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Equipment startups appear to be taking at least some of Lam's advice, but some still dream of a relatively unattached solo flight to industry stardom. Paul Whalen, chief executive officer of Intrabay Automation, says his eight-month-old factory automation company has no intention of being acquired, at least not yet. Whalen, once the principal engineer at PRI Automation, hopes for a lucrative IPO someday. The startup has already turned down several offers of a buyout, he adds. "We think we're on an excellent track," Whalen says.
While hoping to avoid a takeover, Whalen acknowledges that startups like his need a larger partner. Since its August launch, Intrabay secured $450,000 in its first round of funding from friends, family and private investors known as angels. But those monies were earmarked only for the design of Intrabay's equipment; Intrabay forged an alliance with German giant Mannesmann AG, which is funding production.
For Intrabay, the deal's linchpin was that the startup got to retain its intellectual property, with Mannesmann serving primarily as a contract manufacturer with only a minority stake. For its part, Mannesmann gained a long-sought foothold in the semiconductor industry, a point that helped Intrabay in its lengthy efforts to retain intellectual property rights while getting the financial boost it needed, Whalen says.
"Had we not gone after a strategic partner and done all this independently, we would have needed to raise several million dollars to get to the point we're at," Whalen says. "By using the infrastructure of a multinational, multi-billion dollar corporation, we got the product produced at a much lower cost than having to build the infrastructure internally."
Adhering to one of Lam's cardinal startup rules, Whalen is clearly keeping an eye on Intrabay's financial resources. The company hired roughly 40 sales representatives around the globe that "fund their own way," Whalen says, underscoring how Intrabay has "spent a great deal of time considering the best use of our funds."
Intrabay's tunnel vision may help it keep costs in check, but some in the investment community say factory automation startups serving the semiconductor industry will need to adopt a broader approach to really soar. Ken Epstein, principal at NewCap Partners in Belmont, Calif., predicts that Intrabay will move beyond the semiconductor market.
"It may very well be that they will get some sales there, but they'll move out of that into other areas," Epstein says. "Factory automation translates itself beyond semiconductor equipment. It's probably a good market for them, but it's not going to be where they get their valuations. It's a good niche, but it's only one niche. They'll get their valuation more on the software solutions and how many other markets they can service. From a valuation standpoint, they're going to be a factory automation information technology (IT) play."
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Intrabay, which is aiming its equipment to the end-use integrated device manufacturer as well as to other equipment suppliers, similarly is being challenged to follow a focused business strategy. It's been fending off overtures that could force it to lose site of its factory automation equipment's core functions.
"We get asked on a daily basis to modify our toolsets to meet customers' specific requirements, but we resist that and use integrators to do all customization of our equipment. Customization would eat up engineering resources quite quickly," Intrabay's Whalen says.
Although the industry transition to 300 mm production equipment is set to bring more standardization into the equation, the tool buffers that Intrabay says it can supply require a variety of interfaces since most fabs are still operating at 200 mm. Intrabay will design custom interfaces, Whalen says, but won't build them.
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