This was the second Silicon Catalyst.UK event we attended. Attendance was now up to 100+ with full semiconductor focus which makes these events so good and effective. It brings together the whole eco-system: from EDA to IP, from fabless to specialty silicon manufacturers. It was a great event with a set of excellent startup pitches as well as a set of industry veterans presenting. For the UK these events are critical to bring the UK’s semiconductor industry back to the level where it belongs. It has the talent, it has the entrepreneurial spirit. It is important to continue and broaden these efforts. It will take time so financing and supporting such events over a longer period of time is key. We are talking a decennia and longer and failures are part of the effort. Too many governments are afraid to “waste” the public taxpayer’s money if there is a failure – it should be made clear that failures are part of the journey and equally valuable as the successes. Only with this approach will you get real and lasting results.
One of the challenges that comes with design services is the cyclical nature of the services business. When the economy tightens and corporates are watching their operational expenses, the first step will be to halt any external contracts/contractors which are not deemed absolutely essential.
Whereas the earlier (staircase) model is a good approach in scaling up revenue and creating new revenue streams, the foundation of the company is still based on the service model: headcount continues to be the main driver (typically up to 60-70% of revenue). In terms of (enterprise) valuation the additional revenue streams, however, will already make a significant difference.
Design services companies typically start small (some exceptions when it concerns management buy-outs) and natural growth is a slow process as it requires hiring and training of engineers based on/driven by the revenue stream of the company. Growth of business is tied to growing the team and it is not always easy to find the engineers.