VentureBeat

In an endorsement for wireless video networking, Panasonic and Samsung said today they have invested an undisclosed amount into SiBEAM, the maker of high-speed networking chips.

Sunnyvale, Calif.-based SiBEAM makes WirelessHD chips that can wirelessly transfer video from one device to another in a living room. The SiBEAM chip sets operate in the 60 gigahertz band of the wireless spectrum. It’s difficult to make radio chips that operate at that frequency, but there is very little interference.

The networking speeds are fast enough to transfer high-definition video over short ranges in a living room. Wi-Fi networking is in place in many homes for wireless Internet access, but HD video is very demanding and requires better speed and quality measures to be moved wirelessly without a loss in picture quality or frame rate. That’s why SiBEAM and its rivals have been working on better technology.

The move shows that big consumer electronics manufacturers still believe in wireless video networking despite the failure of WiQuest, one of the chip makers in the rival Ultrawideband, or UWB, camp. But UWB radios can only transfer data at about 110 megabits per second over 10 meters.

Wireless video has been promoted as the key technology needed to simplify the networking of all sorts of online-connected gadgets, including game consoles, Blu-ray players, set-top boxes and computers.

SiBEAM is garnering support for a consortium built around its WirelessHD standard. That group includes Panasonic and Samsung. Other members include Broadcom, Intel, LG Electronics, NEC, Sony, and Toshiba. But the big consumer electronics companies are also spreading their bets to ensure that some kind of wireless video takes off. While Panasonic has been a backer of SiBEAM since 2006, Samsung and Sony have embraced multiple solutions.

Sony has used proprietary wireless technology from Israel’s Amimon on a new Bravia flat-panel TV that is being launched in Europe and Japan. Samsung is also a member of a group of companies that is trying to turn Amimon’s technology into the WHDI standard. The Amimon solution is slower than SiBEAM’s since it uses the 5-gigahertz radio spectrum, which is crowded with different wireless devices.

John LeMoncheck, chief executive of SiBEAM, said in an interview that support is shifting to WirelessHD as product launches near. SiBEAM has been sampling its chips for a few months now, but LeMoncheck declined to talk about volume production. He said that products are expected to be on store shelves in 2009.

SiBEAM was founded in 2004 by a team of University of California at Berkeley researchers. They wanted to make chips that transfer data using the 60-gigahertz band of the radio specturm. The company raised a seed round of $1.25 million from New Enterprise Associates and US Venture Partners. In 2005, the company raised $15 million from NEA, USVP and Foundation Capital. In August 2006, SiBEAM raised $21 million from the same second-round investors. Earlier this year, it raised a $40 million round led by NEA. The company has 90 employees.

Last week, the wireless chip startup WiQuest shut its doors after its VC backers gave up on the maker of ultra-wideband (UWB) wireless chips. The closure of the firm with 120 employees and $54 million in funding raises a question about the nascent UWB technology, which provides high-speed data wireless links over a short distance. But supporters of the technology say one company’s failure won’t sink the industry.

For years, UWB technology has been a solution looking for a market. In essence, it’s meant to move high-quality digital video from one gadget in a room to another at a high speed.

The WiMedia Alliance, which has more than 350 member companies, developed the standard based on the UWB technology. UWB devices can transfer a theoretical 480 megabits a second of data over a couple of meters and about 110 megabits a second over 10 meters. It was a good alternative for transferring high-definition video within a room from a set-top box to a TV. Wireless USB wire replacement equipment can transfer data at about 220 megabits a second over a few feet.

The technology itself can be used for a variety of applications. That flexibility prompted one group of companies to use UWB as the technology for wireless USB (universal serial bus), where the wireless technology could replace the wires that connect a computer to a monitor or a keyboard to the computer. The WiMedia Alliance also hopes that the Bluetooth standard will adopt UWB in faster versions of the Bluetooth wireless connectivity solution, which is used as a “personal area network,” or PAN, for connecting devices to each other or to printers.

But the shutdown of Sequoia-backed WiQuest in Allen, Texas, raises big questions. Intel was also once developing a UWB chip set but abandoned that project in favor of investing in UWB startups. Linley Gwennap, an analyst at the Linley Group, says you can probably stick a fork in this technology now.

