OVP V has lost 20% per year for 11 years
OVP VI has lost 7% per year for seven years
OVP VII has lost 25% per year for two years

No wonder other VCs did not want to get involved with these underperformers by investing in Ambric…

I was REALLY surprised at your comment stating that our exsiting investors did not have the intestinal fortitude to put the amount of money needed to get us to high volume production. First you do not have insight to the tremendous lengths they went to to keep us going. If you did you could not make such an outlandish statement. Second you must not understand that funds and partnerships have policy based limitations on how much of a fund can be allocated to a given company or sector. So it is not an issue of having a “stomach” for an investment – it is an issue of having the capital resources and the partnership direction to support such investments. There are very few A or B round investors who also take the lead in a C round. We had MANY interested parties wanting to come in on the round. In sum it was more than we needed – both VC and strategic sources. The challenge was getting a lead investor to lock down in a poor macro-economic environment.

Of course investors are motivated to make a profit – that is there MO by definition. Their job as parnterns managing a fund is to manage risk and return. So your statement “Investors wanting to make money would back you” cleary does not incorporate that everything is relative. It is about percieved risk and potential return. So please do not paint this as an “absolute” – which implies that there was something fundementally wrong with Ambric.

I suggest we let this thread end here.

As pointed above, blaming the market conditions does not sound 100% convincing. My advice would be to thoroughly evaluate how much your association with OVP has cost you, including the people (if any) that they have installed at Ambric who have no industry experience and have a track record of failure. Obviously, I cannot speak for Ambric, but at NanoString this has been a big factor. Consider this: OVP has been losing massive amounts of their investors' money for over ten years; how many VCs would want to co-invest with them, given that record?

If you feel that OVP had a substantial role in Ambric's demise, you should be more vocal about it, as it would help with your asset sale. As I said, blaming everything on the capital markets is a bit thin; at the same time if OVP destroyed the business by incompetent interference (something that I had witnessed firsthand), the assets would become much more valuable when they are detached from that group. And if you can get decent money for the assets, it would help OVP as well, so everybody wins in that situation (well, except for OVP's superinflated ego, but that's another story…)

Clearly the economic conditions probably contributed to more skepticism among investors who were looking at your deal. Everything equal, investors want to invest less money than they did before.

However, the “capital calls” problem is apparently not to blame here. Explaining this was the point of the article. Read the headline and the story again.

Your existing investors had stopped backing you, well before the capital calls crunch. They couldn't stomach the amount of money you needed to get to that high volume production you needed to get to profitability. Investors are motivated to make a profit. If you were in the great position you say you were in, investors wanting to make money would back you. They didn't. And they didn't well before the capital calls problem hit.

Yes, it sounds like you created real value, and that your assets are worth something real. Congratulations to your team for getting that far. Yes, you should be out there marketing it. But you step over the line when you argue that your downfall was linked to the capital calls problem (which you tried doing in our original phone call), because it positions you to say it was external factors that killed Ambric, i.e, that you are a victim of temporary, exceptional circumstances. I don't think you've proven that.

From Global Semi Alliance's 3Q08 funding report:
“With the unstable global economy, semiconductor companies continue to find it difficult to secure funding, as the return on investment must be clear and risks easier to assess and manage. Semiconductor funding continued to follow a negative trend in Q3 2008, with both the number of semiconductor funding deals and the total value of semiconductor funding decreasing quarter-over-quarter (QoQ) and year-over-year. The total number of semiconductor deals closed in the 3rd quarter decreased by 44% YoY [57% decrease excluding solar and equipment deals]. GSA’s findings confirm the observation that venture capitalists are investing less in fabless/IDM companies because of higher design costs and consolidation….” Note that Q3 does not even include the venture-liquidity crisis timeframe, which really started hitting ~late Oct/early Nov. Also, the entire Pacific NW got just 3% of semi fundings vs 23% for California.

Matt's inaccurate 'reporting' hurts the chances of semi venture fundings in the Pac NW. .. and it inaccurately demeans the entrepreneurial achievements of a team that succeeded with customers and succeeded with a commercially proven, massively-parallel product breakthrough. The Ambric architecture was a co-winner of Microprocessor Report's Innovation Award, along with Intel's CORE architecture.

BTW – no one at Ambric ever claimed being the 'next intel'… the goal was to take significant market share from TI (DSP), Xilinx and Altera (FPGAs) in the high-end ~$5B embedded systems market. We had many design wins at hard-core DSP and FGPA-biased customers, convincing them with compelling time-to-market and development-cost advantages.

You have not clarified either of these in your piece. It is left as inference.

Perhaps you are not familiar with Semiconductor business milestones. As a veteren in this industry, “full production” means that a product has been qualified and meets objective critereia of value, quality and function. In the semiconductor space, the landscape is riddled with products that never get to this point. You did not restate here what I clarified to you in our follow on call which was that:

“Ambric did not reach HIGH VOLUME production. But it was in FULL production.”

Our volumes are dictated by our customers not by us. They are in the ramp phase of their products. The fact is that the product was of value to them to go forward in production.

To your citation of my last 'fact' – great your source is someone else – apologies for the misunderstanding. However you said I am wrong 'Not every company is told to sell – many get support….”

