Management presentation on the complex ecosystem necessary for a successful semiconductor startup. Covers key issues: marketing, finacial, legal, PR, funding, and technology.

1. Ecosystem Environment for Starting a
Semiconductor Company
DesignCon 2008
February 5, 2008
Financial
Marketing PR
Founder
Legal Funding
Technology
The Internet Channel for Semiconductor Entrepreneurs and Investors

2. Startup Ecosystem Panel
Steve Szirom Steve Bengston
Senior Analyst, InsideChips Director, Emerging Ventures Practice,
President, HTE Research
PriceWaterhouseCoopers
Lucio Lanza Glen Balzer
Managing Director, President,
Lanza techVentures
New Era Consulting
Dave Guzeman James Prenton
President, Partner,
Mindpik
K&L Gates
2

3. 2007 World Electronics Markets
2007 World Electronics Markets
Worldwide Markets
WW GDP $48,000B
Total Electronics
100.0%
$1,765B
Semiconductors
14.3%
$252B
Consumer Electronics
8.2%
$145B
Semi Equipment
2.4%
$42B
Semi Materials
2.3%
$41B
EDA 0.3%
$5.6B
Source: InsideChips.com
3

4. Ecosystem: Legal
• Pre-incorporation: employer issues,
NDA/confidentiality/IP issues, founders
agreements
• Incorporation package, form of equity
• Added value
– May have synergistic relationships/network
– Adds credibility for potential investors
4

5. Ecosystem: Technology
• EDA tools and IP core partners
• Design team strategy and formation
– Architecture, circuit design, software, algorithm, compiler
– WW design teams
• China, Taiwan (multimedia, consumer)
• India (software, tools)
• Central Europe (software, algorithm)
• Israel (DSP)
• Russia (algorithm, mathematical)
• Reference design customer partner
• Wafer fab, test, assembly partners
5

6. Ecosystem: Marketing
• Marketing objectives, strategies and tactics
• How big/where is the market today and in five years
– Key customers
– Product definition, segmentation
– Price trends
• Key reference/development customer relationships
• Sales and market forecasts
• Competitive landscape, unique differentiators
• International strategy
6

7. Ecosystem: Financial
• CPA consultant or part-time CFO
(semiconductor experience helpful)
• Accounting firm relationship
– Pre-sales burn rate, sales ramp, break-even,
profitability => P&L, Balance sheet, cash-flow
– May have synergistic relationships/network
– Adds credibility for potential investors
7

8. Ecosystem: Public Relations
• Sets the stage for company’s external image/visibility
– Investors, customers, partners, distributors/reps, others
• Company name, logo and brand
– Memorable, what does it mean, domain available, lasting,
original, craft a unique and visionary story for the new venture
• Web site design and content
– Drives the company image worldwide (big bang for the buck)
• Create and increase the “buzz” level as appropriate for
stage of company
8

9. Ecosystem: Public Relations
• Use “guerrilla” tactics to stretch limited $$$
• Use combination of external and internal
resources
• Combine various elements, have an integrated
marcom plan for various stages of growth
• Think globally, act locally
• Do it right the first time!
9

10. Craft A+ Communications
Financial
Marketing PR
Founder
50 pages
Legal Funding
Business Plan
5 pages
Design
Exec Summary
15 minutes
Short Pitch
2 minutes
Elevator Pitch
Credibility
+
Potential
10

11. Ecosystem: Investors
Funding source
Stage
• “Kitchen table” • Founder(s)
• Seed • FFF, Angels, Incubation
• “A” round • VCs, Corporate
11

12. Key Success Factor: Founder/CEO
• Organize founding team, expectations, share agreements, vision
• Experience (ideal) in development, operations, marketing, and
finance, such as business unit director of mid-large chip maker
• Ethics/integrity, creativity, adaptability, persistence, intelligence,
experienced, moderate ego
• Wisdom to turn reigns over to seasoned management
• Openness in internal and external matters
• Energy and drive to thrive in resource constrained environment
• Act as coach and therapist in early tough going
“Startups fold or perform poorly as a
result of CEO failure more often than
any other single cause”
NEXT
12

13. Top 5 Legal Issues for Semiconductor Startups
James Prenton
james.prenton@klgates.com

14. #5 – Effect of Employment Agreements
ASSUMPTION: I possess all ownership rights to an idea I conceive
or develop.
ASSUMPTION: I own all inventions that I develop entirely on my
own time without using my employer’s equipment, supplies, facilities
or trade secret information.
ASSUMPTION: My employer wasn’t interested in my idea so I can
pursue development.
FACT: Potential investors will carefully examine IP ownership to avoid buying
into a lawsuit. Certain market segments are notorious for litigation against
former employees. When in doubt, seek guidance!

