Start-Up: the book

Penny Aycinena asked me to write a short article in EDA confidential, which summarizes my concerns and hopes about innovation and start-ups. It is published today (June 30, 2008).

Let me add more here:

The chapter of “Start-Up” which has been the least noticed is Chapter 6. It is one of my favourites though. It is about EDA, which stands for Electronic Design Automation. Today, no architect would design a complex building without software, nor would an automobile engineer. It is exactly the same with digital circuits.

Twenty five years ago, EDA was nearly non-existent. Forty years ago, chips were designed internally (and manually) at IBM, Motorola… and little by little, some new players emerged, tiny start-ups became big and an industry was born. It was more than $5B in revenues in 2007. The typical ebb and flow of start-up creation and acquisition went on for two decades. But since 2001, not much has happened: no IPO, small M&A deals and a few days ago, Cadence, the biggest EDA vendor, announced a hostile acquisition bid against Mentor, the number 3 player. Both companies were founded in the 80s.

EDA is a good illustration of what Silicon Valley is: a rich network of individuals, academics, entrepreneurs, investors. What is interesting about EDA is that its center is probably Berkeley (rather than Stanford or Sand Hill Road) as the picture below shows. Let me quote again two legends of the EDA field, two recipients of the Kaufman award, the Nobel Prize of EDA:

- “Risk taking in EDA is gone.” Joe Costello

- “If there is a single point I wish to make here today, it is that as a discipline, both in industry and in academia, we are just not taking enough risks today.” Richard Newton

It could be that the maturity of EDA and of Silicon Valley is not such a good sign.

I am not the only one complaining about the weakness of Europe in terms of start-ups. Juha Ruohonen compared in his report VICTA (www.tekes.fi/julkaisut/victa.pdf) the situation of Finland and Israel and he reaches similar conclusions to mine: not enough growth companies, a lack of ambition, and too many lifestyle companies.

His comparison table is self-sufficient:

And his analysis of the reasons for problems are:

Finally his conclusions: There is a clear need in Finland:

• To create a viable high-growth ecosystem
• To multiply the number of VC capable growth companies
• To eliminate the waste of resources to lifestyle companies
• To provide a viable platform for fast international growth
• To increase the corporate involvement and the number of corporate spin-offs/-outs
• To better facilitate the transformation from research project into a fast growth start-up.

This can be achieved by:

• shifting focus from quantity into quality
• moving from project-based development to efficient long-term structures
• creating structures to enable success of commercial players
• attracting much more international talent into Finnish early-stage community.

My comment: you can replace Finland by Europe and the analysis is the same. Solutions are complex no doubt but I would add that betting on youth, on risk taking is essential (the “Stay Foolish, Stay Hungry” explained by Jobs, see the July 07 post) and that international exchange must also include discovering what exists abroad.