One of the problems was that the companies that led with the technology tried to get other companies to back their version of a standard. But a standard battle erupted that took several years to resolve with Intel, Texas Instruments and Staccato on one side and Freescale and others on the other. The WiMedia standard was only adopted at the end of 2005.

The first chips came out two years ago, but they were expensive solutions requiring two or three chips. And in reality, those chip sets transmitted data far below the theoretical speeds. Market researcher In-stat said only 100,000 or so UWB chip sets shipped in 2007, with the figure expected to grow to 190 million by 2012. Products that have hit the market include a wireless USB adapter from Kensington.

The slower-than-promised chips were a disappointing outcome for a technology that had been promised for more than a decade. The Federal Communications Commission started looking at proposals for the use of air waves for UWB technology in 1998. It finalized its ruling in 2002.

It allowed companies to use a broad frequency range of 3.1 gigahertz to 10.7 gigahertz of the wireless spectrum, but it limited the range to 10 meters or so in order to ensure there was no interference with police, fire or military radios. The first low-frequency chips did run into interference, so now the new chips are focusing on 6-gigahertz and up.

There are now single-chip solutions coming out, but WiQuest’s own single chip solution came back from the factory dead on arrival. That is, the first prototype didn’t work and it meant the company would need months of reworking. Rather than put more money into the company to fix the chip, the VCs shut it down. Stephen Wood, the WiMedia advocate at Intel and president of the WiMedia Alliance, still believes that one company’s failure won’t doom the industry. He believes that cheaper chips will solve the adoption problem.

“This is a natural phase we are going through where the technology is evolving, the industry is maturing, and consolidation is happening,” Wood said.

The first chip sets were $15. At $8 a chip, where many of the solutions are now, laptop makers and desktop computer makers aren’t likely to adopt the technology. Once it moves to $4 a chip, then Wood believes adoption will take off, just as it did with technologies such as Bluetooth. But a technical article notes that prices are at about $20 now and will hit $5 in 2010.

Wood noted that the technology started with 14 startups, a situation that everyone knew wouldn’t last. Today’s surviving UWB startups include Alereon, Wisair, TZero Technologies, and Staccato Communications. Other players include Realtek, NXP/ST Microlectronics, Sigma Designs, and CSR. Samsung demoed wireless USB technology a couple of weeks ago, hooking cameras, cell phones, TVs and computers to each other via Alereon’s chips. Laptops with wireless USB options built into them are coming from Dell, Lenovo, NEC, Fujitsu, and Toshiba.

But some companies are shifting gears. Radiospire is now shifting from UWB to a new technology, dubbed 60-gigahertz wireless, for transferring high-definition video. SiBeam has also moved ahead with its own rival Wireless HD technology for transferring data using the 60-gigahertz spectrum. TV makers such as Sharp, Panasonic, Mitsubishi and Samung are supporting it.

Meanwhile, Wi-Fi is trying to move up from the 54-megabits per second range to several hundred megabits a second via the 802.11n standard. But Wood says Wi-Fi is still fraught with transmission quality problems. He notes that both Bluetooth and Wi-Fi, which are now pervasive in a wide range of gadgets, also had very slow starts. New radios can take five or more years to gain adoption, especially with regulation and the development of new chips involved.

Over time, new uses will emerge, as people start to download movies from set-top boxes or the TV directly to handheld devices such as the iPods of the future. Wood sees the day when you can download a movie from a kiosk to a handheld just before you get on an airplane. You could do the same for gadgets in cars, or upload camcorder videos wirelessly to a TV. That could be a long way away from today, unfortunately.

When the stock market goes into the dumps, it takes a while for the effects to trickle down to start-ups. That’s because start-ups are often are working away on a project that’s isolated from the larger market — and if they’re lucky, they have money from venture capitalists.

For the start-ups with no angel or VC backing, forget about raising money. They’re going to have trouble immediately. VCs are paying too much attention to their existing companies. But what about those lucky ones — those who already have a venture backer? The conventional wisdom is those companies will have an easier time getting money again when they need it, because VCs want to make sure the companies survive long enough so that they can earn a profit on the investment.

