How to start a company – all relevant ecosystems count service companies as one of their core components. Service companies focus on a specific step or set of steps in a product cycle and provide reliable services with high quality. In the following article, we will review the different aspects of starting, running, and growing a service company. Service companies are often neglected because they do not attract venture capital (“there is no hockey stick curve for their revenue”). However, statistics show that service companies are often at the origin of successful startups, either by spinning them out or by themselves moving up the value chain.
As we encounter design services companies regularly as part of our work (market analysis, corporate advisory, M&A, …), we do find it important to provide a better view of their role in the eco-system as along with some of the relevant aspects of their strategy and operations.
Many design services companies start from the perspective of a few talented design engineers solving a particularly difficult design problem for a first customer. Frequently, it concerns former MSc and/or PhD students who have researched a next-generation solution within the realm of IC design, EDA, FPGA programming, or similar fields. Once the first project reaches completion, the team will start thinking about the next project. They will take on those project(s) that usually cover similar challenges as this is where the team [and the company] is building its reputation. Although this approach will yield a (incidental) strategy that provides some focus, often enough cashflow requirements drive companies to take on projects outside of their natural scope and lead to a more generic service profile which makes it less distinguishable from its competitors. It also results in more zigzagging behavior which, once introduced, is hard to get rid of.
Fundamental therefore, at the start, is the focus on defining an ambition (revenue, company size, market, focus, customers) and related strategy. Equally important is to make room for supporting and maintaining that strategy by driving a clear marketing and sales strategy. This will impact the OpEx for the company as you need to make room for a marketing professional who drives the company’s branding in a consistent and professional manner. However, the challenge starts with defining the ambition and the strategy underpinning that strategy. This crucial step needs to be at the core of the startup. It is important to ensure sufficient (external) input for this process to avoid limited views on where the (semiconductor design services) future is heading. Equally important, once defined, is to ensure that the ambition and strategy are properly maintained and calibrated to match developments in the market and the underlying ecosystem. More than VC-driven product startups, design services startups, as they are driven by their own cash flow, are more susceptible to the changing winds of time. Being able to weather a storm (market downturn) is critical to the survival of the startup. More on this in the subsequent postings.
Underneath a partial example of a design services strategy board. In a separate posting, we’ll cover a full dashboard example.
Imagine you’re building a robot. Not just any robot. Your robot. It’s smart, shiny, and meant to change the world. But before you bring it to life, you face a serious question: “Do I buy the robot factory, or just rent a workshop?” That’s where the magical world of CapEx and OpEx begins.
When you’re building a startup, the kind of funding you choose can determine the path your company takes. Two common funding options usually come into play: Venture Capital (VC) and Corporate Venture Capital (CVC).
TD Shepherd congratulates the Innoseis Sensor Technologies’ team on closing of their Seed round led by FORWARD.one. Innoseis ST is a spin-off from the Nikhef who transferring advanced research in gravitational-wave detection into commercial sensor technology.