VC, one of many, takes shine to EDA Industry: Rockefeller family fund part of $300M-plus EDA venture capital infusion in last 18 months - Design Strategies - Brian Ascher - Interview

Electronic News, Feb 11, 2002 by Gale Morrison

Venture capitalists have made their own flight to quality in the new century. An incomplete and unofficial tally--no one is independently tracking this--shows venture capitalists have poured well over $300 million into EDA startups in the last 18 months. Just last week Monterey Design Systems Inc. announced it had closed another round of funding to the tune of $20 million.

Of course, part of the explanation for the venture capital spigot-turned-fire hose is the positive feedback loop that results from the extremely warm reception some of these same companies IPOs received in late 2000 and throughout 2001. Venture capitalists like few things more than a ready and waiting investing public.

Electronic News talked with one such venture capitalist, Brian Ascher. Ascher is an associate with Venrock Associates, the venture capital fund of the Rockefeller family and other limited partners. Venrock's roots go back to the 1930s when Laurance S. Rockefeller funded what was the one of the highest-tech opportunities around: aerospace. The fund became formalized as Venrock and entered high tech as we know it with its 1969 investment in a small Santa Clara, Calif., company called Intel.

Ascher and Venrock have taken a strong liking now to EDA. The fund recently participated in Atrenta's $11.2 million series A round of financing, having led an earlier $8 million round in 2001.

Electronic News talked with Ascher about what makes EDA attractive, among other things. Here is an excerpt.

Electronic News: What do you find attractive about investing in EDA?

Ascher: Here we are, coming through this burst bubble of dotcom mania, and Venrock showed great restraint. We stuck to our knitting. And the market is starting to remember what technology investing is all about. It's about proprietary technology and competitive advantage.

In contrast to a lot of companies, EDA has a proven large market and business model. That is, you know who the customers are; you know they have budgets. And they need the product, now more than ever.

We can see the ever-greater chip complexity and the shorter product life cycles those chips have. That means you have to catch errors in the design process earlier and earlier. All of this said, EDA was looking like a market that's worthy of investigation and investment.

Electronic News: Why is that?

Ascher: It's a business model that is quite attractive from an investment standpoint because it doesn't take a ton of investment capital. Not like something that requires consumer marketing, or communications where it's going to cost $10 million to build the equipment to show customers.

It can be capitalized modestly, and yet the company is still able to develop a great product and sell it.

Electronic News: What is it about Atrenta in particular you like?

Ascher: With Atrenta what we really like is that its product fit so well with the market's need for reducing cycle times, and it really facilitates the trend toward larger design teams and greater inter-company collaboration ... Plus they've got a great team, a truly experienced team.

Electronic News: How did you find them?

Ascher: I was introduced to them by a man we had both come to know, Amit Kumar. We have no formal relationship with him, but I have always respected his judgement. He mentioned Atrenta to me six months before I actually met them. He told me what they were up to, that they were still working on a few milestones, and I was really intrigued by the customer traction I saw-a dozen truly blue-chip customers--among the best names in the semiconductor industry--and we could speak to them. We could ask their customers what they thought of the team, all of that.

What I kept hearing over and over again was, "The time has really come for a solution like this." The industry needs a platform that will allow the internal hand offs to occur ... and that increases the chances of catching the mistakes earlier and earlier.

Everyone just held the team in the highest regard. I'm here to tell you, you don't always hear that. And it's all been true to their billing. They are just consummate professionals and extremely well regarded.

Electronic News: Do the recent successful EDA IPOs impact your decisions?

Ascher: In 2001, we saw quite a few successful IPOs in the EDA space. Their valuations are quite high, relative to other sectors. The markets have definitely validated what we believe--that these are real businesses that can sell a product and make a profit and delight their customers.

Electronic News: So you may make further investments in EDA?

Ascher: We're certainly looking at quite a few other EDA companies ... We are also investing directly in chip companies, mostly fabless chip companies. We've invested in Polaris, Onyx, Zettacom--companies generally aimed at the communications chip market.

Electronic News: Thirty-three years later, are you still an investor in Intel?

Ascher: Actually, those things get distributed out to our limited partners. I'm sure there are members of the Rockefeller family who still hold a fair amount of Intel stock. But we still have good contacts at Intel. Ultimately we allow the investors to receive the distribution of stocks.