Tier Logic had a unique value proposition: you could turn its FPGA into an ASIC in a predictable time and cost. It had a working silicon and a proven production tool, and achieved to do so with spending only $20M.

It is a pity to see that a company with such a good technology and such an attracting business proposition must shut down because of lack of interest from VCs. You have to wonder which strings you have to pull in the investment community to get the attention you deserve.

Although Tier Logic will likely attempt to sell its technology to a Xilinx or an Altera, it is also quite likely that whoever the buyer is will simply buy Tier Logic’s patents to bury them. Too bad.

After Abound Logic‘s shut down 6 weeks ago, another startup showing how hard it is to be successful in FPGA.

Related posts:

1. Can Tabula and Tier Logic be successful?
2. RIP Abound Logic
3. Why FPGA startups keep failing

Abound logic, previously known as M2000, was founded by three EDA veterans who had previously started Meta Systems. Meta Systems developed the industry’s first emulation system based on custom FPGAs, which was to become the basis for the Abound Logic device after Meta Systems was acquired by Mentor Graphics in May 1996.

Abound logic’s device, the Raptor FPGA, offered in 65nm technology the capacity of 774k CLBs, each containing a 4-input LUT. This made the Raptor the largest FPGA on the market at a time.

Abound logic was in discussions to close another financing round, estimated around $20M, but one of the main tentatively new investor pulled out, which put to rest the last investment opportunities.

Related posts:

1. RIP Tier Logic
2. Can Tabula and Tier Logic be successful?
3. Why FPGA startups keep failing

Continue reading What is Twitter’s next step?

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Comparing the yearly fiscal exercises directly would be biased (Xilinx’ fiscal year end on March 31^st, and Altera’s fiscal year on Dec 31^st). Instead we can look at a quarter by quarter comparison, even though that can be too low a level. Better is to look for ttm (trailing twelve months) comparison to smooth out the local variations.

Source: Yahoo! Finance. All figures in thousands.

One can see that Altera’s operating margin is overall better. Also in their respective Q3’09 revenue reports, Xilinx expects its Q4’09 gross margin to improve to 62-63%, and Altera sees his to be 67-68%.  So a 3-4% operating margin gap will remain, which is significant.

On the other hand, Xilinx quotes 3145 full time employees, and Altera 2760. This means that a Xilinx employee brings back revenue about 26% higher than an Altera employee! So it all boils down to the question: how can Xilinx be more cost efficient?

One of the differences is the way software is developed. Altera’s software is mostly done in their technology center of Penang, Malaysia, with a very small core technology group in Toronto, Canada. Xilinx’s software team is mostly in the US, and only 5% of the team is in their R&D facilities in Hyderabad, India. A back-of-the-envelop calculation shows that if Xilinx had the same software team but with a US/India ratio 1/3-2/3, which is a healthy ratio for a company that can leverage its India facility, Xilinx would improve its operating margin by one point.

If you extend the same reasoning to whole R&D –not only software–, then it is clear that Xilinx can get the upper hand. Looking at the R&D job listings, it is also clear that Xilinx is moving into that direction. The question then is whether Xilinx has the structure and the drive to achieve such a transformation successfully.

Related posts:

1. What to read in Xilinx’ and Altera’s third quarter results
2. Who should worry about Xilinx and Oasys partnership?
3. Software outsourcing, a necessary evil

The breakroom had a tweeter wall with live reaction of the attendance –hashtag #tcm09, check it out.

The first to present was Mathias Roth from iOpus.com. His message was quite simple: if you are a startup that wants to get attention, be the first to develop for a new platform, any new platform. The rational: if you are among the first, chance is that you will stick. Look at the top 50 add-ons to Firefox today: half of them have been introduced within the year Firefox made its add-ons development platform available. Mathias’ recommendation: get on Chrome’s bandwagon and develop your add-on now –there are only about 25 Chrome add-ons today. Even though Chrome’s add-ons website will not come before the end of the year, it will pay to be among the first.

Next speaker was Rainer Maerkle from Holtzbrinck Ventures. He gave a great talk about what it takes to launch a startup. I will not do justice by trying to reduce his talk to a few words, but it would come as something like: do your homework, focus, take risks, focus, execute, focus. Oh, and don’t wait for VC money, or don’t over-specify your product: just do it and get it out, then release often.

Then come the exciting part: 12 startups pitching for 3mn each + 1mn for question. Some did great, some did not do as well, but all show the enthusiasm of the entrepreneur. Disclaimer: I am sharing what I thought of the presentations and of the startups ideas and business models; this is a very subjective digest, go visit these sites and make up your own mind.

