I cannot remember what reference led me to read “Gunfire at Sea” by Elting Morrison but I thought it captured some fundamental truths about innovation so well I bought several copies of “Men, Machines, and Modern Times” by Elting Morrison and started sharing them with friends in 2005. I had a conversation with Gary Smith about the book sometime that year and he said he had written a thesis at the Naval Academy on the subject of bebop as a model for innovation. I pestered him for several months afterward to dig it up because from his description I really wanted to read it.
Gary Smith, founder and chief analyst at Gary Smith EDA, passed away July 3, 2015 after a brief illness. He was a good friend and a mentor and he contributed substantially to fostering the collaboration around a shared vision in Electronic Design Automation that is necessary to keep Moore’s Law moving forward.
I learned a lot from him in a friendship that spanned more than 25 years and will miss the chance to compare notes with him on life and business. He lived the life he wanted, was devoted to his wife Lori Kate and his son Casey, and stayed active in a professional community he had nurtured for more than four decades.
Steve DiBartolomeo is co-founder of Artwork Conversion Software, Inc., an EDA software firm headquartered in Santa Cruz CA with a development office in Manhattan Beach, CA. Founded in 1989, the company develops CAD translation programs, CAD viewers, plotting software and IC packaging software. Artwork has over 5000 customers worldwide including Alcatel, AMD, Applied Materials, Agere, Bosch, KLA Tencor, Motorola, Ericsson, General Electric, Hewlett Packard, Hitachi, Lockheed Martin, Siemens, Seagate, Sony, TRW..
Q: Can you talk a little about your background and how you came to found Artwork Conversion Services?
I have a BS/MS in Electrical Engineering from UCLA (1978). My founding partner, Antonio Morawski, has a BS from Loyola and a MS from UCLA from around the same time period. I cut my teeth at TRW Semiconductor in Southern Calif starting in 1976 as a student. When I graduated I continued on there until 1980 as an RF design engineer, as did Antonio–we met at TRW.
I took a year and a half off of work and went back to college (UCSB) until I ran out of money and then in 1982 joined Avantek in Santa Clara as an international sales engineer. In 1984 my boss asked me to join a startup, Step Electronics, that would specialize in high tech import/export selling microwave and RF components and subassemblies. One of our first clients was a small software start up, EEsof, which pioneered microwave EDA on PCs. (Prior to that microwave design software ran on a $250K VAX and cost $50K – EEsof’s ran on a $5K PC and cost $7500.) I spent much of the next years selling EEsof tools in Europe (where I lived for a year in 1986) and then later in Asia.
In 1986 I needed a translator for a pattern generator in order to close a large EEsof sale in Germany. EEsof could not do it. I mentioned this to Antonio and he said he knew how to write such a translator. We took the order and delivered it 6 months later.
In 1987 I returned back to the US and tried to sell more pattern generator translators in Silicon Valley. The companies that I contacted were not interested in our translator but had lots of suggestions as to what they did need — so we slowly developed new products (on a part time basis) based on their feedback. At that time (between 87 and 89) Antonio was employed as a consultant at TRW and as a professor at Loyola. He did the programming out of a corner of his small garage.
Finally in 1989 we decided to do this full time. I left Step (which had really been an excellent apprenticeship for learning how to run a small, lean operation) and Antonio left Loyola after completing his teaching contract.
Our primary reason for starting the company was to be “masters of our own destiny” and to work on stuff that was interesting. We really only wanted to make enough money to cover our mortgages and live a reasonably comfortable life.
Q: So what were the early days like?
Between us we put up $10K each and started with that (and two years of experience and a few customers and orders in the pipeline). As mentioned, our largest initial purchase was two fax machines (at $1500 each) and a copy machine ($3000). I worked out of a 500 sq foot office in Santa Cruz and Antonio continued to work out of his garage in Manhattan Beach. We broke even from day one even if the monthly salary was small. Eventually we added a secretary and a programmer and Antonio moved from his one car garage to his father’s two car garage.
I handled all the sales which were almost 100% from Silicon Valley. I basically drove into the valley several times a week and installed and demonstrated the software. I also did tech support, marketing, technical writing … basically everything except programming.
We added employees one at a time and grew slowly but surely.
At the time we started (end of 89), the business we knew best — RF and Microwave components and design — was taking a tremendous hit; the giant build up of the early and mid 80’s (due to Reagan’s military budget) was over and an enormous consolidation was occurring. I’d call an engineer on a Monday to make an appointment and by Friday he’d be gone.
There was not yet any Internet and even cell phones were a tiny market. Things looked especially grim because no one could envision what was going to drive new designs. But somehow we ground through the first couple of years — not making much money but not losing any either and slowly adding a few products every year.
By 1995 we grew to a peak of 14 people – 8 programmers, 1 sales guy, 1 boss (me) and 3 office people. Our maximum revenues peaked at about $3 million dollars in the late 90’s.
Business took a major downturn in 2001 what with the dot-com crash which killed a whole bunch of network and chip startups that were buying our tools as well as hurting just about everybody in the tech business. I recall our shipments dropped 40% one month and stayed down for 18 months before slowly building back up again. By 2004 business was excellent again. Things stayed pretty buoyant until 2007; from that point on it seemed to drift down gradually and, of course, at the end of 2008 the downward drift became disturbingly steep. Most of 2009 was pretty awful and it was not until early 2010 that we saw the green shoots of a recovery.
Q: Where are you today?
Today we are 10 people (7 programmers, 1 sales guy, 1 boss and 1 office person – the internet nature of business no longer requires production of software other than a click). Our goals are not high growth but rather a good profit margin. As a software company we have zero cost-of-goods and the great majority of our expenses is salary. So once you are past “break even” everything after that is profit.
Q: When you look back over the last two decades or so what are the accomplishments that you are most proud of ?
We are very proud of having kept the company going for over 20 years completely on our own. We didn’t borrow a penny and every quarter we showed an operating profit.
We made several major market and technology shifts during those 20 years that kept us going:
- We started by building software for RF and Microwave designers.
- We branched into software directed at PCB designers.
- We branched into software directed at IC designers (back end).
- We moved from translators to display software (viewers).
- We moved from direct sales to end users to OEM sales to other EDA companies.
We have seen many other EDA and technology firms try to change direction, usually in response to major changes in technology or the market that either died or were badly injured in the process.
