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Ciclon Semiconductor acquired by TI

I've been traveling this week, so this post is coming one day late.  Yesterday, Ciclon Semiconductor was acquired by TI.  Ciclon manufactures MOSFETs, components used to build power supplies.  Ciclon's technology allows power supplies to be made more efficient (less energy loss, and therefore less heat given off) and in a much smaller size with fewer components (cheaper, more reliable).  The purchase price of Ciclon wasn't announced, but suffice it to say that it was a very nice multiple on the total amount of capital invested in the company.  TI is serious about selling these products as a full information page was prepared before the announcement.  I invested in Ciclon while I was at Venrock.

The Ciclon story is very instructive for today's entrepreneurs.  The CEO, Mark Granahan, identified Ciclon's core technology and orchestrated a spin-out from Agere where it was initially developed.  Mark was very scrappy and negotiated a very attractive deal with Agere.  This technology and equipment gave Ciclon a head-start on product development and allowed a Series A financing to happen in a market segment that is generally viewed as being low-margin and commoditized.

However, despite having two successful financings, Mark kept the company with a very frugal spending plan.  They leased space from Ben Franklin Technology Partners at Lehigh.  This gave them affordable office space and access to additional resources.  As they developed products and captured initial design wins, Mark built a very strong management team without over spending.  Although their customers are not yet announced, I can tell you that they have design wins in very visible products from some of the leading consumer electronics and computer vendors.  The company was able to get to revenue very quickly, including leveraging some legacy products from the Agere spin-out to lower their cash burn.

Some key takeaways from the Ciclon success story:

  • A very clear definition of the market opportunity, validated by customers at the start of the project.  It helped that they were targeting a commodity market with a disruptive technology
  • Defensible technology, with a roadmap to extend it.
  • 'Unfair advantage' derived from Agere spin-out.  Every start-up needs some key advantage in order to counteract the fact that they are a new company with relatively little money
  • Maintained frugal mindset despite initial funds raised and commercial adoption
  • Hire a world-class team.  Even a company like Ciclon faced many challenges along the way.  Their team was strong enough to overcome technical and manufacturing challenges that might have derailed weaker companies.
  • Get to revenue quickly, even if it is with an interim product.  This helped offset some of the cash burn, which benefits both the investors and the entrepreneur.

Congratulations to Mark and the team at Ciclon.  I am sure that they'll be very successful getting these products further into the market while at TI.

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