1. Goutez (food for friends). They provide an on-line market place to buy local food products. Lots of people tried to be on-line food resellers, but only a fraction is still alive. I don’t know whether there is a market large enough to have a sustainable business here.
2. Communote. They propose an enterprise microblogging platform. Basically, a secured place where people can collaborate and share info. It looks pretty slick, and it has already a few customers. But having a Twitter for enterprise might not be enough. They had quite a number of questions regarding their differentiation with respect to other enterprise collaborative platforms. Also, may I ask what if GoogleWave goes enterprise?
3. Graph.me. Good presentation on a platform that enables users to build up their own poll, which they ask friends or social network members to answer (Facebook, MySpace). Business model is to sell the resulting data pool to marketing research. Neat idea. Obvious question is the privacy problem.
4. CaptchaAd. Propose a video ad CAPTCHA. Instead of your usual textual CAPTCHA, a short ad video is played and the used must answer a simple question (e.g., what was the brand of the car in the video?) to prove she is not a spambot. Clever idea, but will the users enjoy watching 10 seconds of video ad to fill in a form?
5. Red Panda. Intentional browsing add-on for Firefox: it instantaneously shows on a side-bar links (news, product reviews, Wikipedia articles, tweets, etc) that are relevant to whatever web page you are currently displaying. Very cool. Business model is targeted ad.
6. intelliAd. They have a web platform to optimize SEM campaign, e.g., determine the best bid for a keyword to optimize CPI. Easy setup, nice GUI, these guys are flying with 20 customers and are looking in expanding in the US. Very solid product and business plan, a success in the making.
7. Vicommerce.com. They provide a layer on top of video players that is used to define clickable area by the on-line resellers. This results in a very entertaining on-line shopping experience. They already have some major customers, solid business plan.
8. Getyourguide.com. A platform to get travelers and local activity providers together. Nice but is that enough differentiation with Yahoo! travel and Tripadvisor, to name only two?
9. Directededge.com. They provide a user recommendation plug-in to businesses. Based on the fact that 20% of Amazon’s revenue comes from user recommendation click-throughs, this is definitely a good idea. The product is still in an early stage, stay tuned.
10. SnipClip.com. They aim at monetizing brands on social networks (Facebook, MySpace), which are known to have a very low clock-through rate. The idea is to sell branded virtual goods (mostly media). Creative, let’s see whether the social network community will bite.
11. Terminii. Propose a web-based appointment services for small and mid-size business. Definitely useful. Disastrous presentation: the presenter stopped his talk because of slides issue. Mike Butcher, the host of the event, did a great job to bring back the speaker and let him explain his business.
12. Valuescope. A news aggregator filtered with natural language analysis, targeted at sales and marketing. Extremely good presentation, very focused.

Mike Butcher’s top 5 picks were:

• #5: Vicommerce.com
• #4: Directededge.com
• #3: Valuescope
• #2: CaptchaAd

and his top one pick was (drum roll please):

• #1: Graph.me

Overall a very interesting day, very well organized, with a great host. It showed that Munich has talents and a good VC structure to produce a dynamic startup environment. Congratulations to the speakers and to those that came to pitch their startups!

Related posts:

1. What to see at the TechCrunch Munich event?
2. Why FPGA startups keep failing

The gathering is an opportunity for local entrepreneurs and techies to network, as well as a few selected startups to pitch in front of their peers. Present also will be a few VC firms. The highlights:

• 14.30 Welcome: Mike Butcher (Editor TechCrunch Europe)
• 14.40 Mathias Roth (iOpus.com) “Chrome: Why creating products for a brand new platform can supercharge their service”
• 15.00 Rainer Maerkle (Holtzbrinck Ventures) “Copy, adapt or innovate – which type of business should you start?”
• 15.20 Startup Pitches
• 17.00 Panel of Startup Support Schemes in Bavaria interrogated by Mike Butcher
• 17.20 Matthias Kroener (CEO, Fidor Bank, Munich) “With traditional banking dying, and community banking up, what does this mean for the startup economy”
• 17.45 Finger food, drinks, and more networking

One of the exciting parts in that kind of event is of course the startups pitches. There will be 11 startups going for the seduction exercise, speed-dating style: 3mn presentation + 1mn for question! It is tough to convey the message with that time constraint, but only the best shall survive. The chosen ones are:

1. Communote –enterprise microblogging platform
2. Graph.me –rate your social network reach
3. CaptchaAd –CAPTCHA with video and ads
4. Red Panda –intentional browsing
5. intelliAd –bid management for Internet marketing
6. Vicommerce.com –in-video shopping
7. Getyourguide.com –on-line booking for tours, attractions and activities
8. Directededge.com –users recommendation plug-in
9. SnipClip.com –virtual goods selling platform for social networks
10. Terminii –web-based appointment services for small and mid-size companies
11. Valuescope –info aggregation and analysis for marketing and sales decisions

I will share what I saw and what I liked after the event –that is, if I can get in! The on-line registration closed unexpectedly, I hope that showing at the door will demonstrate enough motivation for me to attend. Stay tuned.

