John Stockton's Venture Capital Blog
Opinions on high tech Venture Capital Investing
 
 
Found: 7 Entries
August 15, 2007 Format for Print
1. MEMS Applications are emerging
  More than what I thought
 

During a conversation today with a couple of entrepreneurs today, we started enumerating the current applications of MEMS beyond the obvious Ink Jet printer heads, DLPs and automotive crash sensors. Here is what we came up with during our few minutes on the topic (no particular order):

Mature applications:
  • Pressure sensors (automotive, medical, consumer, ...)
  • Accelerometers
  • Display Light Modulators (TI DLP, Sony Grating devices)
  • Bio-Assay devices (Lab on a chip)
Emerging applications:
  • Gyroscopes
  • Relays (ATE and RF applications)
  • Microphones
  • Memory elements
  • Crystal and filter replacements
Future ideas:
  • Microfluidic pumps (gasses and liquids)
  • Micromotors
I'm sure there are others that I've forgotten or am not aware of - but this list had more items on it than I thought that it would. Let me know if you know of others too.
 
Category: Trends Submitted by: John
 
August 24, 2007 Format for Print
2. The IP Business Model Revisited
  Still a winner take all business
 

Introduction: After doing a couple of IP deals (ARC and getting ARM Ltd going), in most cases, I'm not sure why anyone would ever do one again! The idea is sound, where a bunch of people with deep domain expertise set out to create something like software, but in much more of a hard form - namely RTL for chips. The idea is to take very complex behavior and reduce it to a HDL description, test it and sell it to a number of customers for a bunch of money. The problem is that only a few companies have been successful doing it!

Industry Problems: There are a number of problems common to this industry, that are shown below:

  • The first problem is that most of the functions are (almost 100%) digital only and standards-driven. That creates the issue that any great team of coders in another country can create designs that are just as good. This also tends to reduce the value of the IP. Lots of supply, some demand.

  • The second problem is that most customers haven't figured out yet that paying for IP, either up-front, or in a combination of up-front and with royalties, is in their interest. They tend to treat IP vendors as one-shot purchasing arrangements - not one where they contemplate a long term relationship with future designs. This tends to give the buyers much more power in the selling equation.

  • The third problem - is that most Mom-and-Pop semiconductor IP vendors never bother to actually put their designs into silicon. They might go through the entire design flow one time, so they can prove they can hit certain timing targets, but there is something reassuring about knowing that a design has been used successfully in silicon a number of times before your team actually starts to try to use it themselves. This tends to reduce the value of the IP.

  • The last problem is that creating IP for a narrow range of applications is difficult, but creating IP so that it is configurable to be used in a very wide range of applications is extremely (>>2x) difficult. The other issue that goes with this is that most interesting IP is a combination of software and gates. The software must be automatically changed to support the changes in the gates. This overwhelms most smaller IP vendors (eg, at ARC the compiler would automatically be changed to support changes to the instruction set architecture).

Industry Characteristics: There are a number of characteristics in common for IP companies. A short summary of them follows:

  • While it's not necessarily a problem, an important characteristic of this industry is that it has exhibited a Winner-take-All characteristic where the number one company in a particular market segment gets the vast majority of revenues and the number two and three players are left far behind picking up the scraps of business that the number one couldn't service for some reason. A particular example comes to mind with ARM Ltd vs MIPS and ARC Cores. ARM is clearly in the number one market position with MIPS and ARC trailing way behind. Tensilica is also in this race, but with revenues slightly less than ARC's.

  • Another important characteristic of this business is that before there is a major customer with a highly visible design-win, the value of a license is very difficult to defend, usually boiling down to an argument over how much effort it takes the customer to make vs. buy the same technology and the risks associated with the make side of the equation. In the early days of IP at VLSI Technology (we had PC building block chips called MegaCells), some IP blocks were more difficult to use due to design styles, documentation or other implementation issues than they were worth. In multiple cases, we brought in IP from some other group only to throw it out and start from scratch.

  • Another issue facing IP vendors is the Horizontal vs. Vertical decision. On one hand, they can create a very large market by making something that is useful in a very broad range of markets. This takes lots of work and rarely meets all of the specific needs of customers. The other approach is to make something very Vertical - or focused on a single market application. This is usually done with lots of domain-specific knowledge in the design team. This creates the dilemma that to add a new vertical segment requires adding people from that area, some of which are very difficult to find or recruit.