15. #4 - Timing and Form of Entity
Timing:
Dictated by need to memorialize ownership of the business by the founders, sign
contracts with third parties, secure IP ownership in the Newco, adopt and use
incentive stock plans and set the stage for investments.
Delay may result in: (a) dispute among founders (“forgotten founder”), (b)
uncertainty over IP ownership and (c) adverse tax consequences when founders
try to acquire shares at a nominal price (“cheap stock”).
Form of Entity: Corporations over LLC
LLCs – Ease in legal maintenance and can be taxed as partnership (losses and
gains of business flow through the members’ individual 1040 returns). However,
(a) VCs will not invest in an LLC, (b) stock options are not available as
incentives, and (c) cannot be acquired tax-free in a stock acquisition exit.
Corporations – Sophisticated investors will prefer corporate form. Employees,
consultants and advisors will appreciate familiar stock-based incentive plans.
More alternatives for successful exit.

16. #3 - Ensure Company Owns IP
EMPLOYERS. Ensure former and current employers of founders,
consultants and advisors will not have a claim against the
company’s IP.
FOUNDER(S). Individual ownership of idea is not the same as
ownership by the company. Each founder must assign their rights
to the idea to the company.
CONSULTANTS/EMPLOYEES. Ensure agreements with third
party developers and employees expressly requires assignment of
intellectual property to the company.
FACT: Company ownership of IP is one of the key areas investors
will focus on when conducting investment due diligence.

17. #2 - Manage Equity Carefully
Founder Allocation – Difficult to discuss as friends or colleagues. Consider
contributions by each and agree in writing. Assumptions and delays re:
contributions and equity percentage problematic.
Repurchase Right – Ensure shares subject to company’s repurchase right
which lapses over time (vesting schedule). Provides incentive for founders to
remain with the company.
Right of First Refusal – Give company and other shareholders right to acquire
shares in the event of a proposed share transfer. Helps avoid unwanted
“partner” from joining.
Securities Law Compliance – Offering and selling securities highly regulated.
Failure to comply can create liabilities and limit ability to raise capital in the
future.
Avoid Promise to Issue Percentage of Shares. Promises to give certain
percentage of shares to consultants and employees can be problematic. Best
to document and agree in terms of number of shares. Any cloud over stock
ownership will jeopardize the success of a potential fundraising.

18. #1 - Seek Help from Experienced Advisors Early!
Experienced entrepreneurs, lawyers, accountants, consultants and
investors can offer valuable advice to assist in the development of
your new startup.
Many investors rate judgment of entrepreneurs by their choice of
the advisors.
Certain advisors will offer promising startups special arrangements
which may include a combination of reduced rates, fee deferral or
equity ownership.
Silicon Valley: a unique concentration of the key components
necessary for a startup to succeed. Take full advantage of what the
environment has to offer!
Dave Guzeman, President, Minkpik

19. Marketing Chip Startups
Dave Guzeman, CEO - Mindpik
guzeman@mindpik.com

20. Starting Up…
What to do on Day One
Marketing & Sales
Strategies and initial roadmap set by founders and
thrashed out in business plan
Critical to have all six Big-M Marketing functions explicitly
assigned to people
One of the founders should be VP Marketing / Sales
Identify six target customers… call them and share that
with them
Have a plan for achieving financial credibility… why
should customers feel safe betting their companies on
you?

21. Big-M Marketing
Executing the Complete Marketing Function
Driving the Products – Product Marketing
Making the Market – Tactical Marketing
Entering Orders – Order Entry / Customer Service
Creating a Buzz – Promotional Marketing
Working the Technical Community – Technical Marketing
Developing Strategies – Strategic Marketing
Intel at $50M had Product Marketing, Tactical Marketing,
Promotional Marketing, and Order Entry
Intel at $100M had added Strategic Marketing and
Technical Marketing

