Is the Age of Silicon Start-Ups Over?

I've stolen the title of this blog post from a question asked by Peter Claydon at a recent SiliconSouthWest event and I thought it worth a comment or two.

According to the David Manners blog Peter answered "it probably is...". However an alternative view was presented in this article which argues that "Scarcity drives up the value of sem...

From my vantage point it is clear to see that the "classic" fabless semiconductor model has had a huge challenge for some time but does this mean it really is all over?

I doubt it. Actually, I very much doubt it.

For a start, it is observable that the structure and behaviour of many companies has changed post millennium as the markets have accelerated pace and much more emphasis is now placed on innovation. This means that many more of the incumbents are looking to de-risk investment hence make acquisitions at a point where market and technology risks have been minimised... why take huge gambles, pump a lot of money in on proprietary technology when you can sit back and let a Darwinian process point the way forwards. The short answer is that "you wouldn't" and this is why we have seen the trend of partnering and acquisition... in the UK recently for example we have seen acquisitions by Broadcom, nVidia, Maxim, Gennum and Atmel to mention only a few.

I was fortunate enough to have studied this trend of "Open Innovation" (back in 2008) in relation to UK microelectronics firms and it was clear to me at that time that this was a route neatly matched with the industry (including start ups) that we have in the UK.

For me difficult times merely heralds the start of a new era - we know that the classic fabless model is creaking but all we can deduce from that is that something has to change. Just as it did when start ups could not afford fabs. The challenge is before us on at least 2 dimensions (I'll not touch value proposition as that's always been the case):

1. the time it takes for an investor to make a return has to be worked on
2. the amount of money it takes before an investor exit can complete.

These are not beyond the wit of man... not by a long chalk. And indeed, there are more flavours beyond a classic VC investment that could/should and would work.

So I do not believe the age of the silicon start up is over... I think its the start of a new era and a new model.