We were early Internet and web adopters and this enabled us to expand our market from just Silicon Valley to worldwide without a large sales force.
Q: What’s been the biggest surprise?
I think it was more of a gradual realization: most EDA entrepreneurs start as EDA users, run into problems doing their job, come up with a clever solution and are suddenly find themselves an EDA supplier. The surprise comes some years after you are an EDA supplier–you have stopped designing stuff and find that you no longer really understand the “problem” side of the equation and have to pester people to tell you about what problems they need solving. However this reliance on others for your critical input is never as reliable as your own (past) understanding of the problems that need solving.
Q: What were the significant changes in the environment you have had to respond to?
The internet changed everything. We jumped on it early and have benefited from our ability to be everywhere in the world from our desks in Santa Cruz. Nowadays I think WEBEX (and the other screen sharing apps) is one of the seven wonders of the modern world.
We realized that we needed to change from direct sales to OEM partnerships in the late 90’s because the big kahunas–Cadence, Mentor and Synopsys–started sucking the air out of the EDA markets. They each wanted to be all things to the customer and cut the kind of deals (we call them all-you-can-eat) that would cut off any other vendor. So we changed our focus to selling into the big EDA companies with small modules that enhanced their products.
Q: What’s the current challenge you are wrestling with?
Design is following manufacturing offshore. We’ve seen this accelerate since after the dot-com crash. It’s a lot harder for a small US based company to cover Taiwan, China, India and Singapore. The big guys set up design and application center’s in these countries.
Q: Any suggestions for other entrepreneurs who want to bootstrap a software business?
If you want to run a company you can make a living from–in other words you are not writing a business plan where the exit strategy is on the first page–then I think I can make a couple of suggestions.
- Start with a small team with common values and complementing skills – in our case Antonio was the programming guy and I was the sales/applications guy.
- Don’t take any more money–none if possible–from outsiders than absolutely required.
- Create something small and simple and quickly get it out there. You’ll get much better and faster feedback than if you try to go around asking people what they want.
- Refine it based on feedback. Document it. Do it again.
- Grow slowly. Fast growth is very inefficient since you will then have a lot of people on board that have not figured out their job.
- Staff or employee turnover has a high hidden cost since the replacements have to start over.
- Cash is king. Save some of your profits as a cushion against a rainy day.
- Spend a lot of time listening to your customer’s problems. Not every problem is one you can or should solve, but the aggregation of their issues gives you a solid base for making seat-of-the-pants decisions. You’ll never have enough information to make a MBA-style decision on new products or directions. But if you’ve listened to enough customers you’ll have a good “feel” and make better decisions.
- Beware of business plans. Have a look at some business plans that are 3-5 years old of both successful and unsuccessful companies. You’ll have a good laugh at both. The main difference between the successful companies and the dead/dying ones is how they reacted when their assumptions blew up.
Finally and most importantly: people can say one thing and do another. Only act on what people tell you if you see that their behavior is consistent with their talk. People are much better at telling you what they don’t like than at what they want. When we are developing a new product we try to get something into their hands quickly and then listen to them criticize it. The criticisms are usually much more specific and useful to defining a product.
Q: Steve thanks very much for your time.
Semifore , Inc. was founded in 2006 by Richard Weber based on his system design experience at several startups and some larger systems firms. All of them struggled with the need for tools and methods to keep the hardware architecture in sync with software architecture and to ensure that the development and customer documentation was up to date. He developed an application that worked from a common specification to generate high level hardware description language specifications, software source code, and human readable documentation for the memory maps and configuration/control register behavior. Semifore has bootstrapped growth since 2006 and has seen their offering adopted at a number of major semiconductor firms. and system houses.
We have two members of the Semifore executive team joining us 10AM PST on Fri-Jan-17-2014 for a discussion of what they have learned about their success so far as a niche player in the Electronic Design Automation space and their plans to scale up in 2014. You can register to take part in the conversation at
- Rob Callaghan, COO of Semifore Inc.
Rob was previously Vice President of Operations for sales and technical support at Magma Design Automation. Prior to Magma, he was Group Director of Business Development as well as Director of Sales Operations at Cadence Design Systems. He has worked with other large electronics firms such as L.M. Ericsson, Amdahl Corporation, and Memorex Corporation in the functions of Product Marketing, Field Operations, Finance and Accounting. His expertise includes strategic and operational planning, operations management, market research, and financial operations for organizations such as direct sales channels, product marketing, R&D operations, corporate business development, corporate mergers and acquisitions and strategic investments. He has a BS in Finance from the Menlo School of Business and a MBA from Golden Gate University.
- Herbie Winsted, Vice President of Business Development and Customer Care
Herb is a veteran of over 26 years in the EDA and Semiconductor industries. He has held positions of Director Business Development and Director IC Implementation and various individual contributor assignments at Cadence Design Systems. He has also assumed management responsibilities for CAD teams and IC layout groups at National Semi, GEC Plessey, and AMD. Herbie has also lead hundreds of multi-discipline automated layout projects in different roles at Silicon Valley Research (Silvar-Lisco) working with major Semiconductor companies worldwide. He has excelled at team building and establishing both business and personal relationships at every level of the organizations he has serviced. He has wide experience in creating marketing messaging, training, and sales collateral. He has always put customer requirements as his highest priority and excels at finding practical solutions that satisfy all parties concerned.
Background for discussion
Semifore Inc. is a software startup in Palo Alto Ca. The company provides a software product platform that automates and manages the register information for the Hardware / Software interface during the definition, specification, implementation and verification phases of the ASIC and/or FPGA design process. The company is privately held and has no external investors. It was founded in 2006 by Richard Weber who is currently the CEO of the company.
Currently the company has over a dozen paying customers which are using the platform to deliver their chip sets to customers. Logo’s such as Altera, AMCC, Microsoft, and other large firms have embraced the tool and associated design methodology to reduce their design cycle time and improve their product functionality.
Semifore’s products are used by Systems Architects and designers, Verification Engineers, Software Development Engineers, and Technical Publications teams inside of Semiconductor companies.
The company has been funded via “bootstrapping” and is operated solely from operating cash flow. This has provided sufficient funds to get through the product development and early customer engagements that allowed Semifore to market, test, and refine the technology to a state of high reliability and functionality with low post-sales support requirements. The product does what we say it does and once it’s installed the product often goes viral.
