Matt's Investments Blog

Don't write off the Microelectronics Industry

Matt Mead - 11.07.2010

Find out why we have invested in a semiconductor company, and the criteria we use when assessing the market

At a time when other investors are walking away from deals in the semiconductor space we have just invested in eoSemi (take a look at www.eosemi.com) - a company developing a new timing device based entirely on silicon circuitry.

So what does NESTA look for when we invest in a microelectronics companies?

Capital Efficiency:

Not all Microelectronics companies are hugely capital intensive. Many investors are tarring the whole sector with the same brush and so are not even considering companies even though there are a number of opportunities where companies have cash requirements that fit comfortably within a VC's range.

The UK is a World leader in the development of microelectronics devices, with analogue and RF design being particular areas of expertise, so this is where we expect to see the most promising companies and the highest calibre of management teams. We are looking for teams running companies that are deeply commercial but are genuinely innovative.

Massive market:

Companies that are dependent on the creation of a new market or a new standard being adopted add considerable risk to an investment. We are particularly interested in those companies that can access the existing market

Timing:

The pace of the industry is relentless and the market is phenomenally large. Whilst it may be out of fashion to fund these companies now we expect that in 2 - 3 years time the industry will be rebounding and M&A activity will be on the rise. The timing of our investments should mean that our portfolio is well placed to take advantage of a much brighter future.

Syndication:

Involving other investors like Capital E and Enterprise Ventures who, like us, really understand the sector and early  stage businesses

Whilst there is no denying that it is a tough market for microelectronics companies but there will be some very big winners growing out of the UK and Europe's exceptional expertise in this sector. Whilst other investors wait on the side lines NESTA has every intention of growing its portfolio.

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