But it comes at a price. When the entrepreneur returns to the VC, an epic battle ensues over valuations. In a climate of fear, the power pendulum swings back to the VCs. The VC knows that an entrepreneur won’t be as likely to get money elsewhere, so he plays hardball. The entrepreneur is more ready to cave in on the valuation. That means when a VC gives the entrepreneur money, the VC can claim more ownership of the company with a given amount of investment (because the company is worth less.) Tension rises, and boardroom fights begin. I saw it all unfold last time, when I started covering venture capital in 2001.

Let’s take a look at the valuations of start-ups during the last boom, and how they trended in subsequent years. The National Venture Capital Association’s statistics are about as good as we’re going to get. They aren’t perfect, because they rely on valuations as voluntarily provided by the NVCA’s member venture capital firms, so the sample size may be too small to be completely reliable. But with that caveat, they do show that from 2000 through 2003, valuations fell pretty hard. You can see it took a while for the valuations to hit bottom, even though the market crash took place in mid 2000.

What does that mean for today? Well, the market’s crash these past two weeks is too fresh to have worked itself through the system. Companies are in the middle of tension-filled negotiations with their venture backers, but we don’t have any stats yet.

Now lets take a look at some recent valuations at one of the most aggressive venture capital firms in Silicon Valley: New Enterprise Associates. That firm has demonstrated how it has offered very rosy terms to entrepreneurs in recent years, bidding up value levels of companies like SolFocus and SugarCRM by offering large amounts of cash for relatively small ownership stakes. It did so because it believed: 1) the deals were competitive and NEA wanted to participate, and so outbid other venture firms to do so, and 2) because it has more money than other venture firms, and so was mandated to put its money to work.

That’s a decent strategy when you’ve got a robust economy. But when the market turns negative, NEA will have difficulty justifying these valuations. They and other investors are more likely to negotiate tougher. In some cases, the dreaded “down round” will emerge, which is where a VC invests at a valuation lower than the company’s previous ones — a particularly brutal snub because it suggests the company has lost value since it raised its last round.

NEA is the leading VC firms this year (so far) in the amount invested. The firm is second in the total number of deals (again, so far this year) to Draper Fisher Jurvetson. I don’t mean to pick on NEA. But the folks at PE Data Center have provided three examples of the firm’s investments, and they’re good for illustrative purposes:

SiBeam (formerly Silicon Microwave Systems) — The Sunnyvale, Calif. company is a developer of chips for the wireless industry. In March, the company closed a third round of funding (Series C) totaling approximately $40 million, alongside U.S. Venture Partners and Foundation Capital. The post-money valuation was $138 million, or exactly in line with the most recent average valuation of late-stage private companies, as provided by the NVCA (see chart). However, as you can see from the last boom-bust, late stage valuations came down significantly. That’s not to say we’re going to see exactly the same scenario play out this time (last time, it was a tech bust, this time it is a credit bust, and companies are generally on much sounder footing). But with the market closed for new IPOs and companies slamming the breaks on acquisitions (they feel poorer, because their lower stock prices are their main currency), there’s no doubt that late-stage companies are going to get seriously slammed on the valuation side if they raise money this year.

CVRx –  The Minneapolis, Minnesota, company develops implantable devices designed to control hypertension. The company has raised several rounds of financing and New Enterprise Associates has participated in all of them. Other investors in the company include ABS Ventures, Kearny Venture Partners, SightLine Partners, and InterWest Partners. The company raised a third round $30 million in May 2006, at a valuation of $95 million, and then raised $65 million fourth round in April 2007 at a valuation of $267 million, and then a fifth round of $84 million in July year at a valuation of $424M valuation. Needless to say, those recent valuations are extremely high. Who knows, the company may be good enough to justify it. But expect them to come down, especially in light of the general decline in valuations for the health-care sector in general (see the chart below, courtesy of Dow Jones VentureSource).

DreamFactory Software – The Mountain View, Calif. company offers on-demand software, and raised a first round of $5.8 million at post-money valuation of $16 million in 2006. Then it raised $3 million more in March 2008, at a post valuation of $24 million. New Enterprise Associates led both rounds financing. As you can see from the charts, the valuations of the earlier rounds didn’t drop as significantly during the last bust. Earlier stage companies will have it slightly easier than later stage private companies. They’re more protected from the market, because they’re not searching for an IPO just yet. However, that’s not to say that investors won’t fight to hard to lower valuations even at this level.