22. The Intel Startup Model
Sell memory chips to IBM and the Seven Dwarfs
Limited direct sales force – total 12 direct sales people at
$100M – leverage reps and distributors
When you know someone’s home phone number… don’t
advertise to them… call them! Top company salesman
was Bob Noyce
Use Noyce, Moore, and Art Rock (VC) to gain credibility
Marketing & Engineering driven
Extensive publicity campaign
Even at $100M, marketing headcount was still 3 times
sales headcount

23. The Pitfalls
The more earthshattering and revolutionary your product
is, the more important it is to have financial credibility
Don’t skimp on promotional marketing in the early days –
outsource it and buy great stuff
The more complex your product, the more important
product marketing becomes
It takes as long to develop a sales channel as to do your
chip… and costs about the same
Sales channels are driven by relationships… even though
your company is young you need to hire a sales manager
with 20 years of relationships
Customers and contract manufacturers are working to
prevent you from selling proprietary products

24. Build it and they will
come… hahahaha
I don’t know who you are.
I don’t know your organization.
I don’t know your service or product.
I don’t know what you stand for.
I don’t know your customers.
I don’t know your track record.
I don’t know your reputation.
Now, what was it you wanted to sell
me?

25. What has changed?
WWW – the world’s largest flea market
Killed most printed tech publications
Zero printing costs for web-based tech literature
Still have layout costs plus web programming costs
Works well when people know who you are and search by
company name
Disappearance of printed publications has made it harder –
not easier – to get attention
Sales reps are harder to find and much more
expensive to sign
Distributors are disappearing – replaced by CM’s…
contract manufacturers and you need a “Fast Eddy”
to deal with them
NEXT

26. Creating a Sales Presence
Glen Balzer, President, New Era Consulting
glenbalzer@msn.com

27. Creating a Sales Presence
• Avoid Exclusive Arrangements in your
sales channel

28. Creating a Sales Presence
• Avoid Exclusive Arrangements in your
sales channel
• Build Direct Sales only when necessary

29. Creating a Sales Presence
• Avoid Exclusive Arrangements in your
sales channel
• Build Direct Sales only when necessary
• Cause and Convenience – Always reserve
the opportunity to terminate a channel partner
for cause and convenience

30. Creating a Sales Presence
• Avoid Exclusive Arrangements in your
sales channel
• Build Direct Sales only when necessary
• Cause and Convenience – Always reserve
the opportunity to terminate a channel partner
for cause and convenience
• Due Diligence – must be performed
seriously

31. Creating a Sales Presence
• Avoid Exclusive Arrangements in your sales
channel
• Build Direct Sales only when necessary
• Cause and Convenience – Always reserve the
opportunity to terminate a channel partner for
cause and convenience
• Due Diligence – must be performed seriously
• English Language Skill in a foreign market is
not very important
Steve Bengston, Director, PwC

32. DesignCon 2008
Steve Bengston
steve.bengston@us.pwc.com
650 281 9843
© 2007 PricewaterhouseCoopers LLP. All rights reserved. quot;PricewaterhouseCoopersquot; refers to PricewaterhouseCoopers
LLP (a Delaware limited liability partnership) or, as the context requires, other member firms of PricewaterhouseCoopers
International Ltd., each of which is a separate and independent legal entity. *connectedthinking is a trademark of
PricewaterhouseCoopers LLP. SJ_07_0080

33. MoneyTree Total Investments: Q1 1999 – Q3 2007
($ in billions)
$32.0 $28.4
$28.2
$26.4
$24.0
$23.3
$22.2
$16.0
$13.2
$12.8
$11.4
$11.0
$8.0
$8.3
$8.1
$7.5
$7.2
$7.1
$6.9
$6.9
$6.8
$6.6
$6.4
$6.3
$6.3
$6.3
$6.0
$5.9
$5.9
$5.8
$5.6
$5.3
$5.0
$5.0
$5.0
$4.9
$4.6
$4.5
$4.3
$0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007
1999 2000 2001 2002 2003 2004 2005 2006 2007
#
of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Deals
918 1304 1421 1865 2128 2107 1931 1743 1283 1217 1001 974 837 849 687 719 692 735 711 782 709 850 682 832 724 819 783 805 864 935 897 912 850 1000 887
November 2007
PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
Slide 2
based on data from Thomson Financial

