Xilinx Creates $100M VC Fund
By Jessica Davis -- EDN, December 20, 2004
Programmable logic company Xilinx Inc is launching a new corporate venture fund to the tune of $100 million.
The Ecosystem Venture Fund is designed to strategically fund companies that build products and technologies that create an ecosystem in support of Xilinx's own products. The fund will especially focus on DSP embedded and high-speed connectivity technologies, according to Hans Schwartz, senior director of business development.
Schwartz estimates the fund will make 5 to 10 investments per year with investments ranging from $250,000 to $5 million. Investments are expected to initially be focused on companies in Europe and the United States.
Xilinx said that the fund is an element of its strategy to move beyond the $5.1 billion programmable logic market to capture additional share in the $36 billion ASIC and ASSP markets through internal and external investments in FPGA solutions.
And the fund will focus on tools that help customers in supporting or designing FPGAs, such as libraries or chip sets or new package technologies, said Schwartz.
"We are not likely to invest in a company that is prototyping with an FPGA to create an ASIC," said Schwartz.
Xilinx created the fund for several reasons, including helping in its effort to enter new markets. But while return on investment is key to traditional venture capital companies in evaluating potential portfolio investments, ROI is merely one element in Xilinx's investment strategy, said Schwartz.
Rather, Xilinx is looking for indirect returns in the form of increased sales for its own products, and not just a straight return on investment.
In addition, portfolio companies are may become candidates for acquisition further down the road, said Schwartz
Xilinx said that potential portfolio companies must demonstrate a commitment to the Xilinx ecosystem, must have early customer validation of the proposed technology, must be well managed with good potential for growth and profitability, and must also have won interest or engagement with other investors.
The new fund is not Xilinx's first foray into corporate venture capital funds. The company created a $75 million fund in 1999 called the Technology Growth Fund. Focused on early stage technology investments in companies such as Accelchip, Hier Design, Nuron and Synplicity, investments from that fund have ranged from $500,000 to $5 million.
"While most corporate funds disengaged from the market at the outset of the downturn in 2001 and 2002, Xilinx has remained steadfast in our commitment to invest in emerging companies to nurture FPGA-based research and development," Schwartz said. "To date we have invested more than $40 million with above average returns."
The new fund will broaden the scope of the company's investment program, according to Schwartz.
Schwartz said Xilinx will announce its first investment next month.
Like the Technology Growth Fund, the Ecosystem fund will rely on an ad hoc team of Xilinx engineers to evaluate the potential portfolio company's technology. Schwartz's small team will evaluate the business and financial operations. And then each company must get the stamp of approval of an executive committee made up of Xilinx's CEO, CFO, CTO and a VP/general manager of one of Xilinx's divisions.
Schwartz said his team is not currently slated for expansion, but "we've got people identified" if that day comes.