The company has relied on trade show attendance and word of mouth to secure additional sales leads to qualify and move to a product demonstration. The customers for this product, are for the most part, currently internally developing their own solutions in this space.
Market / Customer Challenges (Lessons Learned 2006-2013)
- Internal solutions are viewed as “free” and they get the job done today. The cost is buried across many functions within the customer and the time hits they take are part and parcel of the “design silos” in most organizations.
- The teams that have “created” the internal solution often have a vested interest in keeping them alive.
- The currently employed internal “methodology” touches many organizations that may not be the purchasing entity or the driver for the decision or have the ability to overrule and drive a central technical solution throughout the organization. Many large customers have several different of internal solutions in this design space.
- This design problem is very niche and eclectic and often is not highly visible to upper engineering management. It’s noise to them. Education at all levels is required for buy in on this kind of tool.
- Internal solutions tend to be limited to file transforms and depend on rigid input formats to produce useful results. Very little true design intelligence for detecting correct semantics and interface capability to other tools or standards.
- There is considerable confusion regarding the status and capabilities of the “standards” that support this particular design methodology that adds to the tendency to “wait and see “ before making buy decisions.
Key Goals for 2014
- Expand the adoption by existing customers who have embraced the tools and succeeded using them in production.
- Build on current success to add new customers, large and small.
- Determine level of participation in existing standards committees and explore offering our proprietary language as a standard with endorsement from existing customers.
Update Fri-Jan-17: here is the audio for the event.
This is based on a real engagement that started with the conversation in “Living In Anticipation With Schrodinger’s Leads.”
The CEO placed a stack of about 30 business cards on the conference table: “See, here are all of the leads from the trade show.”
“Would you like us to put together a simple campaign where we e-mail them an update of what’s happened since the show and call them once or twice to see if they are interested in a longer demo or an evaluation?” I asked.
“No, that’s not why we asked you to come in, these guys will call when they are ready,” he answered, “We had a visit from someone in sales at BigCo [a large firm in Silicon Valley], he came by our office last week because they are interested in our product and we need your advice on the deal.”
I knew that the two founders had worked together at BigCo before striking out on their own two years earlier when a downturn had triggered layoffs that they used it as an opportunity to launch their startup.
“I cannot figure out how to price the configuration,” the CTO spoke up for the first time, “I can’t figure out if I should charge $7,500 or $15,000. They could technically get by with one license but they should probably pay for two because they have come back and asked for some consulting to be bundled in to close the deal. We quoted had quoted them $7,500 but it seems like it may be a lot of work.”
For a brief moment I was reminded of an early morning ride to the airport on 280, the sun was barely up and the fog was very thick; we had left a little later than planned and were driving a little faster than visibility might have warranted. I really wanted to have the sun come up and burn off the fog.
“Can we just back up a minute and walk around the situation a little more? The guy from BigCo came to your offices? He didn’t ask you to come to his?” I asked. BigCo offices were only a few miles away but it would unusual for them to visit a small vendor unless they were serious about a deal and wanted to get a real sense of company size and activity level.
“Yes, Mike and I worked with him back at BigCo and he wanted to talk to us about deal for a license to help them with a contract they are working on with a Japanese company. He had called me earlier for a budgetary quote for a single license but now he wanted to negotiate a discount and get us to throw in some consulting to close the deal” the CTO elaborated.
“How much consulting?” I asked.
“They need us to convert the work in progress and library elements for a business unit of [a major Japanese company]. They are putting together a deal to sell software to about 120 engineers. If the Japanese engineers have to re-enter the work in the new system the deal won’t go through, if BigCo pays for outsource engineering time to do the translation by hand it’s probably a team of ten to twenty for three to six months. But they would do it by hand; if we use our tools it’s a week or two. The Japanese don’t like the idea of manual translation since the errors are unpredictable: if we do it automatically we also automatically verify, and if they find an error then we can fix our code and re-run. It’s cleaner,” the CTO concluded.
” OK, so aside from doing it with this outsource team do they have anybody else that can do the translation?” I asked.
“No one else has software that has already been used in production. We have two other customers using our tools to allow different teams to move this same kind of data back and forth between different systems,” the CEO explained.
We calculated that the deal was worth on the order of 2-3 million dollars in license revenue to BigCo and the outsourcer was probably going to charge between $60,000 and $240,000 depending upon the real scope and where engineering labor was located. So there was something like $1.5M to $2M in margin after cost of sales and support for the deal.
I suggested, “I think we should quote them between $400,000 and $600,000 for the translation, verification and support of the translation, and a license to access the translation technology on-site in Japan. You are going to be saving them direct cost of probably $120,000 or more, your approach is an order of magnitude faster, repeatable, scalable, and probably two to three orders of magnitude more accurate. You are enabling a $2M deal plus if they win this deal it means that they can flip other Japanese firms to their software. We will probably end up at half to two-thirds of the opening but we should start a the high end of a defensible value range.”
“But we have already quoted them $7,500 for a license. How do I get to $400 grand?” the CEO protested.
I thought for a minute and then asked,”When does the quote expire?”
“I didn’t put an expiration on it,” the CTO said.
I said, “OK, we have to call your contact and send him an e-mail advising him that we will honor the quote for another 30 days but after further analysis of their requirements we think that they need a different product and some related consulting. We are happy to furnish them the license we quoted but we are not discounting it further and we are not throwing in any consulting to get the deal. We would like to request a meeting to fully scope the project but we anticipate that it will cost between $400,000 and $600,000 to meet the quality and delivery expectations of his end customer.”
There was more back and forth but after we walked around it a few more times it was clear that they were bringing considerable value to BigCo to close this opportunity. We drafted and sent an e-mail to their contact and then read it aloud to his voicemail since it was now dark out and he had gone home.
We ended up in a meeting with at the BigCo site with folks from corporate and the lead salesperson from their Japanese distributor. This led to a month of serious conversations that uncovered some additional requirements that neither side had considered, allowed us to run some test cases that increased both sides confidence, and allowed us to develop a detailed multi-phase project plan that included not only our work but key tasks from their team and the Japanese customer.
It took another two months beyond that for BigCo to give us a purchase order–probably because the Japanese customer waited for the end of the year to squeeze the best deal out of them and they didn’t want to give us an order until then–for about $320,000 for a mix of licenses, a month of on-site work in Japan, and a year of support and follow up.
