Crossing the Chasm by Geoffrey Moore (not that G. Moore!) is one of the most well known books on high technology marketing. When I worked at VaST, Mohr Davidow Ventures (MDV) invested in us and Moore (not Mohr), who was a partner there, spent an afternoon with us brainstorming what it would take for us to cross the chasm. Coincidentally, Crossing the Chasm is actually a similar, but more readable, version of an earlier book called Marketing High Technology by Bill Davidow (yes, the D of MDV) which is where the concept of the whole product was introduced. The key insight of both books is that while early adopter enthusiasts will do a lot themselves to compensate for missing pieces of the ecosystems, the mainstream will not. Having a whole product that is ready for the mainstream is really what it takes to get across the chasm.
Jim Hogan and EDAC have been running a series of discussions with founders of EDA startups on what it takes to cross the chasm. Kathryn Kranen (of Jasper, now part of Cadence), Ravi Subramanian (of BDA, now part of Mentor) and Amit Gupta of Solido (still independent). The next evening is in December but I don’t yet have a date. The guest will be John Lee, now a VP at ANSYS having been the founder and CEO of Gear before selling it to them.
I sat down last week with Jim and Amit to talk about what it takes to get over the chasm. Very few EDA companies cross the chasm to, say, $5-7M in revenue. It is fairly easy to get to $1M, everyone has some friends. But $5M to $10M to $20M is a hard progression to achieve. I should point out that Amit’s views are not just based on Solido. He was the founding CEO of Analog Design Automation (ADA) which was acquired by Synopsys in 2004.
I read somewhere that listicles are click-bait on the net, so here is a recipe listicle style:
If and only if (aka iff for mathematicians) you successfully complete all these steps do you have a shot at crossing the chasm. Then you can read Geoffrey Moore’s next book Inside the Tornado (which uses Synopsys as one example). This is the point at which you throw gasoline on the fire. In my opinion, it is the critical decision point in an EDA company (and many other types): when do you ramp sales. Too early and you run out of money paying a sales force who cannot sell the immature product. Too late and…this never happens.
Then you need to:
Then in the third phase there is a very short list:
For the biggest picture of all, the whole company, there are also a few rules. First, never take more than $10M in investment ($5M is better) or it will be really hard to sell in a way that makes everyone whole (carve-out and cram-down are not good words). Patents are important, research shows $300-900K per patent in additional exit valuation over and above forward revenue multiple. But don’t do too many since they are expensive to file and expensive to maintain. Market the company too, not just the product. Sell the sizzle as well as the steak.