Investments in fabless semiconductor have been steadily decreasing in both number and quantity since 2000. There are two primary reasons why total investments and investment dollars have dropped off in that time. They happen to be the same two reasons why software startups are popping up like fresh corn kernels on a hot stove.
- The number of M&A exits have dropped precipitously since a high in 2000 with a little over 120 acquisitions to a low in 2009 of just over 40.
- Similarly the number of IPOs has dropped from about 26 in 2000 to none in 2002, 2008, and 2009. Last year, there were fewer than 5 fabless semiconductors that went public.
Summarizing those two reasons, it can be said that the exits for fabless semiconductors are becoming both harder to come by and less lucrative. The mass consolidation in the semiconductor industry has led to fewer companies in a position to acquire. The turmoil in the financial markets have reduced the number of IPOs generally, but particularly in the semiconductor space. Moreover, the meteoric rise of capital lite opportunities in the consumer software space have attracted both the investment dollars and the entrepreneurial talent.
With limited exit options, venture capitalists and other investors are drawn to the higher and faster returns of software companies. The semiconductor industry has largely been abandoned by all except the most ardent believers.
What’s an entrepreneur with an innovative semiconductor idea should do?