Especially when you are selling to enterprise you need to calculate the real value you are creating, this normally requires you to thoroughly understand their needs and constraints and develop what is typically a multi-phase project plan detailing commitments from both sides to make it happen.
It can take a while to determine what to ask in an opening conversation and which leads constitute opportunities. You have to follow up.
In May of this year I was invited to take part in a month long group discussion on CPSquare where my consulting practice was the focus. This is the introductory statement I posted to explain a little bit about my background and what I do.
I worked in Electronic Design Automation on board, chip, and system design in the 80’s and 90’s. This gave me an appreciation of the value domain specific visual languages for representing geometric, physical, logical, electrical, and temporal properties and relationships. Since I had studiously avoided electronics and anything related to hardware in my education I had to concentrate on the poorly understood problems of data management and applying computers to the design of computers.
I also learned that electronic systems design required a team of experts from different disciplines collaborating to create something new. A chip design team needs to reach a working consensus on a range of problems in different domains. One paradox over the roughly two decades I worked in system design was that solving a problem in one domain moved the constraint to another one, so that you a group that was critical for one or two generations has to let others take the lead as new challenges dominate.
When I was getting ready to apply to colleges I had a long conversation with a friend’s father who worked as a fighter aircraft designer at McDonnell Douglas. He was an expert in materials and mechanical design. He said that one of the challenges his organization faced was that aircraft survivability from the 1940’s through the 60’s had been driven by airframe and engine design as combat took place at close range using machine guns. As Gatling guns gave way to missiles there were many fewer combat engagements within visual range: avionics and electronic counter-measures, which had become important starting in the second half of the World War 2, now came to dominate the equations governing survivability. The challenge was that the organization was dominated by folks with a clear understanding of airframe design and they needed to learn how to incorporate guidance from many new disciplines.
I think this challenge of integrating not only the evolution of knowledge in a particular domain but fostering effective communication and collaboration among experts in different domains was what led me originally to CPSquare. I was working at Cisco in a hardware design best practices effort and I read an article by Etienne Wenger on cultivating communities of practice in the Harvard Business Review. It was eye opening.
These days I work primarily with teams of two to five engineers or scientists who are experts in a field and are challenged with explaining the benefits of their services or software so that they can get their startup off the ground. I spend some time trying to understand the details of the technology but for the most part try and draw a box around it and understand the inputs, outputs, timeframe, and costs that a prospective customer will need to appreciate before deciding to engage.
The incorporation of a new technology into a business process often changes existing political boundaries, frequently obsoletes old assumptions, establishes new processes and ways of working together, and requires shared experimentation between the customer and startup for shared learning.
I am happy to answer any questions folks may have on challenges I face or issues that I wrestle with. I have learned a lot from my participation in CPSquare events over the years and am happy to take part in this exercise.
For more background on my current practice and some of the things that have influenced me please take a look at some of these blog posts:
- Your First Dozen Enterprise Customers
This originally appeared in my “Entrepreneurial Engineer” column in EETimes as “No longer a startup, EVE aims for top tier of EDA players” on Mar-29-2011. I have added some additional hyperlinks in this version.
Dr. Luc Burgun is co-founder and CEO of EVE. He has more than sixteen years of experience in EDA in both engineering and executive management positions. Prior to co-founding EVE, he was R&D Director for Meta Systems, a French company acquired by Mentor Graphics in 1996 that specialized in hardware emulation systems. Dr. Burgun holds a Ph.D. degree in Logic Synthesis from the University of Pierre and Marie Curie in Paris and has been granted six patents. The following interview took place over E-Mail; hyperlinks have been added to offer some additional context.
Second place in a market can still allow a company to be profitable and growing.
Second place in a lawsuit can impact not only profits and growth but viability.
Here is a recent exchange from the LSC mailing list I had with an EDA startup founder
EDA Tools Founder: We are small EDA tools startup. We captured great value because we built a pretty neat product without investment that can match others who were built using >5M-25M investment. Trouble is the software is costly and it takes a long sales cycle to sell.
SKMurphy: Depending on which problem area you are addressing in EDA your customers are not likely to be bargain hunting. If they are spending $4M on a mask set and your software saves them $25K (or even $250K) but introduces an error in the design they will get a dent if their career if not get fired. Investment in EDA is down to a handful of specialized Angels and the ones that are public about their investment philosophy like Jim Hogan advocate bootstrapping to get your first few customers. The EDA market is very challenging for a startup because of the increasing risk aversion and consolidation on the customer side as well. Investment will be difficult to secure, it will not materially shorten your sales cycle, but Angel investors may be able to open some doors for you.
EDA Tools Founder: I believe we need outside investment for the following reasons:
- We have a clear engineering execution plan. Since the core product is ready, the strengthening and adding features is now a parallelizable task.
- We need sales/marketing momentum to start cash flow.
- Investors with networks in this market can also bring in additional momentum.
SKMurphy: Taking each of your points in turn:
- There is little risk reduction or differentiation in your engineering execution, given a clear specification by a customer willing to outsource development or go outside for a solution there are many firms that can implement a workable solution.
- You don’t mention distinctive design insights or design expertise that led you to develop the product but have stressed in a number of posts to this group over the last year that you are able to develop more cheaply. Chip design and now even high speed board design looks a lot like hiring a brain surgeon: customers hire the most experienced provider with the highest number of patients still above ground. It’s an area where promising a bargain does not move the needle.
- There are many folks who can help you reach customers but you have to have a story that promises outstanding results, not a bargain on a piece of software driving a multi-million dollar decision.
EDA Tools Founder: What would you do? I believe investment can speed up both engineering execution and sales. Would you think of another strategy that would work without investment? Are we being cheap or lean here?
My current alternative solution to the above is to focus on other markets where sales cycle is shorter to start cash flow early. However time is precious and we could still execute engineering faster.
SKMurphy: You really need to work on your story:
- The Past: where you have come from, what led you to start your company and what about your background prepared you to be effective at solving this particular problem for your customers.
- The Present: what have you accomplished to date and more importantly, what have you learned from your journey so far.
- The Near Future: what you are actively working on, what you plan to accomplish in the near term, how you will demonstrate traction if your audience asks you “how is it going” in three to six months.
- Who You Are: why do you have an interest in the problem or field that you are focused on, what are the values and the passions that you bring to working on it.
- The Future: what you ultimately hope to accomplish, a vision of a better world you are working to bring about.
