SEPTEMBER 2007: FEATURE, HIGH TECHNOLOGY
Is there any fertile ground left in Silicon Forest?
"It’s a very difficult environment. You’ve
always had to have big ideas. Right now you have to have
a very, very big idea." — JAY EISENLOHR,
AMBRIC
Jay Eisenlohr,
Ambric
Photo by Michael G.
Halle
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BY CHRISTINA WILLIAMS
Jay Eisenlohr figures he’s got a shot at the whole
megillah this time and with two previous startups under his
belt, he has a base of experience to speak from.
“This is the first company that I’ve started that
has the potential to do an IPO and stand alone,” he says.
“It has the potential for thousands of people and a
campus.”
It’s a lofty goal for a 60-person startup that’s
going up against the biggest names in the semiconductor
industry. Of course, Eisenlohr also will acknowledge that the
chance that Beaverton-based Ambric will even be alive in five years is no better
than one in 10.
Nodding in agreement is Christian Prusia, the founder of
Enuclia, a semiconductor company that aimed at the digital
display market from its Beaverton headquarters, but fell short
of the goal.
Enuclia dropped behind on its production schedule and was
forced to close this summer when one of its key investors
balked, spooking the others. With no money to finish its first
product, there was no other choice but to pull the plug.
When Enuclia went down, it prompted some to declare the
region’s storied display cluster all but dead. After all,
projector company InFocus has gone through multiple layoffs and
is up for sale by the board, Pixelworks has dramatically scaled
back its operations and founding CEO Alan Alley left the
business to work in the governor’s office. Even Planar
Systems, the sector’s stalwart that acquired Clarity
Visual Systems last year, has missed revenue targets and
watched its stock price slump.
“[Enuclia] was the last great hope for the video
processing silicon sector here in Portland,” says Eric
Rosenfeld, managing partner at Portland-based Capybara
Ventures, a seed investor in Enuclia. “They were so close
with so many of their customers.”
Rosenfeld is quick to say Enuclia’s fall doesn’t
signal a looming clear cut of Silicon Forest, but the thinning
does point out some of the region’s oft-mentioned
competitive disadvantages, namely: the lack of a
research-oriented university, the lack of experienced high-tech
managers, the lack of a critical mass of companies that
attracts said managers, the lack of high-tech investors and the
lack of je ne sais
quoi — the rabid drive for success that is present
in other high-tech meccas with a 24/7 work culture.
That’s absent, many say, in Oregon where warm summer days
and ready access to the great outdoors sometimes eclipse the
desire to stay inside and pound out code under the fluorescent
lights.
Yet it may be too soon to recite the epitaph for Silicon
Forest. For all the well-known shortcomings, there are still
strengths. It’s home to the world’s largest
concentration of Intel employees, and the fact that Intel cut
just over 1,000 jobs last year is good news for the startup
world as top-trained talent becomes available. And even before
Intel was a force, there was Tektronix, and Tektronix begat
Mentor Graphics begat Planar begat InFocus begat Pixelworks and
Enuclia. Silicon Forest talent runs deep.
And, with Ambric as exhibit A, the startup drive hasn’t
diminished. By the end of the year Ambric, with Intel alum
Howard Bubb as its CEO, will be in production on a chip that
makes it easy to synchronize multiple computers. It has
applications for high-end video and medical imaging, among
others. Ambric has raised just south of $20 million in venture
capital from OVP Venture Partners and others. Eisenlohr says
the company will raise more before the year is out and will
hire more engineers and programmers as it expands to other
markets.
Finding the people is the least of his worries. As Eisenlohr
puts it: “This is one of the truly ripe places for raw
talent.”
ALAS, TALENT ISN’T ALL IT TAKES. Even the triple threat
of talent, money and a killer technology wasn’t enough
for Enuclia, which raised $18 million from top-shelf VCs who
wouldn’t have placed a bet without the chance at a hearty
payoff.
Prusia attributes Enculia’s failure to a lack of two
things: speed and communication.
“Any company in Oregon is going to face this: How do you
innovate locally and efficiently tap into your customers who
are in Asia?” Prusia says.
Enuclia was developing a chip to be used in high-end
televisions, which are universally manufactured overseas. And
in addition to being far away, the TV-makers are updating their
technology at an ever more rapid clip. “It used to be a
18-month design cycle. It’s nine months now. At the end
of the day it all comes down to that speed issue.”
In addition to keeping close counsel with customers, Prusia
also learned too late that it’s imperative to nip hairy
interpersonal issues right away. “If a team’s not
firing on all cylinders it’s not going to execute,”
he says.
