Caution: Comfort Zone!

I had an article published in EE Times last week (see "EDA 3.0 - So you're an EDA startup").  It was one of the most popular articles of the EDA DesignLine publication.  I have received personally over 30 emails not only commenting on the article, but including a number of startup executives (friends, clients, etc.) asking me what they're doing "wrong"!

I won't steal the article's thunder (Read it on your own), but to build on the article, my response to these inquiries has been that it is only fear that we need to be afraid of.  In my opinion, surviving the recession requires conquering your fears and making the right choices.  Unfortunately many business owners won't do either.

In the EDA space, except for Synopsys, Cadence, possibly Mentor Graphics, and a few companies (startup and midsize) who are cash flow positive, all other companies are burning cash and don't have a strong market to see themselves raising future venture rounds.  So, want it or not, fear sets in: the fear of running out of cash and having to close doors.  With fear, most people turn back to their comfort zone.  So EDA companies go back to their comfort zone and focus their efforts on technology development.  And yes, they need to bring in dollars, so they focus the sales team on growing the pipeline.  As a results more features are being developed and more prospect are not happy with the state of the "product" -- in other words, the technology-to-product gap widens, accelerating the burn-rates.  [For difference between "technology" and "product, see the article.]

What's needed is conquering the fears, understanding that the only way to consistently close sales opportunities is to develop "products" (not technology).  To do this, as hard as it seems, startups should stay away from their comfort zone and develop less technology, and focus their investment on the technology-to-product transition, only working with a few key strategic customers.  Only this would provide the fastest possible way to get to a selling product and a movement towards positive cash flow.