VCs not favoring semicon startups: Study

LONDON, UK: Startup companies in the semiconductor sector are attracting less investments – with just over $750 million in 2008 and in the first 10 months of 2009, according to analysts at Gartner, the information technology research and advisory company, headquartered in Stamford, Connecticut, the United States.

The analysts also found that pure-play venture capital firms are showing a tendency to avoid investing in seed and Series A rounds. This has resulted in the startup companies in the semiconductor sector drying up in 2009.

Strategic investors like the venture-capital arms of semiconductor companies participated in about 25 per cent of the investments tracked by Gartner.

It was found that the funding was $593.26 million in 2008. However, the funding was only $164.05 million till the middle of November 2009.

The analysts at Gartner estimated the funding figures based on the funding received by the firms it tracked. The analysis excluded funding not publicly announced, but which provided an adequately large sample that is capable of capturing the trend.

The Gartner analysis considered investment sums of up to $40 million, and $14.3 million, on a average, per company.

In a report of the analysis, Gartner said that venture-capital firms favoured later-stage companies in 2008. As a result, the number of firms being launched dropped considerably, compared to the previous years.

It was found that, compared with the first half of this decade, only few new companies were set up in the last 3 years.