Continually stressing how cost effective you are is just not compelling to customers solving high stakes engineering problems. They are willing to spend a lot of money but they must get results that help to differentiate their products. You can still use lean techniques but you have to be targeting emerging problem areas or offer a disruptive tool that allows a new category of customer to get a result that was not available to them before. Also, when approaching VC’s or Angels the “near future” part of the pitch is key. Your current message is that we cannot get started without your money, you want to be able to stay we are started and will make good progress without you but can go faster with funding.
In my “Maiden Voyage” post on Jul-30-2010 for my Entrepreneurial Engineer blog on EE Times I said that I would focus on innovation and entrepreneurship in the broader electronic systems design ecosystem. I hoped to provide insights in the following areas:
- Perspective on technology innovation.
- Analysis of business strategy for emerging markets.
- New models for global teams and multi-firm collaboration that are predicated on incessant collaboration among experts.
- Perspective on the impact of communication and pervasive connectivity in creating new business models.
- Insights from pioneering engineers on how new computing paradigms are enabling new models for how they invent.
- Interviews with entrepreneurs sharing lessons learned from their successes and their setbacks.
I am going to continue to focus on these areas for 2011 as well.
I have another ten posts in various stages of completion and plan to post one a week at least for the first quarter of 2011. If you would like to be interviewed or have some insights you would like to share about areas 3 and 4 in particular please contact me.
I was interviewed by Peggy Aycinena about six months ago and she subsequently published it in July on the GabeOnEDA site as “Business 101: Art & Magic of EDA Marketing.” Peggy has always appreciated that the technology is nothing without the team and it’s the people you need to focus on and understand if you want to fully appreciate what changes are coming in the semiconductor/EDA markets. She has done more to help profile the players than any other journalist in electronics in the last decade. I was delighted to sit down with her and offer her my perspective on marketing, sales, business development issues for EDA startups. I have added some links for context that are not included in the original interview.
Q – Given that engineers are particularly cynical about marketing BS, isn’t it better to just get out there and talk to the engineers, bypassing the whole ‘marketing campaign’ thing?
Sean Murphy – In the early market for a new product it’s always about serious conversation; good marketing engineers listen as much as they talk. They can also take part in on-line conversations in places like the Verification Guild. All of the major vendors, and many of the smaller ones, also put on serious user conferences that are very effective at both educating the users about new offerings and the vendors about real customer problems.
Q – What’s special about marketing in EDA versus other sectors in technology?
Sean Murphy – There are a couple of special aspects to EDA marketing. Semiconductor firms are driven by Moore’s Law; if you want to sell to them you have to keep up. What doesn’t change is that you’ve always got extremely complex and expensive projects that require a number of different technical disciplines collaborating to produce results.
There are at least six-to-eight primary disciplines gathered around any project table, and a number of additional experts involved for a portion of the project, each with their own specialty tools and requirements. This leads to several dozen different niche markets in EDA.
Q – What are the implications of those many niches from a marketing perspective?
Sean Murphy – Niche markets require technical sophistication and customer intimacy. They are rarely amenable to the consumer marketing techniques that sometimes get tried – certainly for new product introduction.
There’s little value in a splashy product launch unless there are customers up on stage. For example, when Magma launched they had engineers from Sun and several other customers up on stage to establish that “we’re real and we are in production at these places.” So case studies and testimonials from current customers are critical.
Q – Which do you think have been the best and worst marketing campaigns in EDA over the last 3 years?
Sean Murphy – There are two campaigns which stand out as very good.
First, I was delighted by the Certess launch 2 or 3 years ago. They told a story that their CTO could explain in very simple terms – surprisingly enough to his younger sister – describing various problems in verification.
He said things like: Here’s the problem with current verification approaches, and here’s how we’re going to attack that problem. He was able to focus on the customer’s current problem and make fun of some of his earlier mistakes, which was extremely effective.
Too often technology entrepreneurs tell themselves, “We’re bringing fire to the savages,” believing that they’re smarter than their customers. The problem is that most of the people they’re selling to are pretty damn smart themselves. Certess did well by taking a more peer-to-peer approach.
The second example of excellent marketing would be Mentor’s Wally Rhines. Recently, he’s been giving a series of talks that look out ahead, 5-to-7 years in the future. They really seem to be a ground up analysis of what’s going on. At one point during the EDAC CEO panel in February, Wally rejected [Panel Moderator] Jay Vleeschhouwer’s question about consolidation so articulately that it was replayed and elaborated in an interview with Forbes.
Wally’s approach combines a lot of data with humility, or the willingness to go where the data leads him. Other EDA CEOs may be more technically visionary, but nobody has better command of the facts than Wally Rhines.
He’s clearly far less concerned with sharing with his audience how smart he is, and far more concerned about marketing the Mentor message. Plus, he’s got a great crew of people backing him up, who spend the time and effort needed to stay current on statistics and circumstances in the industry.
Q – When small companies can barely keep the lights on, how much of their discretionary budget should be spent on Marketing?
Sean Murphy – There are a couple ways of looking at that question, but the key question is “where are you at risk.”
For the most part, there comes a point where the technology is more or less functional. At that point, most of your risk is the market risk – finding customers who will work with you. In the last decade I haven’t heard about too many new products where I said to myself, “Wow, I wonder how they did that.”
Most of the risk is adoption risk or market risk, which means that you have to devote time and money to solving that problem. Our rule of thumb is that 20-to-40 percent has to be devoted to customer development – marketing, sales, and business development – because that’s where the risk is.
You can’t stay in the BatCave and continue to add features without contact with real design groups. I think too many startups rely on marketing communications, which is just one part of marketing. Most of these tools you sell with your ears; you’ve got to engage with prospects and have real conversations. Of course, you can’t do that if you can’t get in the door.
Q – So, how do you get in the door?
Sean Murphy – It’s increasingly a problem. For the most part, people who start EDA companies come from the industry and bring their contacts with them, but a founding team’s social capital is important.
One example is Oasys, which arguably may have a breakthrough in synthesis technology. Their early success has been due as much to Rick Carlson and Sanjiv Kaul, and other folks on the team, with deep roots in the industry. Their ability to open doors to potential customers was as important as their technology.
