DVCon 2009 - Executive Panel

Lauro Rizzatti: EDA in Europe

by Peggy Aycinena

The principle subject of the DVCon 2009 Executive Panel in San Jose in February was "EDA: Dead or Alive?"

The seven speakers on the panel were unequivocal in the answer: EDA is definitely alive, because it’s the single most important pre-requsitive for progress in electronics. The electronics industry will never die and, therefore, neither will EDA.

In the weeks after the event, I spoke at length with all seven panelists individually to follow up on various topics discussed at DVCon. This article recaps my conversation with EVE executive, Lauro Rizzatti. Links to the rest of the conversations in the series can be found at the end of this article.

EDA in Europe ...

Lauro Rizzatti – It’s no surprise that things are not going well in Europe. Interestingly, EVE is one of the largest EDA companies in Europe. There are many companies below $10 million in revenue, but none except EVA is above $20 million. Even at EVE, we’re expecting 2009 to be a tough year, however, based on this quarter. We’ve had four big orders delayed, one in Asia, one in Europe, and two in North America. These were not insignificant orders and were not cancelled, only delayed. For a small company, however, cash flow is fundamental.

Over the last several years a number of EDA companies in Europe have been acquired. Synplicity bought Hardi, now Synopsys, and Synopsys bought the Chip-it tool from ProDesign. SpringSoft bought Certess last month, and MIPS bought ChipIdea, a Spanish company, two years ago.

Then there are a number of companies that have gone out of business, including TransEDA, Celoxica, and Esterel DA most recently. However, there are still a number in business. Here is my list, with the technology niche indicated:

In France: EVE (emulation), Arteris (Network on Chip), CoFluent (ESL), Magillem (IP/Consulting), Avertec (Static Timing), Dolphin (AMS), Design'n'Reuse (Web/IP), Infiniscale (Analog ESL), PLDA (IP)

In Italy: Yogitech (IP)

In Germany: OneSpin (Formal), Concept Eng. (Schematic), MunEDA (AMS/DFM)

In Ireland: Duolog (IP/service)

In Belgium: Easics (IP/Service), QStar (Test)


Q – Are there special opportunities in EDA in these economic times?

Lauro Rizzatti – It would be great if we had the financial strength to consider acquisitions, but companies want cash. Cash, however, is at a premium and we would have to give away equity in the range of 5 to 10 percent, but the investors would disagree. The opportunities are definitely there, however. It would be great to have the financial strength to look seriously at it.

There are also a number of startups that are interesting. We think it would be a great time to merge, but the same concerns apply. However, it’s a good time for the big companies – Synopsys, Mentor, Cadence, and even SpringSoft – to consider acquisitions.

Q – How does a small company in Europe survive in these times?

Lauro Rizzatti – Certainly through cost cutting and controlling travel expenses, and whatnot. [Meanwhile], the French government is supporting local enterprises through 2 major avenues:

  1. Through R&D dollar reimbursement. The first year you are in business, you get 50 percent of what you spend on R&D back. It’s 40 percent the second year and 30 percent the third year.
  2. Through institutions controlled by the government, you can get loans at zero interest. The terms are approximately 3 to 4 years. At the end of that time, if your business closes, the money is lost. This is the way the government takes risks by supporting innovation and business initiative.

I’m not aware of anything like that in America. That’s why I asked Bob Gardner from EDAC, who was in the audience at the DVCon Panel, if EDAC is planning to do anything about the U.S. Government Bailout money.

I think somebody in EDA should be doing that, exploring ways to have some small portion of the bailout money invested into EDA R&D. If startups could have just have $1 million – and in the big scheme of things, that’s really nothing – you could start an entire company with that amount of money.

Q – Can you get $1 million from the French Government?

Lauro Rizzatti – It’s not that easy. It’s not just a case of submitting a form and hoping someone will come by with a check. People will do due diligence, they’ll look at your books, how you’re doing, your roadmap, and your future development plans. Only when they believe you have a viable business plan, with the risks clearly laid out, will they give you the money.

Q – If you were the one deciding who to invest in, how would you go about it?

Lauro Rizzatti – I would impose rules and require a credible business plan with a complete analysis. I’d ask, who are your competitors, do you have a business plan that proposes an answer to your competitors. If your company is only offering a "me-too" approach to the problem, the money will be lost. But if you can be convincing, why not?

In the old days, we went to banks with a roadmap for our company and got funding that way. To approach a bank with your business plan today is a zero success approach. In fact, EVE did get money from bank in the past, but now we do not get any money from American banks. The risk is too high and the whole banking situation is in disarray.

Q – Do you see the French Government acting as a VC using the model you described earlier?

