Profile - Garrie Vickers & Mark Dellow

Starting up a product engineering services company

By Nitin Dahad

High-tech startups are not only about raising millions of dollars and building engineering teams with in-house manufacturing capability. There's also a potentially huge service industry out there based on selling knowledge processes, IP and technologies. In this issue, The Chilli talks to an entrepreneurial duo hoping to build their new venture offering such services. It highlights some of their experiences in working with a Scottish university spinout (USO) that never made it to an IPO, but was instead sold out to a larger electronics company.

Background

Garrie Vickers and Dr. Mark Dellow have each been involved with leading microelectronic and microsystem technology engineering companies over the last 15 years. Company experience includes GEC Plessey Semiconductors, IBM, Infineon, Motorola, Siemens, and ST Microelectronics.

It was during the start up phase of Siemens, North Tyneside, semiconductor fabrication plant that their engineering careers came together. They both took up senior engineering positions, involved in the submicron technology transfer from Siemens' site in Dresden, Germany. Following the closure of the Siemens North Tyneside facility, Vickers took up a technology transfer position within Alcatel Microelectronics in Oudenaarde, Belgium, whilst Dellow relocated to New York to take up a senior engineering role with IBM.

On returning to the UK they teamed up to work together at Kymata Ltd, in Scotland, a university spinout company, developing and manufacturing planar optoelectronic components. Kymata was founded in 1998 and was granted by Billy Harkin (for the University of Glasgow) a licence to 'FHD' technology (flame hydrolysis deposition, a technology developed by Dr Jim Bonar and others). With this technology, Kymata became a technology leader providing next generation planar and micro-electromechanical systems-based integrated optical components for the networking industry.

Based in Livingston, Scotland, the university spinout grew to 500 people split across six North American and European locations. In March 2000, Kymata secured $75 million of funding from Kleiner Perkins Caufield & Byers, Bowman Capital which led the funding with 3i plus TeleSoft Partners, ComVentures and existing investors such as ACT Venture Capital. In the heydays of the bubble era, they raised a further $67 million round of additional funding six months later, in October 2000.

Kymata made two additional acquisitions of technology companies in the Netherlands, when the Kymata stock value level was more than $1bn. It also licensed in a key IBM-owned technology in return for Kymata stock to broaden its technology base.

In 2001, the international technology market crash meant the public market effectively closed, so in July of that year Kymata sold out to Alcatel Optronics; Kymata was acquired in exchange for Alcatel shares valued on paper at the time of the announcement at €134 million.

Building the team at Kymata

Vickers wanted to return to Scotland from Belgium, and this was what attracted him to consider joining Kymata and lead a device engineering team. "We were starting from scratch, implementing new processes and procedures for product development," says Vickers. Vickers started recruiting a team, which included Dellow, and grew to a product development team of seven. "Our brief was to take a university demonstrator (sciences project) to product (technology) and we made quite an achievement, obtaining a reasonable (98 percent) yield within three months of initial prototype!"

Vickers says that the team that he put together evolved by default to a product engineering team: "We were responsible for taking products from the design phase to product manufacturing." He says that a major problem with many tech startups is that they might have great ideas but the finishing leaves a lot to be desired. "A lot of companies hire a group of engineers to start product development, but none have the experience in taking the product through to manufacture. At many of the local incubation centers, this is the most common problem that startups face."

"One of the big problems in the market today is gaining funding for a tech startup - it's tough out there. But even when a company is funded, the capex [capital expenditure] requirements eat in to a large part of the investment, leaving little room for investment in product development and manufacturing. This is why there is a trend towards the fables semiconductor business model - which we are in favour of over the intellectual property (IP) business model."

"At Kymata, our product engineering team was quite strained - seven people was way short of what we actually needed. As the company began its downsizing, the strain become more critical and started eating into our product group."

