom of 2000 just before dot.coms and telecoms declined. But, listen carefully, now the technology start-ups that are getting funded are the ones with good technology and this is much better use of investment money.

UK photovoltaic start-up wins backing

2008-01-21T14:59:06Z

UK start-up AdvanceSis has managed to raise follow on funding from Seven Spires Investments to finance a three year business plan for expansion of its technology and business development resources in the UK and mainland Europe.

]]> The amount was described as “multimillion dollar” for the photovoltaic company.

The goal for the photovoltaic industry is reducing manufacturing costs and AdvanceSis reckons it can get solar power to “grid-parity” – the point where solar energy can compete on price with fossil fuels.

The Coventry-based company is combining recent developments with advanced semiconductors, power electronics and optical system capabilities to achieve this.

I like the firm, not just because it is working on technology that is important for all of our futures, but also because the firm was set up to commercialise epitaxial SiGe technology, strayed into photonics and photovoltaics and realised it could do something in the sector.

Valley View: Do IPO numbers hint at recession?

2008-01-21T14:34:37Z

Richard Irving, a partner at venture capital firm Pond Venture Partners, ponders how the Silicon Valley chip investors interpret the year ahead

As we enter 2008, the chip industry hopes for continued consumer demand, since this has become the source of most of its growth prospects. Much of this comes from the US, whose economy now faces a credit crisis, election year uncertainty and more.

]]> Perhaps the most important barometer of health to a venture capitalist is the initial public offering (IPO) market – if you can take companies public (float them on a quality stock exchange), founders and investors can get a return on their investment. After some very healthy IPOs in 2007, we have seen some worrying trends in recent IPOs which are worth dissecting.

First let’s recap how an IPO works. Investment bankers approach large financial institutions to see if they like the story of a company they want to take public. If they do, this drives up the share price and size of the offering. This is just like any other market, except that the whole marketing process is compressed into two or three weeks. If the financial guys don’t like the story, the public offering is postponed, sometimes forever.

So a key barometer of industry health is the IPO market. Last year there were over 1,300 IPOs worldwide which raised $291bn. However, only a modest portion of these were technology companies, and over 80 IPOs failed to get to market in October and November alone.

One early sign of a downturn is where an IPO happens but where the company sells fewer shares at a lower price than expected. Two recent examples of weak chip IPOs are Intellon and Entropic, both of whom had to lower the share price and the amount they were raising.

The question Silicon Valley chip investors ask is whether this is the beginning of a downturn or not. The particular situation of each company is similar – a concentrated customer base and margin concerns which indicate higher risk. But you can always explain a macro trend one micro trend at a time.

Importantly, both sell chips into consumer products. Is consumer demand weakening? The recent Consumer Electronics Show will give important clues – see my update next time.

Fund research, not more technology parks

2008-01-16T15:22:22Z

A lot of money has been spent on technology parks around the UK, the latest to be announced is the £8.2m Thames Innovation Centre in Erith.

]]> This centre, we are promised, is intended to house “knowledge-led companies working in engineering, science and the creative arts”. I’m not sure that the creative arts necessarily fits naturally alongside the science and engineering markets but my point really is the amount of money going into this.

It is £8.2m because it is a fancy-pants building, solar panels on the roof, geothermic heating, intelligent lighting and a windmill in the car park to power embedded seat-lighting in the conference room (sorry, I lied about the windmill).

My real worry is that we are setting up technology parks all over the UK but we are not going to have any start-ups to put in them. There is currently a disgraceful mis-funding of the Science and Technology Facilities Council in the UK in which a £80m shortfall threatens job losses at universities and cuts in physics research programmes.

We must fund real, proper hard-work sciences and engineering projects. It is these that build into companies with unique technologies. This insane technology park fetish really angered me when I happened to browse the list of firms based at Coventry University’s Technology Park. Take a look; the lack of real engineering firms is painfully apparent. Out of 24 firms listed, I think I can only say that two are hardware technology companies and there are a lot of Internet-learning type of companies.

So, invest your £8.2m in fancy buildings but if you don’t fund real technology research in the UK, expect many of the firms there to be more of the “creative arts”-type of technology company.

Sedentary techies

2008-01-16T13:28:35Z

Apparently techies are unhealthy. BUPA has released a report today which says the technology and IT sector has “an unappetising set of diet and lifestyle statistics”.

]]> Maybe they have a point because it is quite a high-pressure industry (technology, I mean, not IT). It is completely normal for designers and engineers to sleep the night under their desks when a project approaches a deadline.

BUPA found that a quarter of senior staff in the technology sector fail to take exercise at least once a week. This means you increase the risk of a heart attack by the same amount as a smoker – I don’t know if it is an exercising smoker or not.

I imagine that the truth is a quarter of all office-based workers fail to exercise at least once a week. In the technology sector we’re too busy coming up with devices that will do the exercise for us.

Start-up un-conferences

2008-01-14T15:34:28Z

An industry thrives on the edges of the normal start-up business, these are neither VCs nor entrepreneurs.

]]> These are the facilitators, people who earn there living telling serious and/or worried-looking entrepreneurs how to get where they want to be. I can’t tell you if they are worth the fee, although the events I’ve attended have mostly been worth going to as a journalist.

Apart from the worrying trend that these events appear to be taking on some characteristics of the motivational or ‘how to change your life’-type event, I was rather struck by the idea that you can be transformed from ordinary person to entrepreneur in the space of a few days.

In the technology sector you tend to need years of knowledge in the bank before you can start putting funds in there too. One event in the US is called Startupweekend, where after a marathon 54 hours, participants will leave with a start-up business ready to go. As the website says: “Sound intense? It is.”

Meanwhile, Startup Camp looks like it is coming to London sometime in March. You get “a half a day of Startup University and one and a half days of Camp”. It is “an unconference-style event”, apparently because those who go can decide on the discussions that will take place.

If any reader goes they must let me know how this event works.