In the last decade it’s become much harder, there are fewer early adopter customers. If you look at the role that a company like Sun played in helping to nurture Gateway, the original Verilog company, it’s hard to find a company playing a similar role today – perhaps ST Microelectronics, perhaps Agilent, they helped Certess quite a bit. But, it’s becoming a hard problem.
Q – Another marketing-related issue: Given the huge effort required to publish newsletters and/or host user conferences, do small companies continue to value non-vendor specific newsletters or non-vendor specific conferences, such as DAC?
Sean Murphy – For a smaller company with less than 20 people–which is probably 80% of EDA firms–contributing articles to a non-vendor specific newsletter can help a lot.
I see a lot of value in the smaller conferences for these firms, especially where most of the exhibitors are in a basic 10×10 booth. For example, DVCon, the International SOC Conference, or the EDA Tech Forum events are primarily basic booths.
These events act like “stag hunts” for small firms, allowing them to create a critical mass that can attract customers for technical and business conversations. Customers evaluating new products want to see who is behind the company, because how well that team performs will determine whether the product will be a good bet. With a new product you can’t separate the technology from the team that developed it and will be supporting you.
I’m a huge fan of these smaller conferences. They’re very cost effective. You can have great conversations and make good contacts. You also learn how to get your point across in a short demo or a few minutes of conversation.
I was more optimistic about DAC two years ago. DAC started as a community of practice for design automation folks from the larger firms. But it’s increasingly academic in focus: there is a very real risk it becomes a second ICCAD. Still a valuable conference, but much more academically focused.
I went to a one-day conference recently called “Startup Lessons Learned.” There were about 300 people in the audience, and perhaps another thousand watching the live video that was streamed to more than 60 locations. The video was also recorded and available for playback the next day. Everyone posted their slide decks, so that it kicked off a conversation and shared learning that had a wide impact.
That’s what conferences are going to look like going forward. Somebody in EDA is going to figure that out and will move the ball forward in this area. It’s fundamentally a global industry, where these kinds of collaboration models are needed.
Q – How does a company conclusively prove a substantive ROI for big marketing campaigns?
Sean Murphy – For smaller companies, it has to lead directly to revenue or testimonials – things that are unambiguous indicators of customer ROI. You can look at lead generation, things like bingo cards, website visits, or email inquiries – but if these don’t turn into opportunities and then into sales, a small company cannot survive in this economy. For the smaller EDA firms, marketing has to be clearly connected to revenue.
There comes a moment in a roller coaster ride when everything seems to come to a stop for an instant: you are just cresting the top of the rise and the amusement park is spread out all around you. Time stands still for a moment that seems like it might last forever. And then slowly, but with increasing speed, you start to return to the ground.
I think the Design Automation Conference (DAC) reached that peak experience somewhere between 2000 and 2005. Complemented by a functioning trade press–when there were still folks earning a living as journalists covering the industry–and a certain amount of relief that the dotcom meltdown had spared the EDA industry, the conference still thrived.
News can be sorted by region. See http://www.skmurphy.com/services/knowledge-portals/ for details.
Patrick Groeneveld is the CTO at Magma and the Vice Chair in 2011 of the Design Automation Conference. He also chairs the DAC Strategy Committee for 2011 and he has asked me to take part, representing user and startup concerns in the planning process.
My objective is to foster an exploration of some of the critical issues facing the industry and to suggest some possible roles that DAC can play in addressing them.
I believe that conferences and other face to face meetings are essential for establishing the trust necessary for key stakeholders and thought leaders to collaborate on common challenges.
I think that the EDA landscape has changed significantly in the last five to ten years and DAC has yet to adjust:
- The rise of global teams as the default vehicle for product design and development. Designs never sleep: continuous configuration management and design dashboards are replacing face to face status meetings and Power Point decks. See also:
- Customers are increasingly relying on outside service firms for significant aspects of the product development process. EDA services revenue may be as large as EDA software revenue.
- Clearly imminent is a transition to cloud computing and SaaS models, whether at larger customers on virtualized datacenters or at smaller firms relying on third party cloud computing suppliers.
I welcome your suggestions for how DAC can assist small firms and working engineers. I am specifically interested in your opinion on:
- What are the significant problems or emerging issues that DAC should foster conversation and collaboration to address.
- What can DAC do to better serve the smaller innovative firms.
- What can DAC do to enable innovative engineers to compare notes on current challenges. How do we recapture the roots of the conference as a community of practice where engineers share lessons learned around real design and product development challenges.
Please use http://www.skmurphy.com/contact to reach me.
- “Opportunities for Serious Conversation at DAC 2009“
- “Impressions from DAC 2009 Panel: Tweet, Blog, or News”
- “DAC 2009 Blog Coverage Roundup“
- “EDA Chiefs Hazard No Guesses on 2010 Market“
- “Getting Back to Growing the Pie in EDA“
- “Growing the Pie in EDA: As Revenue Shrinks So Does Analyst Interest”
- “Growing the Pie in EDA: Add Matlab“
- “DAC 2010 Blog Roundup“
See also comments left on an earlier version of this post at http://www.eetimes.com/electronics-blogs/other/4208859/Seeking-input-on-DAC-s-strategy
I am delighted to be able to return to EE Times as a regular columnist/blogger after a sixteen year absence. Richard Wallace, now blogging at “The Next Silicon Valley“, asked me to write “Nickel Tours of the ‘Net” which cataloged the impact of the Internet on Electronic Design as websites first started to become common in 1994. And now Junko Yoshida has asked me to look at innovation and entrepreneurship in the broader electronic systems design ecosystem.
Here are the kinds of insights that I hope my “Entrepreneurial Engineer” blog on EETimes will provide:
- Perspective on technology innovation.
- Analysis of business strategy for emerging markets.
- New models for global teams and multi-firm collaboration that are predicated on incessant collaboration among experts.
- Perspective on the impact of communication and pervasive connectivity in creating new business models.
- Insights from pioneering engineers on how new computing paradigms are enabling new models for how they invent.
- Interviews with entrepreneurs sharing lessons learned from their successes and their setbacks.
My first post, “An Interview with Paul van Besouw, CEO of Oasys Design Systems” is now up. Here are some excerpts:
I recently had the opportunity to sit down with Paul van Besouw, CEO of Oasys Design Systems, and interview him on lessons learned from his entrepreneurial efforts at Ambit and Oasys. I have added hyperlinks where I felt they would provide context. […]
Q: What are the two or three things that you have been able to accomplish that you take the most pride in or satisfaction from?
