A common perception of seed deals is that those are mainly web 2.0 startups, because it takes only a couple of hungry programmers to start the next Google. However, quite a few seed level startups take on core technologies. Now, last time I checked, a semi fab is a few $B, 3 to 4 orders of magnitude more than a seed startup can raise, so, where is the catch?
Well, one of the seed startup I am working with right now has its aim on a new core technology (that shall remain undisclosed, sorry!) that can upend quite a few components in your cell phone. They have raised so far $500K from angels (before the Oct 2008 debacle...), and with that money have done a few prototypes using the Stanford fab. One more $M would enable them to deliver a first product for the cell phone. Wait a second: this is a core tech startup, and they can develop the technology and a first product on $1.5M? The answer is ... maybe, if their plans come to fruition.
They have done it by a) having experienced and smart people who are donating their time because yes, they believe, b) using simulation models and neurons instead of trial-and-error prototypes, c) squatting at the Stanford fab, where for a low fee they can do some prototypes, d) not paying any salary worthy of being called such.
When you think about it, any core tech seed startup can do a proof of concept that somewhat verifies the core of their technology without having to develop the whole big bang product. That proof of concept, if carefully defined and limited, can be done for pretty much petty cash, when compared to the real funding needed to develop the product.
Word to the wise: only the hungry survive...
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