Innovation is alive and well in the semiconductor industry. That was a key takeaway from the strategic investor panel at the second annual Silicon Innovation Forum at Semicon West, and one I cannot reinforce enough within the venture capital (VC) community.
The panel brought together players from the financial and corporate sectors, including our own Applied Ventures, as well as Dow Ventures, Intel Capital, Samsung Ventures Investment Corporation, Band of Angels, DCM Ventures and Tallwood Ventures. I was pleased to see we all shared the same excitement about the many growth opportunities in the semiconductor industry as it continues to transform and drive emerging technologies in adjacent markets.
One point stressed to investors and entrepreneurs is that the semiconductor industry is rapidly evolving to meet challenging manufacturing requirements for tomorrow’s lightning-fast, power-efficient devices. Our industry is experiencing some of the biggest technology inflections in the history of semiconductors. These inflections are growing more complex by the day as devices get smaller, thinner and more powerful, requiring new solutions. These technology inflections are being enabled by precision materials engineering and it is more important than ever to fund tomorrow’s innovations to address critical challenges and keep the industry roadmap on course.
The huge transitions that are beginning to emerge present a unique opportunity for strategic investors like Applied Ventures to step in and leverage our extensive resources to move technology forward. Other investors are already catching on, as the number of semiconductor deals with one or more corporate VC investors has grown from a 2012 low of 9.4% to 13% in 2013, according to internal research based on data from Thomson One, an investment research tool. Applied Ventures has invested in six companies over the past six months, extending our semiconductor capabilities into other areas, such as bioscience.
What is driving this upward trend? Corporate venturers simply see what financial VCs do not – semi–conductor start ups are often a good bet with promising growth opportunities. Corporate venturers know their market best and therefore have a better bargaining position to invest at a set price, help focus the start up on value opportunities and mitigate risk.
Corporate venturers are also effective funders, as they can bring more to the table than just financials, such as seasoned industry perspective, global reach and access to broad and deep resources that can help shape the start up’s future and enable them to focus on their cutting-edge inventions. A corporate investor can work quickly with a start up to accelerate development and help manage challenges and address areas where they may be lacking, such as go-to-market strategies, sales and marketing expertise, and key partnerships across the supply chain. They also generally have an established reputation, and can help to validate a start up’s credibility with influencers.
1. Understand the return on investment for your market and make sure you are solving the highest-value problems with a defensible solution that is differentiated, valuable and sustainable. A big tide raises a lot of ships, so look for large, high-value markets with unmet needs, rather than riding a short-term wave.
2. Know what type of help you are looking for from the VC firm. 3. Assess your start up’s “DNA”:
- Are you capital-efficient?
- Is your team nimble and able to alter course to align with market needs?
- Do you have the right mix of the best players?
- Are your senior executives realistic in understanding their capabilities and where there are gaps?
- Are those less experienced on the team willing to step back and bring in needed seasoned players?
4. Understand the business culture, particularly when working across borders.
In short, VCs have never been more essential in funding tomorrow’s innovations and enabling the semiconductor industry to reach new heights.