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Lean Innovation: Creating a New Path for Pursuing Solutions in Silicon
Daniel Armbrust
Semi Europa – Innovation Village
October 8, 2014
Semiconductors just reached record revenues …
… so everything must be going well?
0
100
200
300
400
1998199920002001200220032004200520062007200820092010201120122013
$B
Worldwide Semiconductor Revenue
Source: WSTS 2/14
$305B!
... but underlying trends are not good
Development costs are
skyrocketing
EBITDA is down
41%
1%
15%
-26%
EBITDA (% of Rev) EBITDA (YoY)
Top 5 Semi
186 Other Semi
$0
$50
$100
$150
$200
$250
$300
350nm
250nm
180nm
130nm
90nm
65nm
45nm
/40nm
32nm
/28nm
22nm
/20nm
14nm
*
10nm
*
SO
C D
ev.
Co
st ($M
)
Source: Semico 2013 Source: 2012 Data, AlixPartners 2/14
Growth is slowing
Source: SIA, AlixPartners
Chip-only ventures headed for extinction?
Source: GSA
54 53
32 28
42 37
22 22
4 4 7 6
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
# of Seed/Series A Deals
• Long time to revenue
• Relatively large investment required
• Few IPO successes
• Less investment from traditional
sources
We are in the “post-chip” era
Semiconductors once was a haven for entrepreneurism and startups … now consolidation is our reality
1960’s 2010’s
Evolution of the supply chain structure
Historical Now
Innovation through acquisition can be a greater source of growth for established companies
“If you attempt disruptive innovation within your
organizational boundaries, the immune system will come and
attack you” Salim Ishmail, Singularity Univ. and
Brickhouse, Yahoo’s internal incubator
27%
55%
Semis
Other Industry Ave
Semiconductor M&A & market-share
growth is 50% of other Industries
The biotech industry still has a healthy start-up environment because of “solutions and acquisition” focus
Source: PWC, US Investments by Industry / Q4 2013
Investor
Start-up
Bio-Tech / Pharma
Companies
Biotech is second only to software in
number and amount of deals
“Point solution” start-ups selling
to established companies
Semiconductors have not leveraged an incubator model … and instead use angels, VC’s and company venture funds
0
500
1000
1500
2000
2500
Software / Apps Solution Focus
# of Incubators
2000
Software / Apps Silicon
focused
Yet there is tremendous opportunity ... these all need solutions in silicon
Medical Transportation Wearables &
Sensors
Energy
Next-Gen
Wireless
Context is everything
Context is everything … “Wall Street”, digital re-release in 2014
This is the best time ever to innovate in silicon as we enter the IoT “Era of Devices”
Michael Malone:
… lack of exciting new products and a decline of
early-stage new investments.
Most observers appreciate the Valley's four-
year cycle, but few have ever noticed a much
longer, 20-year cycle in electronics.
We have lived in the Era of Code …. But that era is
ending, as the cycle of hardware begins to asset
itself in the form of watches, wearables, mobile
health, autonomous cars, drones, 3D printing and
a revolution in sensors, all tied together by a
cloud-like Internet of Things.
We are entering the Era of Devices. This will be led
by builders
IP and systems companies have faster time to revenue and lower investment required than chips
Time To
Revenue
Investment Required
Chips
IP
Systems
What do we mean by “Solutions in Silicon”?
Chip Chip
Software / App
Service
Business Model
IP
System
Software / App
Service
Solutions in Silicon Semiconductor Software
Complete solution
Faster time to revenue
Taps into larger profit pool
Differentiation
While you can spend $100M starting a semiconductor company, it is not necessary or typical
0 500 1000 1500 2000 2500 3000
.18u
.13u/.15u
90nm
65nm
45/40nm
32/28nm
22/20nm
2015
2014
2013
2012
Source: I.B.S. 2011
130nm has the most design starts
65nm & 45nm have yet to peak
Even 28nm Can Be Done Frugally
• 1st 50GFLOPS/Watt processor
• 1st crowd sourced funded
semiconductor company
• Total invested <$5M
Lean Innovation: software and internet startup learning applied to semiconductors … returning to our roots
Lean innovation principles:
Customers
Who are our customers and what matters
to them?
What does the customer really want,
regardless of what they say they want?
What is the customer willing to pay for?
How do we continuously learn about
evolving customers needs?
Accelerating
Minimum viable product (MVP)
Small batches, Split A / B testing
Waste is anything that doesn’t contribute to
learning about what is valuable to
customers
Cross functional teams focused on the
customer: effectiveness versus efficiency
Creating Value
Validated learning of your customer value
and growth proposition hypotheses
Build – Measure – Learn feedback loop
5 Why’s … towards root cause understanding
and blame avoidance.
Do we need to pivot or persevere?
Source: The Lean Startup, Eric Reiss
What do solutions in silicon startups need?
MPW Prototyping DFM, System
Integration &
Prototyping
EDA Tools Lab and test
Equipment
Mentoring Secure Work
Space
Business &
Legal Support
Lots of Pizza
What do semiconductor startups say they struggle with?
Rank Issues Rank Expenses Top 3 Challenges
Source: Silicon Catalyst, 15 startups surveyed in 2014
What do semiconductor startups say they struggle with?
Source: Silicon Catalyst, 15 startups surveyed in 2014
EDA, Prototypes, Test, $’s
Rank Issues Rank Expenses Top 3 Challenges
The Silicon Catalyst transfer function: we accelerate start-ups with ideas into companies ready for exit
Silic
on
Cata
lyst
Op
po
rtu
nit
y
Iden
tifi
cati
on
Silicon Catalyst
Incubator
Mentors
Strategic Partners
12-24 Months
Exits
Acquisitions
IP Licensing
Series A
or IPO
Follow
-on
Invest
ment
Silicon
Catalyst
Screening
Investors
$
$
$
45 startup companies are in discussion with us
IP
48% Solution
47%
Tool
5%
Product
Start-
up
90%
Spin-
out
5% NewCo
5%
Status
Mobile
General IoT
Energy
Transportation
Extend Moore's…
Biotech
0 5 10 15 20 25 30
Number of Companies
IoT Segments
Who is Silicon Catalyst ?
• Sand Hill Angels,
Board Director
• i-GATE NEST,
Board Director
• Xpedion Design
Systems/Agilent,
VP Product
Development
• Denali Software,
Chairman &
founder
• 12 startups
• Board of Directors at
Adapteva, Ambiq Micro,
Kilopass
• Global Semiconductor
Alliance, Board of Directors
• GlobalFoundries, EVP,
Design, Products, Sales &
Marketing
• NXP Semiconductors, EVP
Global Sales & Marketing
• National Semiconductor,
SVP, WW Sales & Marketing,
VP Product Lines
• Cisco Systems, Director,
New Markets &
Technologies
Rick Lazansky Mike Noonen
• President and CEO of
SEMATECH
• IBM Microelectronics,
VP, 300mm
Semiconductor
Operations
• Strategic Client Exec
for IBM’s Systems and
Technology Group
Dan Armbrust
Silicon Catalyst is an incubator for Solutions in Silicon
Our goal is to vet all startups worldwide
and incubate the best
• We are the only incubator focused exclusively on
Solutions in Silicon
• We are building a coalition of in-kind partners to reduce
the cost of solution development
• We are building a world-class network of mentors to
guide start-ups
• We will guide start-ups to speedy exits by mostly
acquisitions, not iPO
• We will deliver ROI for everyone involved: entrepreneur,
investor, and partners
