MEMS Commercialization Report Card, Part 9: Creation of Wealth, Part ThreeJanuary 9, 2015 By: Roger H. Grace, Roger Grace Associates
In the previous two episodes of this series, the topic of Creation of Wealth has been addressed, first with an introduction to the subject in Episode 7 and in Episode 8 with the results of detailed interviews with MEMS industry luminaries, referred to as MEMS millionaires. This article completes the review of the interviews as well as provides a conclusion/summary to the topic. Figure 1 is a summary of the most significant MEMS acquisitions and IPOs from the previous episode, offered as a convenient refresher.
While there have been many MEMS millionaires, we've focused on the entrepreneurs who created several MEMS companies, serial entrepreneurs if you will, and either created and developed new products and grown the companies, or some that have never brought a product to market but have elected an exit strategy to sell the company to a strategic partner. We may also assume many people in the MEMS industry personally created wealth for their significant contributions to companies, such as Analog Devices and ST Microelectronics.
Joe Brown was on the founding team at NovaSensor and was a co-founder of SiTime. He has over 35 years of experience in MEMS. At SiTime, he assumed the role of Manager of Strategic Alliance and then Director of Sales. His words to becoming a success MEMS entrepreneur are, "no one cares about MEMS, you need to sell customers the benefits of using MEMS in their designs and the resulting value of their products that are enabled from this decision. You need to demonstrate quantifiable product differentiation and compelling reasons to purchase the product. This is not a technology push but rather market/applications pull strategy."
Joe continues, 'engineers are responsible for managing risk and it is your job to mitigate the risk when you are asking someone to design in a disruptive technology. Selling the SiTime MEMS oscillator was not easy, we needed to thoroughly understand the customers' pain points and address them with our product specifications and features and the resulting benefits to their products. Once we had our product positioning in place through our collaborations, we needed to bring on our sales and distribution network. We decided to take a complimentary approach of manufacturers' representatives, distributors, and catalog distributors from a worldwide perspective. My key criteria for selecting an organization were to determine the synergy of their existing product line with our MEMS oscillator product lines and to assess their current involvement and knowledge of their customers and their potential usage of our product. All of our efforts paid off well."
From a strategic alliance development strategy Joe stated, "SiTime was similar to most MEMS startups in that we were fabless. Our design consisted of a separate MEMS oscillator chip and a separate ASIC chip and we decided to select different suppliers for each thus maximizing the resulting performance. Additionally, we needed to select a packaging and test supplier. I ended up interviewing over 25 organizations to come up with our team. I believe that the time and effort expended to undertake the due diligence was well worth it. Doing your homework in picking manufacturing partners is critical for success."
Jim Knutti started his MEMS career in the late 1070s as a PhD student of the famous Professor Jim Angell of Stanford University. Started in 1982, his first company was Transensory Devices, which later merged with I.C. Sensors in 1985 and subsequently sold in 1990. Jim's next success story was Silicon Microstructures, which he founded in 1991 and sold to Elmos in 2001. Jim is the co-founder and CEO of MEMS pressure sensor company Acuity, which he founded in 2007.
My interview with Jim revealed that the secret of his many successes was his ability to, "anticipate market opportunities five years out that are not currently being adequately addressed." Jim added, "for ultimate success, it is essential to define the technology and market segment, and not follow the herd, add maximum value to what you offer, compete on performance, and seek opportunities where your device can enable solutions". Finally, he was emphatic in stressing that, "it is critical to look beyond what your customer is telling you about the market. You need to understand the customer's customer to get the best picture." This approach is referred to as leapfrog marketing.
Richie Payne PhD started his career in 1970 as a researcher in the semiconductor space at Bell Labs. His early years in MEMS were at Analog Devices, which he joined in 1980 and was on the team to develop and manufacture the famous and successful ADXL-50 automotive airbag accelerometer that is ubiquitous in many of today's SRS systems. His long list of MEMS startups where he was either a co-founder or early management team contributor include Cyrano Sciences from 1997-to 1999, OMM (high density cross-connect optical switches) from1999 to 2001, Polychromix (NIR spectrometer) from 2001 to 2005 that sold to Thermo Fisher Scientific, and Pixtronix from 2005 to 2014, later sold to QUALCOMM.
Richie states that the key to success common to all of these organizations is, "Develop something that people want. Do lots of market research by visiting potential customers around the world. You need to offer a solution that has a 10X advantage over the existing offering. We did this with the ADXL when we offer a MEMS-based approach at less than $10, versus the existing electromechanical one that cost $25 and had less performance and features. But that was not all, the EM approach required between three to five devices per system and all the wiring. The MEMS-based approach needed only one device and, with some sophisticated software algorithms, was better able to detect a crash from someone banging on a car bumper with a hammer. This was a huge success for ADI." He concludes, "Packaging and testing are key to the cost structure of MEMS. You need to invest much time and effort into creating low-cost packaging and testing solutions to be able to create and sustain solid profit margins."
