Crowdfunding Components & Risk Assessment

As the semiconductor industry has consolidated in the past 10 years, entrepreneurs have been forced to think differently about how to fund a great new idea. Venture capitalists, as we know, have cooled on the industry's ROI, to say the least!

But, not surprisingly, at that end of the design and supply chain, novel approaches have filled the VC gap because great ideas abhor a vacuum. Friends and family have become significant investors in startups. Often, entrepreneurs simply fund the endeavor out of their own pocket, working on their ideas at night or moonlighting to make ends meet.

But technology today offers a new avenue, crowdfunding, courtesy of web-based companies such as Kickstarter and Indiegogo.

They came, they saw, they invested
The idea is simple: Put your idea online and entice the crowd to fund it, often in exchange for early access to the product.

Our industry's most famous example so far is Andreas Olofsson and his team at Adapteva, which designs powerful multicore DSP engines from a small office on the old Battle Road in Lexington, Mass.

Adapteva had already churned out successful designs when it wanted to go a step further, but being a startup, needed additional funding. Into the Kickstarter crucible Olofsson dived, and shortly, he'd pulled in more than his $750,000 goal and almost overnight built a new developer community in the process.

Now comes a Harvard-trained biochemist and part-time R&B singer, Elliott Small, who has licensed Georgia Tech patents to try his hand at a smarter, faster lithium-ion battery-charging system.

You get the idea: The dam is about to burst on this.

But getting an idea to prototype in this fashion in one thing -- and one level of risk management.

Scale problems?
How does it scale and how does it ripple down the supply chain? The fact of the matter is, as the semiconductor industry has evolved in the past 60 years, it has built in a rock-ribbed risk-management profile.

Good ideas, when they emerge within companies, are thoroughly vetted by engineering and finance (is there a business case?).

Ideas that don't get traction inside companies often become discrete startups, vetted by experienced venture capitalists, who are often are ex-engineers and former finance guys. And since most buyers are inherently cautious, the startup component-company needs a level of validation from a big customer. That's just another layer of risk assessment for the larger potential market.

Once that happens, everything becomes smooth sailing, overflowing orders and early retirement on warm beaches with little umbrella-festooned drinks in hand. (Yeah, right!)

How much different?
There's little doubt in my mind that crowdfunding will become accepted and more common in our industry in three to five years. But how much more common is the $64,000 question?

This model for our industry isn't the same as it is for consumer segments, where you can get early access to that great fast charger, for example. For one thing, the potential investor-audience is a lot smaller. In Adapteva's case, it was obviously a smaller audience, but investors got early access to the technology as well, but it's big T technology and the lure for developers was unusual and great.

As more and smaller iterative (and no less valid) ideas go the crowdfunding route (relatively simple logic devices, A/D and D/A converters, and other components, MEMs devices, for example):

• How willing do you think the engineering audience will be to support the R&D?
• Will the risk-assessment routine for purchasers eyeing crowdfunded commercial devices be any different than for traditionally developed components?
• What delivery, security, and reliability demands do you think will be required of the innovators?