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1. What was hot at the TechCrunch Munich event?
2. What is Twitter’s next step?

Source: Xilinx and Altera financial reports, and Yahoo! Finance

Xilinx’ quarterly income of $64M (0.23$/share) beats Wall Street’s expectation of 0.19$/share. Altera’s quarterly income of $56.7M (0.19$/share) meets Wall Street’s expectation. Both companies expect a 6-10% revenue increase for Q4’09 from previous quarter. Xilinx expects its Q4’09 gross margin to improve to 62-63%, and Altera sees his to be 67-68%.

Both companies are benefiting equally of an improving economy. Altera is seeing a large part of its revenue coming from new products (60% for Q3’09), as opposed to Xilinx (31% in Q3’09).

I would give a slight edge to Altera, given its recent offer of high-performance new devices, and its operation margin consistently ahead of Xilinx’. One day Xilinx should be able to close the 3-4% operation margin gap it has with Altera, but until then it will not be as efficient and dynamic as Altera. I will discuss in another post how Xilinx can close this gap.

Related posts:

1. How can Xilinx improve its bottom line
2. Who should worry about Xilinx and Oasys partnership?

There have been attempts to challenge the comfortable equilibrium between the two FPGA giants Xilinx and Altera.  Indeed, the number of FPGA startups increased after the 2000 downturn.  Over the past 7-9 years it looks like VCs founded FPGA startups one after another.  Beside the attraction of a programmable logic market that has been growing a healthy 8-11%, compared to a stalled ASIC market, the availability of engineers and executives from the most prestigious firms (Xilinx, Altera, Intel, LSI, etc) may have been a factor in driving more VC money in FPGA startups.

However, most of these startups die after a few years.  The list includes Chameleon Systems, which died in 2002; the promising Velogix, formerly known as Flexlogics, created in 2002, and which eventually ran out of funds; Ambric Inc, whose assets were acquired by Nethra in 2008; Mathstar Inc, which stopped operating in 2008; and CSwitch, which closed the doors this summer.

Still, there are a number of active FPGA startups.  Among the most notable, one can cite Abound Logic, formerly known as M2000, which started back in 1996, and claims high density FPGA for high-end customers; Tabula, which had to go through a full reset, raised a considerable amount of money, and from which a product is expected sometime later this year; eAsic, still on going after a few misfires; Achronix, which promises a throughput of up to 1.5GHz; SiliconBlue, which aims at low power application; and certainly more companies lesser known or still in stealth mode, like Tier Logic.

All these attempts failed so far to jeopardize the duopoly Xilinx/Altera.  Why is it so?  Any new venture needs to come with a significant differentiation if it wants to challenge the existing competitors.  Many FPGA startups came out with claims of higher densities and better clock cycles.  But regardless of how you look at FPGA architectures, it is not a fundamentally difficult hardware to design, especially with the profusion of expert layout engineers that exists in this field.  One cannot expect a revolution that would bring a 10x better density.  Startups’ claims of 2x or higher density eventually have to face the harsh reality that Xilinx and Altera just need to move to the next technology node to match or substantially reduce the performance claims.  Moving to the next technology node is certainly more accessible to a Xilinx or an Altera giant than to a startup for which a new mask can consume half of a second- or third-round financing.  The bottom line is that displacing a well established vendor requires more than a 2x density improvement.  First of all, you need to make sure you have the software that can exploit that extra density to deliver better results; second, for most applications, density becomes secondary as long as it fits on a board, and the ever-increasing size of the Xilinx and Altera devices makes capacity a hard sell, except possibly for a small fraction of the high-end customers; third, capacity is even more secondary when power consumption comes into play.

In a consumer electronics market more and more dictated by portable and wireless products, power is a factor that is more important that raw performance.  In that regard, SiliconBlue looks the best positioned to distinguish itself from its peers, and proposes a value that both Xilinx and Altera cannot meet, at least for the moment.  They are the ones to watch.

Related posts:

1. Can Tabula and Tier Logic be successful?
2. Is FPGA a sustainable market for EDA?
3. RIP Tier Logic