Opportunities: With these difficulties - there are two bright shining spots in the IP business: multi-domain patent protected IP (e.g., Qualcomm & Rambus) and physical IP (e.g., Rambus).

  • The first category consists of problems that require deep insight in two or more domains, such as in the case of Qualcomm, spread-spectrum RF, cell phone radio, modem and baseband knowledge. Each of these areas requires specialized understanding of an area that is not commonly known.

  • The latter category of physical IP is more common, but still is a lot of work. For each new process variation from TSMC or others, the IP company has to alter their design to still meet all of the critical specs. It really is a treadmill - but one where customers are willing to pay for the work.

Conclusions: With all of this said - the IP business is inevitable, but the industry has a lot of growing up to do before it is a (relatively) low-risk investment category.

 
Category: Trends Submitted by: John
 
January 2, 2010 Format for Print
3. 2010 Predictions
  My multi-faceted forecast for 2010
 

Predictions for 2010:Now that we are off and running in the new year, and since it has been quite a while since I've updated this blog - that I'd start with my predictions for major things this year.  I usually limit these to technology and devices, but this year I decided to go all out - and include Politics, Social and Financial trends.  Have a look - I'd be interersted in your views on these items.


Hot technologies:

  • LEDs everywhere - finally they get low enough in cost to make sense in high-end apps
  • SSDs - next design iteration finally gets it right. OS support for TRIM increases perf.
  • Android-based handhelds - generic OS finally gets good enough
  • Apple Tablet - Industrial Design sells; Apple is the 'Ultimate Marketing Machine'
  • Silicon Carbide goes main-stream to meet electric car requirements; slow growth
  • 4G actually starts to take-off and make sense as a data-offload for cellular network
  • Network infrastructure upgrade for video - core and edge need 10x capacity growth
  • Windows 7 - performance pays; get rid of sluggish software; takes advantage of SSDs
  • AJAX applications continue to impress - creates alternative UI for applications


Disappointing Technologies:

  • Solar - slow market, low energy prices continue, will take a long time to make a dent
  • Wind - good technology, takes a long time and a lot of money to make a difference


Devices:

  • Connectivity in home appliances finally makes sense, e.g.:
    • Alarm clocks that show the weather and first appointments (Chumby)
    • Picture frames that always have latest home picture files
    • Energy monitoring systems that track home energy usage
    • Wireless connectivity for E-Books makes them very successful
  • Automotive electronics:
    • Weather maps in cars with reasonable geographic precision
    • 3D sensors for back-up and blind-spot detection
    • IR Imagers for safer night-vision - some with head's-up displays
    • Mobile hot-spot for Wi-Max and WAN phone service


Economic Environment:

  • Interest rate rise just after election season - the only time the stock market won't count
  • VC Industry stays in the doldrums, still too many firms for the market
  • Semiconductor industry recovers, but continues to consolidate - like the airline industry
  • On-line vs. brick & mortar stores - symbiotic existence continues


Experiments:

  • 3D displays - first generation won't go anywhere but will get a LOT of attention
  • 3D sensors - impressive technology, all depends on a hit game or two to drive it
  • Android wall-powered devices - new software platform becomes default embedded OS
  • Electronic noise continues - like Twitter, not real useful
  • Facebook continues to be the alternative web-mail interface for the teenage generation


Social:

  • Diet-awareness in general - if you measure it, people will (finally) pay attention (good news)
  • Continued ethnic shift in the south-western states - Mexico continues to come to the US
  • The US continues to have slow economic growth due to de-leveraging of credit


Political:

  • Centering of Obama administration, hopefully no knee-jerk corrections
  • Search for leadership in the GOP; The party of 'No' needs some answers.

 
Category: Trends Submitted by: John
 
March 1, 2010 Format for Print
4. Update on Semiconductor Company Valuations
  Good times and Bad times
 

Summary - The semiconductor industry, like many others, goes through good times and bad times (although it seems like it has had a bias recently for more bad than good). This cyclicality makes it difficult to get a company funded during bad times, and it can lead to false hopes during good times. This blog entry shows the range of valuations between the good and bad times and demonstrates that GPM is probably the second most important metric for growing a business (behind growth rate).