Lessons for the product engineer entrepreneur

Vickers and Dellow both emphasise the huge differences between working for a tier one semiconductor company and starting up a product development group yourself, especially within a startup. The most important thing, they claim, is that you have to be a self-starter. "You have to be very motivated - there is no comfort zone," says Vickers. They say that in large companies, you take it for granted that systems and processes are in place, and if you design a product, then you can just 'throw' it over the wall to another department for the next phase of development. But in a startup, you need to bring in all your experience gained from previous organisations to set up fast track systems and processes for product development and manufacture.

"One of our proudest moments at Kymata was what we were able to achieve, taking a new product to volume manufacturing. The toughest part was to educate other people at Kymata the need for the processes we were trying to put in place."

When recruiting for a product engineering team, they stress the need for looking for similar skills. "We looked for engineers in the semiconductor industry similar to ourselves - with a track record, and self-starters. We did place some ads, and tried the big advertising campaigns, but had a poor response. The more successful approach was word-of-mouth, once we had a core team."

"You also need to be looking for motivated people - those who want to be involved in cutting edge technology. Our motivation in setting up our new enterprise, Integration Experience, is that we'd like to see a lot of the emerging companies succeed - we feel there is an expertise we have that can get them to volume and profitability at a faster pace."

The motivation to go it alone - and the challenges

Both Vickers and Dellow believed that they had a level of experience that could be offered as a service, and so they set out last year establishing the feasibility of a knowledge-based service company, offering their skills to both university spinouts, fabless startups as well as established companies to take their products and concepts through to manufacturing.

Asked why they didn't want to do the typical high-tech startup thing and build up a company worth millions, which can be sold or floated, they commented, "It's a lifestyle model - you've really go to enjoy what you do, and we take satisfaction from getting companies to manufacturing." The duo believes that what they're doing is not offered by any other company in the UK. The closest thing to what they do is offered in Silicon Valley, although there are companies like Cambridge Consultants, Generics and Qinetiq doing some aspects of what Vickers and Dellow are offering. "But they don't offer the detail that we do. We're more hands on with our approach, and we do the work rather than just talk about it."

Dellow left Alcatel Optronics last August to take some training and check out the feasibility of their project. He said "I discussed the idea with several people and companies, and realised there's a huge gap in the market, especially in optoelectronics and microelectronics. The core of our vision is to integrate the product into the manufacturing process, providing yield analysis, yield improvement, and feedback."

The company they formed, Integration Experience, is basing its business model on three core strands:

1. virtual product engineering - applied to technology transfer from a university, or between sites of both startups and tier one semiconductor companies

2. technical audit and due diligence - they have partnered with commercialisation bodies and regional development agencies, and will carry out due diligence at various stages, either before investment, following an investment, or simply for a risk assessment.

3. materials and failure analysis laboratory - this is a longer term vision; the present work they get is sub-contracted out and they also have access to a fab in west Scotland.

Vickers says that before the end of the year, they will grow to four people, and highlights one of the key issues for a company like theirs. "We are classified as a tech startup, but because we're service based, we're not eligible for any of the startup schemes on offer from the government. So we can only grow by simply generating cash flow. We have our first customer already and several ongoing NDAs in place."

Advice to others

The advice that Vickers and Dellow have for others is to stay focused. "Make sure you don't overstretch yourselves - we were advised to be specific rather than take a scattergun approach. That's why we focused on three core areas of the services we are offering, rather than being all-singing, all-dancing. It's important to be clear in what you want to achieve," says Vickers.

Having good mentors is also important. "We have strong mentors from established semiconductor companies," says Vickers. "One of these is Jim Savage, of Silicon Glen Technology, a long established supplier to the semiconductor industry throughout the UK."

Vickers and Dellow see significant opportunities for the type of service that they are offering. "There's a lot of awareness out there in terms of what's required and where it is available from."

The biggest piece of advice offered by Vickers and Dellow is this though: "A lot of people sit around in companies saying, 'I could do this' or 'We could do that'. Our advice is - just go and try it then. By setting up your own company, it really shows what you can do or what you are capable of."

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© Chilli Publishing Ltd 2003

04AUG2003