Tackling EDA’s Broken Business Model: Blaze DFM CEO Jacob Jacobsson (Part 2)

SM: You have seen , I have been endlessly beating on Cadence and Synopsys on this issue. What has created this dynamic? Why is EDA so undervalued in general?

JJ: When you sell software the cost of goods is almost zero. When I was working with semiconductors, we could always point back and say there was a limit to how low the hardware price could go. The mentality was that as long as we could make some money from customers we were better off than making no money. If you go back to Daisy and Mentor, the competition was not based on who was more profitable –  it was on who was the larger of the two companies.

SM: So the customer could just play you against each other.

JJ: Exactly, and they did. On some level we thought we were interchangeable. As a designer I do not believe we were. A certain flow is developed while doing things, but on some conceptual level we believed we were. Now it is Cadence and Synopsys, and they are doing the same exact thing. Obviously they cannot come together and make an agreement to stop this. Someone needs to stop this though, and that company has to be financially strong enough to do it.

SM: Going back to Daisy, what happened after them? Where did you go from there?

JJ: First of all I was new to the Valley, so I did not see the writing on the wall that they were going to go under. I stayed there too long. What caused me to leave was an acquisition of a company called Kinetics via a hostile takeover. This was a circuit board company in Colorado, and the thing I saw was that you cannot do a hostile takeover in this market because the only asset you have are the people. This company was in Colorado. They did not cooperate with us. In retrospect it was a desperate move in the first place to even buy them. I should have recognized that and left earlier.

I went to Cadence for nine months, an experience which never did sit well with me. At Daisy I was really important. People looked up to me. At Cadence there were lots of really good people and I was just one of them. Somehow my ego did not like that. Joe Costello, the president, was far better than I was and I did not want to admit that.

A former coworker at Daisy recruited me to Xilinx, which is a fabless semiconductor company,  a brand new concept at the time. I remember going from almost nothing to $50 million, to $100 million, to $300 million, all with 60% gross profit margin. The eye opener here was the Xilinx was in a very, very fierce battle with a couple of other companies but no one compromised on gross profit margin. All three companies were run at 60% GPM and all of them were growing like crazy.

SM: How long were you there and what were some of the key lessons learned?

JJ: I was there for seven years. I think the CEO is responsible for having a firm financial hand over everything. The president, Bernie, grew up during the Depression. That influenced how he ran the company in lots of ways, and it made an impression on me. I learned it was a lot easier to save money and be cheap and then gradually increase the amount of money spent rather than starting with too much and having to pull back. You will always be a little understaffed and you have to work a little harder, but everything has solid economic grounds, which enabled us to maintain 60% GPM was because it was run without any fat.

As we grew so fast my management became very conceptual versus personal. Over time I realized there was not much more for me to do there, I had filled my role.

This segment is part 2 in the series : Tackling EDA’s Broken Business Model: Blaze DFM CEO Jacob Jacobsson
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