Data - The plot that follows looks at a variety of semiconductor companies, including mixed-signal companies (LTC, MXIM, SLAB), big semiconductor companies (TI, NXP), and a few power chip companies (IXYS).

Plot - The relationship between Price to Sales ratio versus GPM% is shown on the figure below. The significant point is that the slope of the line is almost 10x GPM% during bad times, and 20x GPM% during good times.

Conclusion - The bottom line is that anything a company can do to offer higher GPM products is really worth it. When we get back to good times, for each 10% increase in GPM, the value of the company goes up by about 2x!

 
Category: Trends Submitted by: John
 
January 1, 2011 Format for Print
5. Predictions for 2011
  An update on my predictions from last year
 

Predictions for 2011: Here is an update on what I posted from last year at this time.  Where possible, I've tried to indicate what is a continuation of a trend that started last year.


Hot technologies (largely same list from last year - new comments):

  • SSDs - next design iteration finally gets it right. OS support for TRIM increases perf. Costs drop.
  • LEDs continue to impress.  Market is just lifting off of the flat part of the 'S' curve.
  • Android-based handhelds - generic OS finally gets good enough (already out shipping Apple's iOS)
  • Tablet Clones - Now comes the wave of tablet makers trying to experiment and differentiate
  • Silicon Carbide goes main-stream to meet electric car requirements; slow growth
  • 4G actually starts to take-off and make sense as a data-offload for cellular network
  • Network infrastructure upgrade for video - core and edge need 10x capacity growth
  • AJAX applications continue to impress - creates alternative UI for applications (UI design is hard)
  • 3D LIDAR camera technology gets into other applications beyond the Microsoft Kinect
  • Lighting control systems for big building applications that let light levels be optimized for power
  • Embedded Linux everywhere - 1 second boot times for QT applications
  • Face-less applications that switch emphasis from traditional UI design to a web-UI style design

Disappointing Technologies:

  • Solar - slow market, low energy prices continue, will take a long time to make a dent
  • Wind - good technology, takes a long time and a lot of money to make a difference
  • Natural Gas - slow to grow in application, but good to keep in reserve
  • Electric Vehicles - Charging is the flaw in the usage model (idea for start-ups)

Devices:

  • Connectivity in home appliances finally makes sense, e.g.:
  • Alarm clocks that show the weather and first appointments (Chumby)
  • Picture frames that always have latest home picture files
  • Energy monitoring systems that track home energy usage
  • Automotive electronics:
    • Weather maps in cars with reasonable geographic precision
    • 3D sensors for back-up and blind-spot detection
    • IR Imagers for safer night-vision - some with head's-up displays
    • Mobile hot-spot for Wi-Max and WAN phone service
Economic Environment:

  • Interest rate rise just after 2012 election season - the only time the stock market won't count
  • Continued de-valuation of the US$, reduces debt and makes US manufacturing competitive
  • Serious competition for US Reserve currency from mix of Euros, Yen and RMB
  • VC Industry starts to come out of the doldrums, still too many firms for the market
  • Semiconductor industry recovers, but continues to consolidate - like the airline industry
  • On-line vs. brick & mortar - symbiotic existence continues (shop at store, but online)
 
Category: Trends Submitted by: John
 
January 13, 2007 Format for Print
6. 2007 Consumer Electronics Show
  My take aways from a brief visit to Las Vegas
 

Displays: The race between LCD and Plasma continues at the high-end of the display market. 1080p (actually 1080 horizontal lines per vertical scan) displays were everywhere. TI finally has a version of their DMD, aka DLP, that supports 1080p through a technique they call wobulation : where they physically move the reflective die by a few microns to create the illusion of a second pixel for each mirror (actual array is 960x1080 to get to a 1920x1080 display). These units were everywhere and price points getting down to $599 retail for a full 1080p rear projection unit.

Big flat-panel displays : there were monster displays everywhere with some of the remarkable ones being 102 to 108 inches diagonal (Plasma and LCD). The image quality of these displays has reached a point where the source material is now the limiting factor, not the display.

