Venture capitalists have generally given semiconductor startups the cold shoulder for years now in favor of the web and software spaces. But an acquisition announced Wednesday afternoon indicates it may be time for VCs to warm up to chip technology once again.
LSI Corporation(s LSI) announced Wednesday plans to acquire SandForce, a five-year-old Silicon Valley-based semiconductor startup, for $322 million in cash. On a fully diluted equity value basis, we’re told, the deal is worth about $400 million.
It’s notable because it is the largest M&A deal for a U.S.-based venture-backed semiconductor company in nearly a decade. Other big semiconductor acquisitions have happened in the past ten years, but they have involved divestitures from publicly-traded companies (ON Semiconductor’s $522 million acquisition of Sanyo Semiconductor) or companies borne out publicly-traded firms (Micron’s $1.3 billion acquisition of Numonyx, the brainchild of both STMicro and Intel(s INTC).)
SandForce, meanwhile, has a more straightforward startup story: Founded in December 2006, the company raised $60 million in four rounds of venture capital from investors including DCM, Storm Ventures, TransLink Capital, UMC Capital, Red Maple Ventures, Darwin Ventures and Canaan Partners.
The $400 million payback to SandForce’s VCs could embolden those firms and others to invest a bit more aggressively in hard technology startups. That could be good news for chipheads — and the rest of us who just love the cool gadgets they ultimately help create.