We created a new technology with a small team, and little funding. At first, we were completely self-funded. We rented a small apartment where we spent about a year just coding everything from scratch. Later, we received some seed funding from several EDA-savvy angel investors, which allowed us to move into a “real” office.
We had a working prototype by 18 months to show other angel investors, which allowed us to secure a bit more funding. I was able to attract the attention of some of the best people in the industry. It took some convincing, but I was also able to attract Joe Costello‘s attention. He is now a member of our board of directors. […]
Q: What development, event, or new understanding since you started has had the most impact on your original plan? How has your plan changed in response?
Venture capital for EDA is pretty much non-existent. This was a new reality and we were forced to do things differently. We are working with less money and fewer engineers on a longer development time-line than we would have if we had started Oasys 10 years ago.
Q: Any other remarks or suggestions for entrepreneurs?
[…] What makes EDA both interesting and challenging is that it is not only about the software. In the end, you are building software to build hardware. You have to start with insights into both and learn a lot more along the way. In many cases it is the experience of what does not work that really allows you to focus on the things that do work. EDA software is built on a technology foundation surrounded by algorithms. Starting out, a lot of time is spent on finding out what does not work. There are many details that need to be incorporated to enable your technology to work in an actual production flow.
Starting with a great technology is not sufficient.
Oasys has announced deals with Renasys, Xilinx, and Juniper this year and is poised to have a significant impact on the EDA industry. Go ahead and read the entire “Interview with Paul van Besouw, CEO of Oasys Design Systems“
Kurt Keutzer was interviewed June 8, 2010 on the DAC website and he had a number of interesting things to say about engineering and entrepreneurship. What follows are some excerpts but it’s worth reading the entire interview. I have added several hyperlinks for context.
Career advice he gives his students:
- I think that every engineer needs to realize today that fundamentally they are a corporation of size 1. There’s no lifetime employment and a career is no longer a simple matter of riding the escalator in a big company. Individual entrepreneurship is a requirement, not an option.
- Every engineer needs to know how to assess the value of the technology they are working on. They need to know the difference between a technology, a product, and a market-maker.
- To do this they need to know how to identify a market, size it, and segment it. They need to understand the difference between technological advance and creating customer value, and that customers will pay for value and not, per se, technology.
- To understand this they have to be able to take a step back from technology and see the world through the eyes of the customer.
- In terms of career directions my advice is go where the growth is. In Foster’s classic S-curve [from “Innovation; The Attacker’s Advantage], areas of technology tend to go through long fallow periods in which not much progress is made. Then there’s a period of explosive growth. Then there’s another long fallow period. You want to be right around the inflection point of explosive growth. Putting a lot of effort in an area, either too early or too late, will not yield results comparable to what even a modest amount of effort will yield when invested at the right time.
How would he apply technology S curve analysis to EDA?
- I wish I knew. EDA seems to be experiencing one of its longest plateaus in its history.
- EDA and the semiconductor industry seem to be in what could be called a “non-virtuous cycle” (i.e., a vicious cycle). New generations of EDA tools are not improving individual productivity very dramatically even as Moore’s Law continues. So the cost of building chips, of which the principal component is human capital, has risen exponentially. This high cost has led to fewer and fewer leading-edge designs each year. This means that EDA companies must charge the leading-edge customers more and more to keep their revenues up. This means the cost of leading-edge design increases further. It’s a downward spiral.
- FPGA suppliers have created another “non-virtuous cycle.” FPGA makers seek to control their own destiny by giving away tools for free. There are two problems with this.
- The tools FPGA vendors give away aren’t very good so designers aren’t very happy with the flows. For example, I can’t get my students to use FPGAs anymore if they have the alternative to use software-programmable standard parts.
- Because the tools are free, third-party tool companies can’t get a foothold to provide better tools. I believe that poor tools and design flows is one of the biggest inhibitors to the growth the FPGA industry.
Update June-23-2010: Paul McCllelan offers this perspective on what’s holding EDA back in his “DAC 2010 Retrospective”
EDA is still somewhat stuck in an outmoded style of design that assumes the chips are designed from scratch and then someone writes some software to run on them. In fact much of the software already exists: software generations are 10 times as long as chip generations, and chip design is increasingly about IP assembly rather than efficient design from scratch. I continue to believe that this block-level is an interesting choke point, with the potential to generate a virtual platform for the software developers and testers, and the potential to turn the design rapidly into an FPGA or SoC. But the tools don’t yet exist.
Here is my roundup of blog posts about the 2010 Design Automation Conference. You can also follow the #47DAC hashtag on twitter for breaking announcements during the conference. Last year’s roundup is available a DAC 2009 Blog Coverage Roundup.
Original intro: If you write a blog post that reviews an event, a day, or DAC 2010 as a whole with some substantive commentary before the end of July I will include a link to it. Please leave a comment to let me know if I have overlooked or incorrectly categorized anything.
Preparing For 2010 Design Automation Conference
- Gary Smith “What to See at DAC 2010” (PDF)
- John Busco “Vendors to See, Vendors to Overlook”
- John Cooley “My Cheesy Must See List For DAC 2010“
- Gabe Moretti “Gabe’s DAC 2010 Preview“
- Brian Bailey “Brian Bailey’s Must See List For DAC 2010“
- John Busco “Pre-DAC EDA Gossip and ‘User Evaluations’“
- Bill Murray “EDA Technologies to Watch Out for at DAC 2010” (PDF Reliquary h/t Jasper)
- Daniel Payne “What I Am Seeing at DAC 2010“
- Harry Gries “Where in DAC is Harry the ASIC Guy?“
- Ed Sperling “Extension Media Road to DAC 2010 Videos“
- Karen Bartleson “Conversation Central Back at DAC 2010 and On-Line”
- JL Gray “My Personal Must-See List for DAC 2010“
- Anne-Francoise Pele “EDA Design Line What’s New List for DAC 201o“
- Srinivasan Venkataramanan “Pre-DAC Round-Up of Verification Technologies“
- OVM “OVM at DAC 2010”
- Very interesting lineup of talks. If these practical problem-focused sessions can’t make the regular program DAC may slip further into a purely academic conference.
Note: I am worried that the default DAC website links will break in less than a year, they are tied to the top level DAC site not a DAC 2010 encoding. If anyone knows the permalinks for the DAC sessions please let me know. If you look at the DAC 2009 Blog Roundup the 2009 DAC sessions had a year encoded in the URL and they all still work.
