Will VCs ever come back to electronics?
1 min read
The demise of Tier Logic is a fairly sad indictment of the current state of the venture capital market when it comes to electronics. How times change.
You don't have to go back too many years to find a completely different state of affairs. At the end of the 1990s, venture capitalists (VCs) were fighting to put money into dot com companies and those targeting web based communications. All manner of crazy ideas were being pitched to the VC community, which responded by writing large cheques without too much 'due diligence'.
The word 'fighting' is used with good reason: One one occasion, VCs literally came to blows on the floor of a Canadian technology showcase, such was their desperation to get a part of the action. Those who weren't inspired to square up would then get involved in bidding auctions.
It was a time when 'crash and burn' was seen, not only as a rite of passage, but also as an essential entry on a CV. For their part, VCs were happy to see 19 of 20 investments fail, safe in the knowledge that one successful investment would be more than enough return to cover the others.
Sentiments were changing even before the global economic crisis, but when that hit, VCs retreated – and they have not been seen in any meaningful fashion in the electronics world since.
When viewed from the perspective of supporting companies looking to develop chips at the leading edge, you can understand the lack of enthusiasm.
A company looking to develop a 40nm chip is likely to require far more than $100million to support the endeavour. Assuming the company can actually develop working silicon, the VCs exit strategy of choice – the IPO – is far from a guaranteed success. Providing a return for those investing in their funds becomes something of a problem.
Where does this leave electronics? If Tier Logic, a company with an apparently good idea, working silicon, working tools and – more importantly – orders, can't get funding, what hope is there for companies who are looking to get themselves to that point?
A topic discussed at a recent West Coast VC event was 'Semiconductors: Return of the IPO?'. The conclusion was, apparently, no.
Are we to conclude that leading edge electronics is now a club with a closed membership list?