Lauro Rizzatti – Yes, but they don’t sit on the board of directors of the companies they invest in, which is a good thing. They wouldn’t have a clue what to say. They give companies money, but not really huge amounts. Eventually, everyone knows a company has to stand on its own two feel.

Q – So what about getting funding from traditional VCs?

Lauro Rizzatti – I saw recently that Jasper just received a $7 million round of VC funding. I was very surprised. If you had asked me before the announcement if Jasper could raise the money, I would have said no, that it was highly unlikely. I’m not sure what their argument was, but $7 million is a lot of money!

Q – Do you think the VC funding channel is viable anymore?

Lauro Rizzatti – It might be, but just somewhat.

Q – Several years ago, I heard Lucio Lanza comment that no one should be bragging about multiple rounds of funding. He argued that was a sign of a company’s failure to thrive.

Lauro Rizzatti – I completely disagree. That is too extreme a view of the world. If you go through 5 or 6 rounds of funding, maybe there is some truth there, but a first or second round of funding is just the opposite. You’re showing the world that you trust the world, and the world trusts you.

Q – Does the investment community in Europe support IPOs in EDA?

Lauro Rizzatti – Certainly there are fewer IPOs in Europe than in America. Although today, the moment is bad for IPOs everywhere. But years ago, yes – there were IPOs in the U.S., but not in Europe. Celoxica is the only one I can think of.

Q – Do you think EDA should be an entirely private industry, without any publicly traded companies?

Lauro Rizzatti – Someone told me recently there are 500 companies in EDA. If only 5 of those are public, that’s hardly having too many publicly traded companies in the industry.

Q – Yes, but those 5 companies have 85 percent of the revenue.

Lauro Rizzatti – Well, this is the bigger problem. It’s very unhealthy. Of those 500 companies in EDA, probably 400 will have a very short life span, which in the end, plays against the whole industry. The perception is not good, and then the VCs have a reason to think twice before giving any money to EDA startups. It starts a chain reaction.

Q – Does the social net in Europe affect how EDA companies operate there, in a place where there are no layoffs?

Lauro Rizzatti – That’s not really true. It is possible to lay someone off in Europe, but you have to prove the candidate is not producing. You can’t just make the statement. You have to provide documentation to prove the person, compared to everyone else, is not producing, is too laid back.

Q – What about an across-the-board layoffs, as a cost-cutting strategy?

Lauro Rizzatti – Here in America, it’s too easy to lay people off, and it’s far too brutal. Maybe somewhere in between the two societies, between America and Europe, is the ideal mix. Make it harder to lay off people, but still be able to lay them off if the company can no longer afford to employ them.

Q – How is the EDA industry different in Europe?

Lauro Rizzatti – This quarterly obsession thing in America – if you have just one bad quarter, you’re in trouble. If you have two bad quarters, it’s the death of your company.

Q – There’s a more long-term view of the business cycle in Europe?

Lauro Rizzatti – Most definitely. Siemens, for instance, doesn’t care about the results of any particular quarter. Everything is considered in years, not quarters. It’s an entirely different approach. In America, it’s an extreme. I was actually quite shocked by it when I first arrived. I think it’s just a bit too rough.

Q – Because you think EDA is a longer-term play between investment and reward?

Lauro Rizzatti – Definitely, yes! To design a new emulator, for instance, takes at least 2 years, maybe even 3. And we’re absolutely not unique in this. If you want to do something special, something advanced with a little breakthrough compared to a previous generation of technology, it takes years. A quarter is absolutely meaningless in that setting!

March 25, 2009

Bio ...

Dr. Lauro Rizzatti is EVE-USA General Mananger and Marketing Vice President. He has 30+ years of experience in EDA, ATE, and Telecom industries, where he served in top management positions, product and technical marketing, and engineering. Prior to joining EVE he held various positions in companies such as Get2Chip, Synopsys, Mentor Graphics, Teradyne, Alcatel, and Italtel. Lauro has published several articles and technical papers in the trade press and has presented at numerous international technical conferences. Lauro holds a doctorate in Electronic Engineering from the Universita` degli Studi di Trieste, Italy.

The DVCon 2009 Panel Series …

* Atrenta’s Ajoy Bose & Mike Gianfagna:
Recrafting the concept of EDA

* Javelin Design’s Diana Feng Raggett:
Government funding for R&D in EDA

* Synopsys’ Gary Meyers:
FPGAs versus ASICs

* EVE’s Lauro Rizzatti:
EDA in Europe

* Berkeley Design Automation’s Ravi Subramanian:
Setting the EDA roadmap

* SpringSoft’s Scott Sandler:
EDA dead or alive?

* Calypto’s Tom Sandoval:
Reaching the EDA customer


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