Very few new players in the manufacture of semiconductors have been able to give a fight to the established ones like Broadcom, Intel, Qualcomm and a handful of others around the world. Venture Capitalists based out of Silicon Valley have therefore not considered such companies for investments in the past.
There has, however, been one exception. Barefoot Networks Inc is this startup and its main product is a customizable chip for intranet data transmission applications. This venture has succeeded in roping in around $155million from some big names not only from the valley, but also from Wall Street and China.
However, one has to view this in the proper perspective. The kind of investments required in today’s context to stay ahead in this high technology business is indeed mind-boggling. Broadcom, for example, is making the kind of chips that Barefoot is now getting into, has spent around $2.7billion on research and development just the last year and the figure for Intel Inc is multiple times of that at $12.7billion.
If one were to look at the equivalent figures in Indian Rupees, Barefoot’s Rs.1000 crore pale in comparison to Broadcom’s Rs.17,293 crore and Intel’s Rs.81,340 crore. Obviously, Barefoot has to travel a great distance to do the catch up act.
On its part, Barefoot has declared that the startup has plans to build it into a $50billion (Rs.3,20,000 crore) company for which it has drafted as the CEO, Craig Barratt, who has had stints at Google and Qualcomm and he is fully aware of the challenges involved.
The attitude of the investors towards this segment of the industry has been negative to say the least. From an investment of close to a billion dollars in the year 2000, the year the dot-com bust occurred, it has just been around $150million this year on chip making companies promoted by private individuals. It is from this view point that Barefoot appears to have made a cut.
The list of investors to have taken a position on this startup reads like a virtual Who’s Who in the business; Goldman Sachs, Sequoia Capital from Wall Street, Hewlett Packard and Alphabet Inc representing the tech giants and from China, Alibaba Group Holding and Tencent Holdings.
Barefoot appears to possess the technology to manufacture the products it has on its portfolio and in Barratt, they appear to have the relevant human resource to drive the startup to its avowed objectives and in the limited period, it appears to have tasted some amount of success as well.
AT&T is said to have tested the products made by Barefoot in its network transmitting data between Washington and San Francisco and there appears to be no difficulty with their functioning. Switch makers like Cisco Systems and others are also looking forward to trying out the chips made by Barefoot.