But Gary Feather, VP, consumer systems and technology at Sharp
Laboratories of America in Camas, Wash., cautions that one
should view the stumbles of companies like Enuclia, Pixelworks
and InFocus, in context with the wider market, one that’s
getting tougher by the day as high-end digital displays become
more of a commodity.
“As the prices decline and the competition grows,
margins decline,” says Feather. “As the
commoditization emerges and the barriers to enter decline,
business gets tougher no matter where a company is
located.”
Feather makes the differentiation between companies that have
leading technologies and those that are leading markets, the
latter being the more difficult maneuver to pull off.
“It’s great to have the first initial idea,”
Feather says. “We have great people to do that. The
sustainable execution is more difficult.”
Still, market-leading companies, such as Intel, are seeing
talent here and staking their claim on it. In the last year,
Santa Clara, Calif.-based Nvidia, a leader in graphics
processing chips, doubled the size of its design presence in
Oregon in part because last summer it had the chance to hire a
talented development team en
masse. The reason? The team’s startup failed and
they were on the market.
VENTURE CAPITAL RISING?
The money that backs Silicon Forest seedlings appears
to be on the rise again.
The first half of 2007 looks strong at $812.8
million raised by companies in the Northwest,
according to data collected by PricewaterhouseCoopers
and the National Venture Capital Association. But
that doesn’t stop some entrepreneurs from
complaining that venture capital is hard to find in
Oregon.
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Stexar, formed by a tribe of former Intel engineers in 2005,
toiled in secrecy for about a year before folding. Jonah Alben,
vice president of engineering for Nvidia, says his company
jumped at the chance to hire a talented team and is still
adding to its 65-employee Beaverton-based design shop.
“We’re finding good people to hire,” Alben
says. “It’s the right thing to do. We can’t
just say we are a Silicon Valley company, we have to go where
the great talent is.”
One could make the argument that, despite their ultimate
failure, the fact that companies like Enuclia and Stexar are
able to get off the ground and hire a great team in the first
place is illustrative of the region’s strength. Prusia
says everyone from his team who wanted to stay in Oregon has
found another job — either with employers such as Nvidia
or with less established companies.
“Those who wanted a job here have found one,”
Prusia says. “Depending on their desire for risk, some
even went to another startup.”
APPARENTLY THERE ARE PLENTY of risk junkies in Silicon Forest.
In addition to Ambric, there are a handful of other
display-related silicon startups getting ready to elbow their
way into the market and try their luck.
“Consumers will see our product in 2008,” says
Patrick Hauke, CEO and founder of Hillsboro-based Audio
Mojo.
Hauke, one of Intel’s first Oregon employees in the
’70s, assembled a team of close to 30 people and
developed a silicon-based wireless audio system for high-end
digital television setups. Hauke says he’s had good luck
finding people — he hired his entire marketing team from
Pixelworks — but less luck with funding. “I am
greatly disappointed in Oregon’s ability to fund
startups,” says Hauke, who traversed both coasts talking
to investors.
Avnera, a secretive Beaverton semiconductor company led by
Manpreet Khaira, the founder of Mobillian (which sold to Intel
in 2003), has lined up an impressive list of investors
including Intel Capital, Bessemer Venture Partners and Best
Buy. Rumored to also be making a play on the audio side of the
business, 2-year-old Avnera is making a formal launch later
this month.
Capybara’s Rosenfeld compares Avnera to Enuclia —
a company with great potential to grow quickly once its chips
are designed into products. “It’s the kind of
company, a fabless semiconductor company, that is well-suited
to Oregon,” Rosenfeld says. Capybara made a small
($100,000) investment in Avnera’s most recent round of
funding.
All of these startups face the same stakes: One misstep is all
it takes to fall flat in this market. But optimism runs high at
this stage.
“We want to restore the luster to the cluster,”
chants Sam Blackman, the 31-year-old CEO of Elemental
Technologies, an eight-person startup in Portland started by
former Pixelworks engineers.
Blackman is busily lining up customers for Elemental’s
software, which runs on standard computer components but can
handle high-volume video, appealing to professional users who
want to save money as well as regular folk who want more
sophisticated tools. “We’re getting a lot of
interest,” Blackman says. “And once we have
customers lined up we’ll have a better story to tell
investors.”
As with any startup, investors will judge Elemental on the
basis of its product and the potential for customers. But once
the bets are placed, the odds say that many will fail.
“It’s a very difficult environment,” says
Ambric’s Eisenlohr. “You’ve always had to
have big ideas. Right now you have to have a very, very big
idea.”
But perhaps the silver lining for the region is just this:
It’s tough everywhere. And in Silicon Forest,
there’s still room to put down roots — and,
eventually, maybe even thrive.
Have an opinion? E-mail feedback@oregonbusiness.com
