High-tech

Due Diligence: Antenova

By Bipin Parmar

Introduction

Antenova, a post-Chilli R2 [click here to see The Chilli Startup Definitions] antenna technology company based in Cambridge, UK, recently repositioned itself to target the high volume mobile handset and Wi-Fi markets. The Chilli profiles Antenova with a view to assessing its potential for success, and makes a number of observations.

Antenova - vital statistics

Value proposition

Dynamics of the markets for hda technology

The Chilli perspective

Antenova - vital statistics

Antenova was founded in 1999 with the objective of commercially exploiting smart antenna technology and research from Sheffield University, UK, and Griffith University, Australia.

The company secured Chilli S1/S2 funding in January 2000, and after the company produced a working demonstrator, was able to raise an S3 round in October 2000. The company secured an R1 round of £3.4m in April 2001 from the Cambridge Gateway Fund, Quester, FNI, Analysys and NIF, and an R2 round of £6m from all of the above (except Analysys) and Yasuda in August 2002, with which it plans to breakeven.

As is typical in many of the post R2 startups, there was a regime change in the make up of the executive team and board make-up. This factor is often overlooked in many startups, as management teams have to evolve as the company matures. The company's former chief executive officer (ceo), Graham Cooley left in January 2003 to become ceo of Metalysis, a Cambridge University spinout exploiting a materials production technology for electronics. He was replaced by Greg McCray, formerly of PipingHot Networks and Lucent. The chairman is Peter Radley, ex chairman of Alcatel UK.

The company currently has approximately 25 employees at its Cambridge office, 70% of them employed on the technology side and the balance on sales, marketing, finance and administration. The company claims to be generating some pilot revenues, having received some upfront nre (non-recurring engineering) revenue during 2002, as well as receiving paid commissions for trials and studies.

Value proposition

Antenova's core proposition is to use dielectric material to deliver the foundation of 'smart antenna' solutions. A smart antenna system combines multiple antenna elements with signal processing capability to optimise the direction of its radiation and/or reception performance automatically in response to the environment, e.g. redirecting the antenna away from sources of interference and towards the strongest signal. In the case of mobile telephony, this can result in fewer dropped calls, improved reception, lower power consumption and improved use of capacity.

Antenova's hda (high dielectric antenna) technology allows antennas to have a compact profile and immunity to detuning by surrounding objects, allowing multiple antennas to be placed closely together without any negative effects on gain and efficiency, making most use of an antenna site.

According to Colin Ribton, vp of applications engineering, "We are able to provide internal antennas for mobile devices which have the efficiency of external antennas, at a competitive price point." Commenting on multi-standard applications, "For products requiring support of multiple communications protocols, we have internal antennas that can allow simultaneous operation of two protocols whilst minimising interference between them."

Antenova's technology relies on ceramic elements mounted onto a pcb (printed circuit board). Having selected an antenna from the portfolio, targeting Wi-Fi, Bluetooth, basestations, etc, the antenna is customised for each customer, with volume manufacturing subcontracted to specialists in ceramic technology.

Vicki Ward, marketing manager, summarises "Our antennas are small, unobtrusive, efficient and resistant to detuning. Our antennas enable compact dual-band Wi-Fi and combo solutions for PCMCIA cards, access points and mobile handsets."

The company has been involved in studies with the UK's Radiocommunications Agency, Orange and Hutchison 3, and believes that the efficiency of its technology can help reduce overall handset power consumption, and also provide a reduction in the number of basestations required for 3G deployments.

Antenova had previously targeted a wide range of markets, including telematics, mobile phones, Wi-Fi, Bluetooth, and fixed wireless access, and has recently repositioned to concentrate on the high volume, client terminal segments, in order to spread the nre costs over larger quantities.

Dynamics of the markets for hda technology

The market for hda smart antenna systems includes Bluetooth, Wi-Fi, uwb (uweeba) and 3G, both at the client terminal end (handset or plug-in card) and the infrastructure end (basestation, access point, etc).

Other features in The Chilli have analysed Bluetooth, Wi-Fi and uweeba, but a number of general observations can be made:

• Client terminals, such as handsets, Wi-Fi cards supporting a wireless standard must have a very low bom (bill of material) cost in order to proliferate the market - the promised land is sub $5, with solutions for Bluetooth and Wi-Fi (802.11b) today in the $10-18 range. The antenna currently commands less than $3 out of the $10 to $18 pie, and that will come under pressure as the overall bom decreases further.
• Wi-Fi infrastructure is declining in cost, as the market is saturated with many vendors. As the market shakes out, with fewer seeing much traction (read ROI) in the public Wi-Fi space, previous volume projections may not materialise
• 3G infrastructure, in the shape of w-cdma basestations in the $50-150k range, is likely to be deployed more widely soon, as 2.5G networks run out of capacity, and mno's (mobile network operators) like Vodafone generate positive cashflows from data services, while others with strong balance sheets can write-off their 3G plays
• Distinction must be made between influencers/specifiers, builders and purchasers. Influencers and specifiers may reside in North America and Europe, but much of the purchasing and manufacturing is conducted by contract design and manufacturing houses including Arima, Inventec and Quanta in the Far East, where volume pricing rules.

Antenova faces several kinds of competitors:

• Systems integrators providing complete subsystems
• Conventional commodity antenna suppliers
• Other startup smart antenna vendors, including SkyCross & Waveband in the USA, and Plasma Antennas & Sarantel in the UK

The Chilli perspective

Antenova announced in May 2003 that it was focusing on the mobile handset and Wi-Fi markets. The challenge for the new management is whether it can breakeven on its current funding round with this new market focus. The handset and card markets put price factors above functionality. Infrastructure products, with their higher asp and component count, can absorb a higher individual component cost and preserve a higher margin, but have a prolonged sales and design-in window.

With the bulk of handsets and PCMCIA cards produced by contract manufacturing houses, Antenova has to invest in suitable representation in Asia, both sales, customer support and possibly logistics, but its biggest challenge is to take a premium product, in relative terms, to a cost-conscious, wafer-thin margin segment.

Antenova's proposition is a benefit play. On that basis, tackling a price-sensitive market on its own would be challenging. The Chilli can see different scenarios that could lead Antenova to cross the next hurdle, namely generating volume sales and revenues to self-fund its next product and market:

• Antenova teams up with a large chipset vendor, in one of the target market sectors, to demonstrate a benefit-led solution at minimal premium in terms of bom cost, to a module or sub-system vendor, to generate traction. With the right partner, Antenova could also share the chipset vendors Asia representation and distribution network
• The company can still address the infrastructure market, by using third parties, where it can share margins due to a higher asp and stay designed-in for longer, under slightly less intense pricing pressure. Again, it would be wise for Antenova to kit with an existing supplier to the market [link to chilli tips on strategic alliances], perhaps someone with complementary dsp expertise
• The company currently doesn't have much presence in the US market, and careful selection of a global strategic partner can address this and the Asian market in one relationship. The downside with this is the risk of relying on one big partner, who could equally fail to deliver. So a choice of two is more likely
• It needs to put additional resources in marketing and marketing presence against its smaller startup competitors. A possible scenario of aligning with a US startup could be quite an interesting proposition.

Once Antenova has demonstrated some traction, the company would be ripe for acquisition, probably by a systems, materials or large sub-contract assembly vendor, who understands the services-intensive nature of Antenova's proposition, and can use the antenna technology as a performance differentiator against other systems vendors.

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© Chilli Publishing Ltd 2003

29JUNE2003