Please reread what I wrote “EVERY company goes through ongoing analysis of when to “exit” and when to continue seeking funding” I did not state that every company is told to sell. So I do not understand why you say I am wrong. Please clarify

To your last sentence. I am NOT trying to distort anything in the interest of trying to sell our IP and assets. I AM trying to preserve a sense of journalistic integrity around facts and not created misperceptions. Period.

Thus I ask you to state clearly – for the record, whether you believe Ambrics failure to get C round funding was in any way affected by external systemic issues or whether its failure to get funding was a function of something else.

You can not refute the viability of the product in the market. There is too much data to the contrary.

Joe

This is an incorrect statement. There have been $100m rounds over the past few months: Pacific Bio, Sapphire Energy, Range Fuels come to mind… I am not arguing the merits of the technology, I am just saying that there are money around. One venture capitalist even wrote about this today:
http://www.avc.com/a_vc/2008/12/theres-plenty-o...

There has to be another explanation of why the “next Intel” could not raise.

I wonder if OVP's track record of failure over the past 10 years has something to do with this. There are money around, I have seen some eye-popping deals close very recently. It feels like people just don't want to get associated with proven losers. As an example, the CFO that OVP put at NanoString was previously the COO of another OVP failure, Action Engine. How would he be able to go and ask VCs for money with a straight face, given that?

Ambric had successfully validated its technology, developed products, and was cultivating, successfully, a broad market. Among others, Apple, Adobe, Boeing, and others were customers or partners. It was still an “emerging growth” company however – not yet profitable, and dependent on risk capital to fund growth. That capital was simply not available.

Was it a silicon valley self-fulfilling prophecy? (”we've already tried and failed in this “space”; we've proven it can't be done so we're passing on the investment”); was it failure of management and investors? (getting tapped out, not starting initially with deep-enough pocketed investors); did the capital markets fail? (VC's hunkering down, LPs not making capital calls); is the VC model broken? (Bob Zider's contention – VCs are lemmings, not risk-takers).

Much speculation is possible. In any case, Ambric did not fail – the technology worked, products were selling, a strong funnel of blue-chip customers were stepping up. They simply ran out of money. It recalls Vince Lombardi's contention “we didn't lose; we simply ran out of time”.

Only in this case there is no “next week”. Over 70 people gave up years of effort, devoted their careers, and sacrificed families and personal lives to realize a vision. That is the tragedy.

Not sure if I'm going to cede much here, based on your points above.

You tried telling me in the phone call that the AIG capital calls mess contributed to your demise. I can see why other reporters took that at face value, especially if you expressed it to them in the way you expressed it to me. The point of the article was to make clear that you were alluding to an event that happened at the same time as your misfortune, but which did not directly lead to your misfortune.

On most of your other points, you're really splitting hairs. Your point about full production, for example, is relative. As you stated in the phone call we just had to clarify this, you admitted that the only way you'd have reached profitability was by increasing production. So yes, while you were in production, and that was “full” for you at the time, you know very well what I meant: that you needed to get to a greater volume of production to have the economies of scale to be profitable.

And you're missing the point on other information given to me by other sources. For example, in your last “fact” above, you say you never said such a thing. Well, i never said that you said such a thing. Another source told me that. I mentioned up high that I based the story on several interviews. What's more you're wrong that. Not every company is told to sell. Many get support for continued operations.

And so on.

I wish you good luck on trying your assets. But trying to distort what I'm trying to say won't help the process.

You state:
“But in Ambric’s case, the issue was just used as an excuse by the company for its demise even though it apparently wasn’t a contributing factor, according to several sources, including Ambric representatives”

Fact: Ambrics demise was stated in a press release as a failure to secure a C round of funding. Your use of “excuse” implies we were lookng for a scapegoat which I object to strongly. The tie in of broader issues was developed in the media, in articles such as the EETimes and WSJ articles you cite. Your use of “by the company” is highly misrepresentitive.

You state:
“He says Ambric is merely pointing out that the company’s hardships came at the same time as the mortgage industry crisis, led in part by the collapse of insurance giant AIG. This event, in turn, sparked a series of crises at other large investors, resulting in the widespread capital call problem we’ve discussed.

Fact: 'He' is an unreference pronoun. If I am the 'He' of reference then I will clarify that there are a number of issues that have caused the VC's to slow thier investment flow – including the AIG issue. But you failed to mention many of the other issues such as large endowment and retirement funds that have shifted thier allocations away from the venture community.

You state:
” It had successfully cleared the first hurdles for selling its products, but had a ways to go before full-scale production. “

Fact: Ambric was in “full scale production”. If you are trying to state “Ambric did not have revenues to be profitable yet”, then state that

You state:
“Ambric’s Herbst, however, doesn’t dispute any of this.”

Fact: I can not and will not speak for AEI nor will I speak as an authority on a legal contract (not possessing a law degree). I also cited that I had not reviewed the contract

You state:
“In consultation with Ambric, they realized the company needed to raise between $20 and $30 million more in order to prove its model, we’re told. So they encouraged management to sell out to a big-pocketed buyer.”

Fact: I never said any such thing and I believe you should cite your source if you are going to make a statement of this sort. I am also not sure what you are trying to imply. EVERY company goes through ongoing analysis of when to “exit” and when to continue seeking funding. So this statement bears no unique insight to the plight of Ambric

You left me hanging on what you believe are the systemic issue that affected the plight of Ambric. If you feel that Ambric's inability to secure a C round was independent of the broader systemic issues then state that.