3D Display: LG had a demonstrator 3D display that provided very good depth viewing without any glasses. I talked to their engineer and he said they did it by taking 25 versions of 2D images and sequentially replaying them through the display with special filters that allowed the image to be demultiplexed. It uses only proprietary content, but it looked great. I'm sure it will be marketed to digital signage applications for the next several years.

Micro-projectors: there were lots of pocket sized LED projectors that could display very small images (like 1 foot square) with low brightness (100 lumens). These looked OK in a dark room, but are not ready for primetime anytime soon. They were driven with LEDs and therefore the technology curve alone will make them viable in 3 to 4 years (~1000 lumens gets them into the game).

LEDs: Both pocket projectors and rear-projection displays are now starting to use LEDs as light sources. These displays have better color range (gamut) than arc lamp based displays and never wear out. In addition to the display applications, there were decorative LED apps such as desk lights, strip lighting and incandescent light replacements everywhere. One company was offering designer desk lamps that used 60 3 candela LEDs in a strip as a desk light replacement. It looked great and used only 8W of power. Unfortunately they are going after premium pricing initially - $95 each!

GPS: There GPS units everywhere : small handheld devices and larger form factor units. The interesting thing I saw was multiple vendors shipping silicon for indoor GPS (-160 dBm sensitivity). In addition to eRide and Global Locate, u-blox and SiRF have shipped silicon.

UWB: There were multiple companies displaying UWB devices of all flavors (proprietary, ISM-band compliant and MBOA). None of the displays that I saw went more than about 2 feet. I asked vendors what kind of range they were able to get and most of them said there was so much RF noise in the convention center that they were lucky to have it work at all.

Software and Content: Microsoft had their usual HUGE booth with several hundred visitors at any one time. The Windows Vista demo was compelling, but they had the usual demo glitches when they guy presenting different features found that some of them didn't work during the demonstration. He found a way to quickly switch to the next topic.

MSDN-Live: It was interesting to see the MSDN-Live products which finally started to look pretty interesting. MSDN-Live is the datacasting service that was started to feed the Spot watches. That never went anywhere, but the killer application for this seems to be integration of real time traffic information into GPS receivers. This allows roads to be color coded according to the average traffic speed and icons added to maps where there are accidents or disruptions. Microsoft charges both an up-front fee and yearly service fees for the data streams.

Sony: they did their usual focus on consumer electronics for about 3/4 of their display, but the other 1/4 was a theater showing previews of Spider Man 3. They made each viewer check their phone and cameras at the door, so there were huge lines to get in and out of the theater. It shows their emphasis on content.

Automotive Electronics: It was amazing to see a whole convention hall devoted to aftermarket automotive accessories. This hall had the best demonstrations with all sorts of custom cars (ranging from a small Lotus Elise all the way to a HUGE jacked up GMC truck). Cars with 24 low profile tires were common. Amplifiers (multiple KW in a car) were everywhere. LCDs were also everywhere.

Media Players: Streaming video and IPTV players were very common also. This technology has been around for a few years with very mixed results, but Sigma Designs has a new chip set out that really supports very high performance streaming of 1080p content directly to HDMI outputs. Netgear, Linksys and lots of no name companies demonstrated boxes that looked great.

 
Category: Trends Submitted by: John
 
January 1, 2007 Format for Print
7. What's Hot and What's Not - 2007
  Annual update of industry trends
 

Recently I had a chance to make a presentation at the fourth annual Semiconductor Venture Fair in Redwood City, California. I've done this for two years in a row, and it is interesting to revisit a forecast annually to see how things have changed. In this presentation, I went over my views of what is hot in the industry right now, and what is cooling off. Here is an abbreviated version of the key points:

What's Hot:

  • Cell Phone as a platform
  • Cameras everywhere
  • Wireless (anything)
  • MEMS
  • Flash Memory & alternatives
  • Security (many forms)
  • Nano [mostly anything]
  • Virtualization
  • China & India
  • M&A Exits (where are the good old days of IPOs?)
What's Warm:
  • Optical Infrastructure components (making its way back)

What's Not:

  • MHz alone as a performance benchmark
  • Stand-alone PDAs
  • Optical Infrastructure components
  • ASICs and Custom Silicon
  • Digital-only SOCs
  • CCD Imager Chips
  • Network Processors
  • Infiniband
  • IPO Exits

