Recently, Gartner fired their EDA research team, part and parcel, with veteran analysts Gary Smith and Daya Nadamuni. Here’s John Cooley’s report on the departure with comments from many industry stalwarts. This takes out the last remaining independent analyst that covered EDA as an industry.
There is a problem in EDA. Small $4 Billion market that is not growing. No financial energy. No IPOs since 2001, very few acquisitions, alarmingly few financings, closure of EDA-specific venture firms like Telos, overall lack of innovation.
As it is, very few people understand the EDA business, and it is much too complex for Wall Street to fathom. There were a few VCs who knew how to invest in EDA – Mike Schuh at Foundation, Lucio Lanza, Jim Hogan and Bruce Bourbon at Telos, Pierre Lamond at Sequoia, and a few angels, most notably, Prabhu Goel. Others who have invested in EDA, like Theresia Ranzetta of Accel who invested in Jasper, don’t really know much about EDA.
Probably one of the best small companies in EDA today is Atrenta, led by Ajoy Bose, a veteran of the industry. Atrenta recently raised a Series D round at a high valuation, but from obscure VCs, and I don’t think any of them understands EDA either. Says something, when all the top VCs sit out on a late stage deal with serious revenues!
Furthermore, if you talk to people inside the industry, many of them cannot wait to get out and do something else!
So what is going on in the industry?
For solving insanely complex sets of technical challenges, the industry doesn’t offer sufficient financial rewards anymore. There was a time when the big 3 players – Cadence, Synopsys, Mentor – used to engage in active M&A, making it worthwhile for entrepreneurs and VCs to invest. Now, Mike Fister is at the helm of Cadence, and brings with him the NIH philosophy of Intel. Mentor is struggling. Synopsys doesn’t feel the pressure to acquire like before. Thus, the innovation machine has stalled. Add on top the fact that Cadence decided to pull the plug on Telos, their Venture arm, and one of the very few EDA investors is now dead.
If you read John Cooley’s report on Gary Smith, it appears that Cadence and Synopsys got pissed off with Gary, and pulled the plug on him too. Well, anyone who has operated in an oligoply, knows, that the media for the industry is completely dependent on the 2-3 large players who dominate the market. In Mechanical Design, the media sucks up effectively to Autodesk, PTC, Dassault, and as a result, survives. There is very little startup activity, and 95% of the coverage goes to larger players. Gary Smith, however, chose to support those who innovated. Magma, the challenger. Startups. And he pays. It also appears that the financial infrastructure around the Design Automation Conference (DAC) is also precariously waiting to collapse, especially with rumours that Cadence will pull out of the conference.
All this should be alarming for the trillion dollar semiconductor industry. If EDA, as an industry, collapses, or becomes a monopoly / duopoly, the innovation in semiconductors will also stall. I had written a few pieces earlier on the Future of EDA. Here they are again:
And here are two pieces on two growth areas within EDA that are still receiving some funding:
DFM Vision – Clearshape, Blaze, Aprio are working on this area.
RTL Hand-off and Predictive Prototyping – Atrenta could crack this code.