Job Elders PhD began his MEMS career in 1992 and since that time has founded and sold several MEMS companies. These include TMP (optical) from 1995 to 2000 and was sold to Kimata, C2V (gas chromatograph) from 2002 to 2009 and sold to Thermo Fisher, and Kimata (optical), which was sold to Alcatel.
Elder's most recent big win was his investment in XSense where he was on the board of directors. The company, started in 2012, develops motion sensing systems and software and was sold to Fairchild in 2014. Job stated that his secret of creating wealth is, "Creating a product that has significant product differentiation through superior functional specs. It is critical that you plan and execute a thorough plan of communicating this information to the target market and validate user benefits created through the adoption of the product. Customers need to be educated and be assured that your solution is credible and its adoption will pose minimum risk.
Job continues, "With TMP, we had the right product in the right market at the right time. With C2V, we did a combination of conducting extensive market research and matching it with the technology development projections. This was a multi-iterative process lasting over two years and it was quite difficult to get good data. We conducted frequent reviews of the changing market needs and our resources to support them. You need to have a strategic vision and thoroughly understand where each functionality of your solution will be used and by who, and then successfully execute the plan. Being open minded is also important. Startup business strategies are much more difficult to successfully create and execute versus large companies."
He concludes, "Planning and funding a substantial promotion program is a major success factor. At C2v, we conducted a great deal of PR and attended many trade shows to demonstrate our GC product and conduct market research. Additionally, we worked very closely with the target application 800 pound guerillas to best understand our products performance and functionalities."
We will conclude our interview summaries with Steve Nasiri of NovaSensor. Steve was a co-founder along with Janusz Bryzek of Transparent Optical Networks and the sensor division at Maxim. But more significantly, he was the founder and CEO in 2003 of what might be considered to be the most impressive success in recent MEMS creation of wealth stories: Invensense, a producer of dual-axis gyros for the consumer market, which he took public in November 2011 with a valuation of approximately $1 Billion.
Steve is very proud of enabling many of his employees to also become MEMS millionaires since 37% of the company was employee owned at the time of the IPO. Steve claims the secret of creating so many millionaires at Invensense was, "Building a component that I understood. I had a hunger to build a product in very large volumes and that I could leverage my past 25 years of experience to create." He continues, "At Invensense we considered packaging and testing to be a major product differentiator and cost item. We created a very unique packaging solution that leveraged IC packaging: MEMS on-top-of CMOS. Additionally, we did not attempt to replace the old quartz gyro solution from a form/fit and function perspective, but rather created a solution that had significant advantages in cost, size and performance, all at the same time. We spent a great deal of time and resources creating a technology platform for our two-axis gyro and captured our first customer, Sanyo, with a $2.75 device for their digital camera.
Steve concluded, "I believe the huge success of the IPO was based on the credibility of the company, our ability to keep the company lean and maintain high yields of greater than 95%, and produce very respectable gross margin numbers of greater than 55% before tax." Invensense currently employs over 650 people and has recently acquired several MEMS organizations including the microphone group at Analog Devices.
This is the third and final part of the Creation of Wealth topic in the MEMS Commercialization Report Card series. Across nine interviews with the world's leading MEMS entrepreneurs, it's gratifying to see the strong consensus in defining the ingredients of the secret sauce of success for creating companies, selling these companies, acquiring companies, or going IPO. Based on the interviews and personal experience, the critical success factors for the creation of wealth and achieving MEMS millionaire stardom include:
- Be a visionary, anticipate market trends
- Adopt an applications/market pull versus technology push strategy
- Do your homework, conduct market research and better understand the unfulfilled market needs, embrace a leapfrog marketing strategy to understand your customers' customer needs
- Create a solution that is highly differentiated and has a high multiple of performance/cost/feature advantage over existing solutions
- Embrace promotion and educate your audience as to the customer benefits of adopting your products using communication strategies
- If you plan to sell your company, find a partner who can highly leverage your solution to create a more competitive position for themselves in the market and thus maximize your value
Qualities that these aforementioned MEMS millionaires possess include:
- Indefatigable commitment to become successful…worked smart, worked hard and "played" and spent time with their families to create a good balance in their lives
- Embraced a "win-win" strategy with their employees and their customers
- Demonstrated high integrity in all of their dealing with suppliers, employees and customers
About the Author
Roger H. Grace is president of Roger Grace Associates (Naples, FL) which he founded in 1982 as a marketing consultancy serving the sensor, MEMS, IC and capital equipment markets. He holds the B.S.E.E. and M.S.E.E. (as a Raytheon Company Fellow) degrees from Northeastern University where he was awarded the Engineering Alumni of the Year Award in 2004. He was a visiting lecturer at the University of California at Berkeley College of Engineering from 1990 to 2004. He can be contacted via email at firstname.lastname@example.org.
Read the first five parts of Roger's MEMS marketing manifesto.
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