Some Specific Examples

  • Cell Phone as a platform: As the mobile infrastructure offers faster data rates, the cell phone will emerge as the primary way that people will get to the internet. From discussions with coworkers about the way people use phones in China, this is already the primary way people think of for getting to the internet (instead of using a PC). More and more, the phone platform will offer integrated tunes, video capture, television playback and even financial services. It is truly the most personal of computer and communications devices
  • Cameras everywhere: Post 9/11, everyone is worried about security. Maybe they can't monitor everything in real time, but they can record videos and look for clues to what happened after the fact. If you look around and take notice of the number of cameras that have popped up, you will be surprised. They are everywhere you go. Not only for security monitoring, but also in places that are useful - like in your car for backing up and blind-spot elimination. I think we've only seen the tip of the iceberg in the camera market.
  • FPGAs & MEMS: This is a collection of technologies that don't necessarily go together, but they are both ones that are going to be getting a lot more attention in the near future. First, the FPGA as we know it will continue to take business away from the bottom end of the ASIC market. The next thing I'm expecting is for a class of more coarse-grained FPGAs to be created that have less flexibility to fit any application, but are more efficient than the current 5% (transistors actually used for logic computation vs. overhead).
  • Wireless (anything): This seems to be the year embedded wireless devices. Stand-alone PDAs are pretty much a thing of the past - the only issue now is how many bands do they support (Bluetooth 802.11 or 802.11 and GSM/GPRS). Also in the low-end of devices, smart sensors are starting to be wirelessly connected. The ratification of the IEEE 802.15.4 standard and the higher layer networking standard called Zigbee (tm) has created a number of suppliers that are all offering low cost medium performance embedded wireless devices.

  • Flash Memory & alternatives: The flash memory market is almost as big as the DRAM market, not by units, but by revenue. It is a pretty exciting time with all sorts of new applications for embedded storage. A new class of video cameras is showing up that does away with the tape mechanism and simply records to a flash card (or in some cases, a CF-format HDD). Unfortunately, as technology scales to smaller geometries, it gets harder to make flash memory cells. This will ultimately create an opportunity for new non-volatile storage technologies. There are lots of efforts going on, everything from FERAMs to Carbon NanoTubes. This field is due for a major technology shift in the next couple of years.

  • Security (many forms): Suddenly the unfiltered internet has become unusable. From spam, viruses to spyware and pfishing scams there has never been more of an assault on the small business and home users of computers (larger organizations at least have IT departments to deal with all of this nonsense). Look for biometrics to become a big thing in the near future. The finger-print imaging companies suddenly look like they are doing very well. The software layers above that will be the next great opportunity.

  • Nano [anything]: Maybe it's just a naming convention, but suddenly everything has a nano label put on it. Maybe because some of the US Government types said that anything measured in nano-meters should qualify (like the entire semiconductor industry). With that said, there are some truly interesting things going on in that space. Sorting the commercial opportunities from the science-fair projects is going to be a chore.

  • RFID Wireless Sensors: The big buzz around at the moment is RFID and the more general category of active sensors. The RFID experiments have been driven by a couple of high profile users - Wal-Mart and the Department of Defense. It will take a couple of years for them to work out the bugs, but ultimately it will become an interesting opportunity. It's a shame that a number of start-up companies are all working hard on something that will ultimately sell for $0.05 each. The wireless (anything) comments above cover the wireless sensor space.

  • China & India: Outsourcing has finally moved to beyond just menial tasks and now is clearly on the path to taking a bite out of the US brain-trust. Many smart and motivated ex-patriots are moving back to their home countries. This is going to ultimately catch up with us. Hopefully the US will be able to avoid what happened to England in the early 1900's.

  • M&A Exits: IPO's just aren't what they used to be, not that they are bad, there just aren't enough opportunities for them right now. As a result, start-up companies need to be thinking the most likely way to liquidity is a Merger or an Acquisition, rather than a great IPO. The financial returns traditionally are about 3x less for a M&A rather than an IPO, but that's not always bad.
  • MHz: Processor speed alone is no longer the figure of merit fo
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    Category: Trends Submitted by: John