34. MoneyTree Total Investments: 1980 – YTD Q3 2007
Annual Venture Capital Investments
($ in billions)
1980 to YTD Q3 2007
$105.1
$120
$100
$80
$54.1
$60
$40.6
$40
$26.4
$23.0
$22.4
$21.9
$21.8
$21.1
$19.7
$14.9
$11.3
$20
$8.0
$4.1
$3.7
$3.3
$3.3
$3.3
$3.5
$3.0
$3.0
$2.8
$3.0
$2.8
$2.2
$1.6
$1.2
$0.6
$0
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
D6
07
Y T 200
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
November 2007
PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
Slide 3
based on data from Thomson Financial

35. Investments by Region: Q3 2007
Upstate NY
New England
$31.5
Northwest $998-14%
12 Deals
$290.6 119 Deals
47 Deals
Sacramento/N. CA
NY Metro
$14.5 North Central $385-5%
2 Deals $111.0 57 Deals
17 Deals
Philadelphia Metro
Silicon Valley
$238.3
$2,485-35% Midwest
Colorado 26 Deals
287 Deals $343-5%
$196.6 45 Deals
24 Deals
LA/Orange County DC/Metroplex
$425-6% $331-5%
Southwest South Central
56 Deals 34 Deals
$134.2 $19.2
23 Deals
San Diego 7 Deals Southeast
$359-5% $353-5%
37 Deals Texas 52 Deals
$386-5%
39 Deals
KAU AI
AK/HI/PR NIIHA U
O AHU
$4.1 MOLOKAI
MA UI
LANAI
3 Deals KAHOOLA WE
HA W AII
Q3 2007 Total Investments - $7,104 in 887 Deals
November 2007
PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
Slide 4
based on data from Thomson Financial

36. Investments by Industry: Q3 2007
($ in millions)
$1,108.1
Software
$1,091.2
Biotechnology
$920.6
Industrial/Energy
# of % Change $
$825.5
Medical Devices and Equipment Industry
Deals from Q2 ’07
$585.1
Telecommunications Software 187 -27.18%
Biotechnology 99 -10.04%
$513.2
Semiconductors
Media and Entertainment 96 9.68%
$508.5
Media and Entertainment Industrial/Energy 83 69.42%
Medical Devices and Equipment 76 -19.86%
$353.9
IT Services
Telecommunications 74 13.56%
$289.1
Networking and Equipment Semiconductors 55 12.19%
IT Services 51 44.7%
$280.2
Financial Services
Financial Services 31 420.22%
$194.7
Business Products and Services Networking and Equipment 29 -22.16%
Business Products and Services 23 -2.59%
$152.8
Electronics/Instrumentation
Electronics/Instrumentation 21 -1.95%
$96.3
Healthcare Services Consumer Products and Services 20 -65.91%
Healthcare Services 15 251.14%
$87.7
Computers and Peripherals
Computers and Peripherals 13 -41.07%
$57.3
Consumer Products and Services Retailing/Distribution 13 -56.89%
Undisclosed/Other 1 -100.00%
$40.0
Retailing/Distribution
TOTAL 887 -1.43%
$0.0
Other
NM = Not Meaningful
$0 $900 $1,800
Q3 2007 Total: $7,104 in 887 Deals
Visit www.pwcmoneytree.com for Industry definitions
November 2007
PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
Slide 5
based on data from Thomson Financial

37. Investments by Stage of Development: Q3 2007
($ in millions)
Later Stage $2,976.4
Expansion $2,718.5
% Change in
# of
Stage of Development $ Amount
Deals from Q2 2007
Early Stage $1,185.3
Expansion Stage 294 16.00%
Later Stage 288 -7.07%
Early Stage 213 -17.54%
Startup/Seed 92 0.29%
Startup/Seed $224.0
Total 887 -1.43%
$0 $1,000 $2,000 $3,000
Q3 2007 Totals: $7,104 in 887 Deals Last
November 2007
PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
Slide 6
based on data from Thomson Financial

38. Questions and Discussion?
• Steve Szirom, InsideChips (www.insidechips.com)
– Marketing, PR, business, international, strategy
• Lucio Lanza, Lanza techVentures
– Incubation, venture capital, VC trends, other
• Dave Guzeman, Mindpik (www.mindpik.com)
– Marketing, other
• Glen Balzer, New Era Consulting (www.neweraconsulting)
– Sales, distribution, international, other
• Steve Bengston, PriceWaterhouseCoopers (www.pwc.com)
– Financial and accounting issues
• James Prenton, K&L Gates (www.klgates.com)
– Legal issues, founders’ agreements, incorporation, employment issues
The Internet Channel for Semiconductor Entrepreneurs and Investors