Update: https://dac.com/content/47th-dac is now the home for the content
- Design For Manufacturability Coalition Workshop (includes links to presentations)
- DAC 2010 Kickoff Reception
- Sunday Recap
- Keynote: From Contract to Collaboration: Delivering a New Approach to Foundry
- Richard Goering “GlobalFoundries CEO Calls For New Foundry Model“
- “Gary Smith EDA: Trends and What’s Hot at DAC”
- Mike Sottak “Gary Smith on What’s Hot“
- Jason Andrews “What’s The Best Way To Reduce SoC Development Costs?”
- Monday Recap
- Management Day
- Ron Wilson “Heard at DAC: How To Organize a Global Design Team“
- Richard Goering “SoC Design Managers Cite IP Integration Challenges“
- Richard Goering “What Changes When SoCs Move To 40 nm“
- Panel “Is the FPGA Tool Opportunity an Oasis or a Mirage?”
- Panel: Silicon Realization Luncheon
- Richard Goering “Users, Partners Outline Mixed-Signal Silicon Realization Challenges“
- Tuesday User Track Poster Session
- Aveek Sarkar “From User Track DAC 2010“
- Birds of a Feather: MEMS@DAC
- Jim Hogan “MEMS @ DAC 2010: Ready to Cross the Chasm“
- Tuesday Recap
- Grant Martin “The Return of the Platform“
- Keynote: Echoes of DACs Past: From Prediction to Realization, and Watts Next?
- Jack Rosenberger “The Future of Electronic Design Automation, According to IBM’s Bernie Meyerson”
- Richard Goering “DAC Keynote 2: Why Cloud Computing Is Inevitable For EDA“
- Nicolas Mokhoff “DAC: IC Design Bound For Cloud Computing“
- Panel: “3D Stacked Die: Now Or The Future?“
- Nicolas Mokhoff “Disruptive 3D Vias Will Follow Applications“
- Panel: “Lucio’s Litmus Test: Is Your Startup Ready For the 21st Century?”
- Phillipe Faes “Is EDA Ready For The 21st Century?“
- Panel: “Does IC Design Have a Future in the Clouds?”
- Richard Goering “A Reality Check on Cloud Computing For EDA“
- Rean Griffith “Above the Clouds: A Berkeley View of Cloud Computing” (2009) [PDF]
- “A Decade of NOC Research: Where Do We Stand?”
- Grant Martin “Snatching Victory for NOCs From The Jaws of Confusion“
- Wednesday Recap
- Keynote: “Designing the Motorola Droid”
- Richard Goering “EDA Gets Wake Up Call From Motorola Droid“
- DAC Embedded/Soc Enablement Day Track
- Richard Goering “Intel’s Gadi Singer: Applications Drive New Era Of SoC Design“
- Panel: “What Input Language Is The Best Choice For High Level Synthesis”
- Richard Goering “What Language is Best For High Level Synthesis?“
- Paul Lindemann Video “47th DAC Closing – Bagpipes Play Amazing Grace“
- Peggy Aycinena “DAC2010: House of Glues“
- Dan Holden “Innovation or Obsession? A Retrospective on Electronic Design“
- Frank Schirrmeister “Maybe This Time DAC 201 is the DAC of System Level Design“
- Stan Krolikoski “UVM at DAC“
- Daniel Nenni “My #47DAC Experience: Clash of the Foundry Titans!“
- Paul McClellan “DAC Retrospective“
- Ron Wilson: “Heard at DAC: Is Workflow the Next Frontier for EDA?“
- Ron Wilson: “The Question on Everyone’s Mind” (“…the question of the week was what on earth Cadence means by EDA360.”)
- Steve Schulz “Analyzing Industry Trends Through The Lens Of DAC“
- Karen Bartleson “A Non-Standard Report on the 47th DAC“
- Chris Wilson “Formal Verification is Dead, Long Live Formal Verification“
- Gabe Moretti “DAC 2010 Report From The Floor“
- Jin Zhang “My DAC Journey: Past, Present and Future“
- Vendor Profiles
- Daniel Payne “My Trip Report for DAC 2010” (14 profiles)
- Ben Freedman “DAC 2010 Videos” (10 profiles)
- Joe Hupcey’s interview series comes the closest to an actual booth conversation and was the most refreshing and insightful set of videos I saw from DAC:
- Graham Bell “EDA Cafe DAC 2010 Vendor Video Profiles” (51 profiles)
- John Blyler “Video from DAC, E3, Arecibo“
- Chip Estimate TV “IP Supplier Talk at DAC 2010” (45 profiles; note: requires a Microsoft Silverlight install)
- 3D Design
- Rahul Deokar “DAC 2010 – A Coming Out Party For 3D-IC Design“
- Attendance Down 25%
- DAC “47th DAC Announces Preliminary Attendance Numbers“
- Dave Orrechio “DAC 2010: Smaller Crowds But Interest in FPGA Design Remains High“
- Olivier Coudert “DAC 47th Digest: What You Missed (Even If You Were There)“
- Daniel Payne “DAC47 Attendance Down 25%“
- John MacDonald “Off To The County Fair“
- John Cooley “DAC Exec Committee caught double counting 1,554 attendees”
- amends earlier http://www.deepchip.com/wiretap/100628.html
- Social Media
- Paul Lindemann “Feels like mostly media types & marketeers tweeting about #47dac. Any practicing engineers finding Twitter useful yet?”
- Paul Lindemann “Twittering About DAC“
- Lori Kate Smith “Social Media @ DAC: Role of Journalists, Alcohol and Print vs. Online“
Current count: 81 posts.
We are working with a semantic technology firm to develop a new portal that will track EDA related blog posts and other content announced via an RSS, Atom, or other feed protocol . Our goal is to provide a richer level of aggregation and analysis than an RSS reader with 200 feeds offers today (see for example my list of 238 in my July 11, 2009 post “EDA Bloggers 2009“).
This is not intended to compete with any advertising supported sites, it will be a subscription service that will allow you to keep track of new blogs (including micro-blogs like twitter) and new blog posts on an ongoing basis.
If you are interested in tracking blog posts and new announcements in the design automation arena, I would like to schedule a short call to get your perspective and feedback on our plans. You can use the contact form to reach me by phone or E-mail.