The Global Semiconductor Alliance (GSA), has formed a Capital Lite Working Group whose main aim is  helping new semiconductor start-ups reduce costs, raise equity financing and improve their chance of success by providing new business models, partnerships and tools.   

The Group is a result of multiple venture capital (VC) discussions that took place during GSA’s Emerging Company CEO Council meetings in 2011.  The mission of the working group is to develop, promote and execute expanded investment models that can be used by semiconductor start-ups to innovate and prosper.  

The Group is not analyzing the current funding problem in order to provide real, workable solutions that re-attract venture investment to the semiconductor industry.   Since the group’s inception, the industry has rallied around its effort as it recognizes that venture-backed innovation fuels the competitive pace of the industry and ultimately provides a core element of growth. 

The Group has gained significant momentum over the past few months with the release of a white paper entitled, The Capital-Lite Semiconductor Model: Revitalizing Semiconductor Startup Investment and a panel session at the 2011 GSA Semiconductor Ecosystem Summit.  More than 30 member companies comprise this group including representatives from the semiconductor, EDA, foundry, VC and banking segments.  

Venture investments in semiconductor start-ups has seen a relative decline as the overall investment cost and time-to-market has made the risk/reward appear less attractive. GSA’s research department cites the number of Seed and Series A semiconductor (i.e., fabless and IDM) funding deals has decreased significantly since the downturn hit in 2008, dropping from 22 deals in 2007 to four deals in 2011.

The average Seed/Series A funding amount has also decreased from $8.7 million in 2007 to $7.0 million in 2011, representing a CAGR of -5.3%.   As a result of the lack of VC investment, start-ups are forced to look at other avenues for financial support.

The group’s first objective was to identify ways to reduce capital requirements for semiconductor start-ups while providing venture level returns for investors.   To support this, the group is developing a toolkit comprised of various expanded investment models and a process for implementation that will be vetted by industry participants and put to work, enabling a new portfolio of innovative start-ups.   
 
To learn more about the GSA Capital Lite Working Group, visit: http://www.gsaglobal.org/capital_lite_working_group/.