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Ventures get capital for a price

Posted: 01 Oct 2004 ?? ?Print Version ?Bookmark and Share

Keywords:venture? capital? eda? startup? synthesis?

After a long drought, venture capital is flowing easily and freely into EDA startups again. It's a positive sign, but we should be aware that venture capital has its costs.

Nine small EDA companies in the U.S. collectively raised more than $87 million in the first six months of 2004. According to the Venture Wire newsletter, that exceeds the $75 million that 13 EDA companies raised in all of 2003.

This year's recipients include Atrenta ($11 million), Carbon Design Systems ($10 million), Emulation and Verification Engineering ($7.2 million), Golden Gate ($9 million), Jasper Design Automation ($13.5 million), Kimotion ($3.9 million), ReShape ($12 million), Silicon Design Systems ($6.7 million), and Tera Systems ($14 million).

The new venture capital funding is good news for EDA users. It will fuel some companies that can bring fresh technology into the market, helping solve problems such as verification, IC implementation and manufacturability. It's also a sign of an EDA industry recovery.

Yet there's a price to be paid: independence. Recipients typically give up board seats to venture capitalists, and the company's focus is shaped by the need to pay venture capitalists back.

Do EDA companies that raise $30 million to $100 million really fare better, in the long run, than those that raise less? Pravin Madhani, CEO of physical-synthesis startup Sierra Design Automation, believes that "capital-efficient" startups do best. Sierra was launched with just $5 million and already has customers and revenue.

In an "EDA Views" column on, Stanley Hyduke, president of 20-year EDA veteran Aldec, explained why his company avoided venture capital. "Some venture capitalists who contacted us have insisted on raising profits at a very fast rate," he wrote. "If we had gone the route of venture capitalists, we might have grown faster, but being on our own we learned financial discipline that helped us to go through all the recessions without layoffs. We also have had a lot of fun because we had complete freedom."

Finally, there are many startups in EDAprobably too many. If venture capitalists fund startups that don't make it, it may sour investors on the whole sector. So let the venture capital flow, but let's hope it flows with prudence.

- Richard Goering

EE Times

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