Although Silicon Valley, New York City and Boston continue to grab the lion?s share of the private equity pie, it seems George W. Bush?s home state of Texas is getting plenty of VC play these days.
Since January, 86 companies in the Lone Star State have captured a whopping $1.084 billion worth of venture dollars and, last week, Dallas-based ChipData Inc. jumped into the ring by roping $23 million.
For Sand Hill Road VC Trinity Ventures, which led the Series B transaction, it was a dream deal.
“This is a case you love to see as an investor, where you go and find a company that has a product [already] built and has customers paying significant amounts of money for it,” said Tom Cole, a principal with Trinity. “We talked with customers and they were excited about the product and what it was doing for them. Some customers even wanted to invest [in ChipData], and that?s never happened before.”
Moreover, the company?s profile fit with Trinity?s desire to invest in firms with a strong return-on-investment story. “IT departments are shrinking so much, they?re rationalizing their spending and [putting their money] where they think they?ll get the best returns,” Cole said. “ChipData benefits both sides of the transaction, whereas other companies that just concentrate on procurement or sellers can actually end up eliminating potential benefits for one side or the other.”
Essentially, ChipData caters to semiconductor engineers, integrating software at the enterprise level to connect both the buy side ? original equipment manufacturers ? and the sell side ? electronic component suppliers and independent software vendors ? all within the same secure loop. Its offering is meant to shrink development costs and improve time-to-market.
“We operate upstream of the supply chain,” explained Bill Shirk, ChipData?s chief financial officer. “So if the supply chain maximizes the efficiency of manufacturing, we maximize the efficiency of research design.”
Joining Trinity on the deal was new investor EDS Ventures, as well as first round backers CenterPoint Ventures, InterWest Partners and Sevin Rosen Funds.
Noel Fenton, a general partner at Trinity, joined the company?s board of directors as a result of the financing.
To date, Chip Data has raised more than $33 million worth of venture capital financing. While its first round was used primarily to set its business plan in motion, its latest infusion will be committed to increasing its headcount to 150 from 100 by the end of the year, developing its product and expanding the company?s presence throughout Europe and Asia.
“We work with integrated circuit managers, which immediately points the finger straight at Japan,” Shirk said. As such, the company has already started carving inroads in that country.
Chip Data is currently in pilot mode with several revenue-generating customers, including Intel Corp., Infineon Technologies AG, IBM Corp. and Agilent Technologies. Last year, the company posted approximately $500,000 in revenue, and this year, it is expected to do even more, Shirk said, although he declined to give exact figures.
Although Shirk said he hopes the company will continue on that path so it doesn?t have to draw another bucket from the private equity well, CenterPoint Managing General Partner Bob Paluck said it would not be out of the ordinary for ChipData to do one more venture round before making its Wall Street debut.
Paluck added that he and his cohorts would like to take the company public, and Shirk agreed that IPO plans were on his mind as well.
“[An IPO] is everyone?s nearest and dearest desire,” he said. “But as with everything else, we?ll do it when the market is right.”
Robyn Kurdek can be contacted at: Robyn Kurdek@tfn.com
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