I suppose we’ve all known for some time that Icera was going nowhere, but it’s still very bad news for the UK industry as a whole that it’s been sold off to Nvidia for $367 million – barely $100 million more than the funding it raised.
The Icera story means that it will now be harder for UK start-ups companies to raise cash with VCs becoming more wary of giving backing to UK engineer-entrepreneurs.
It’s a shame that the $250 million of equity funding made to Icera was not given to ten companies with $25 million funding each.
In the VC world, as in other worlds, spreading your risks is a better bet than putting all your eggs in one basket.
For the UK VC scene. too much was riding on the success or failure of one company.
Icera had high hopes – its founding CEO and some of its team had come from Element 14 the Cambridge DSL start-up which was sold, pre-revenue, and even pre-silicon, to Broadcom for $600 million at the height of the tech boom in 2000.
The founders of Icera said that, this time, they would not sell out early but would build a significant European player in the consumer space.
It never happened.
Nine years on from its 2002 founding, Icera still hadn’t got a design win in a mobile phone handset – its original target market.
Instead it relied for its revenues on low value sales to dongle manufacturers.
It is thought that VCs would have pulled the plug on Icera some time ago, were it not for the sheer scale of the investment in the company. This way they will get their money back at least – but not much more.
To make 30% profit after nine years means the VCs would have done better to put their money into National Savings – not the sort of return VCs aspire to.
The problem for Icera was that, after it was founded, the wireless chip-set market transformed from a component business into a sub-system business with suppliers having to provide a complete module including software and RF.
This made the business extremely expensive for all but the largest participants. Even very big players like STMicroelectronics, Ericsson, Motorola and Infineon got out of the wireless chip-set business.
If Icera had got down and dirty and competed with the likes of MediaTek in the 2G market, it might have been able to generate enough revenues from Chinese handset OEMs to keep going.
But Icera chose to remain at the high end, and the consolidated handful of major phone makers weren’t going to put their trust in a start-up for a vital component.