Semiconductors Are Hot!

Earlier this week, the Wall Street Journal wrote about chip companies again becoming an interesting sector for venture investing [via Corante]. Venture firms with expertise in the sector (Sequoia and Kodiak are mentioned in the article but there are many more than you'd expect, including our own August Capital) continued to invest in the space throughout the dot com 90's. But as the 90's wore on, there just wasn't a whole lot to invest in.

My partner, Andy Rappaport (who has certainly been involved with a fair share of semiconductor companies over his career), has made the observation that one of the biggest problems with the internet bubble was that it rewarded the shortest-term investment projects. When anyone could go from first funding to IPO in a year, why build a product (like a new kind of chip) that takes 2-3 years to create? Given the economics, it was hard not to be lured by the quick riches.

So yes, semiconductor investing is back to a more normal pace and that's a good thing for everyone. But more importantly, longer-term technology development can again get the resources it needs. And that's a great thing for everyone.