Third quarter statistics on valuations won’t be out for another couple of months. And even then, those stats won’t reflect what happened in the current fourth quarter, which is when the real pain will be felt.  It may be next year before we can give a serious assessment of the true fallout for start-ups. Expect to see more companies go out of business too, as VCs in some cases decide not to invest at all.

Sarah Lacy has some interesting thoughts on the future of the VC industry, by the way.

[Image credit: Salim Virji]

SiBEAM, a company developing technology to stream high definition video more quickly than any existing technology, has raised $40 million in third round of funding.

The financing was led by New Enterprise Associates. The other firms backing up SiBEAM are Foundation Capital and U.S. Venture Partners.

SiBEAM, of Sunnyvale, Calif., is developing a technology called WirelessHD. The technology helps you move rich, high-definition data like video wirelessly from one gadget to another, such as from your portable digital video camera to you TV. We’ve covered the company earlier.

WirelessHD competes with WirelessUSB and WiFi. Wireless USB transfers data at a speed of 480 megabits a second over three meters, while wirelessHD uses the 60-gigahertz spectrum and works in higher speeds, starting at four gigabits at 10 meters and with the theoretical maximum speeds of up to 25 gigabits a second, as the technology matures. That is more than ten times faster than WiFi solutions.

SiBEAM is the first company to build 60GHz chipsets using a complementary metal-oxide semiconductor (CMOS) technology that lowers the costs of the WiHD solution so that it’s affordable for the mass market.

With the money raised, the company hopes to get is the first WiHD-gadgets to shops by the end of this year.

If SiBEAM succeeds, it will be remarkable. The video market is huge, and who wouldn’t want to download videos faster?

The first devices available to consumers will be “little adapter devices” that are used with the existing gadgets like TV, HD movie players, camcorders and gaming consoles, says John LeMoncheck, the President and CEO of SiBEAM.

The price of the adapter is expected to be on par with WiFi adapters. With the adapter, WirelessHD can be used with old gadgets. WirelessHD chips embedded to new TVs and other new gadgets will appear in shops in the beginning of year 2009, LeMoncheck says.

If you’ve just bought a flat-screen TV, and want to transfer hi-definition video from your laptop or camcorder to your TV, you can buy the adapter — instead of having to buy a new TV.

He says that the main target for the solution is new flat screen TVs. WiHD will work with a range of ten meters, so it’s meant to be used between the devices in one room, not in the whole house.

John LeMoncheck said he is convinced that WiHD will win “the battle of wireless technology” and become the standard in wireless. WirelessHD is promoted by SiBEAM, Intel, LG Electronics, Panasonic, NEC Corporation, Samsung Electronics, Toshiba and Sony. The companies formed a group to promote WirelessHD standard in the year 2006.

SiBEAM was founded 2004 by experts in wireless communications from the University of California, Berkeley and the private industry. The company has 80 employees.

Silicon Valley chip company Amimon has released what it says is the first ever chip that serves high-definition uncompressed video wirelessly across the whole home.

That’s a bold claim, but could be true. The young Santa Clara, Calif. company’s chips stream HD video up to 150 feet, at an effective 250 to 800 megabits per second, which matches the capacity of the best of the numerous competing chip makers, many of them using Ultrawideband technology. (Amimon actually boasts that its chips offer video at 3 gigabits per second, but it is forced to strip out some of the video quality — see pdf — to operate within the regulated confines of the 5 gigahertz band, which is the same Wifi, thereby reducing that capacity significantly.)

The chip should spur on the HDTV revolution, allowing consumers to more easily equip their flat-panel TVs with wireless technology. The company’s founder Noam Geri writes about the constraints of the industry until now, and why uncompressed wireless video streaming is important

Many other young chip companies offering wireless video transmission are using UltrawideBand technology, which can transmit a robust 500 megabits of data a second — roughly 10 times today’s WiFi speeds.

Last year, Amimon raised $14 million in a second round of funding, and got another round from Motorola earlier this year.

It follows a series of investments into other wireless broadband chip companies such as SiBeam, Artimi, TZero, Airgo and Ruckus.

SiBeam says it can transmit at 4 gigabits per seconds, using the 60GHz technology using standard (super fast). However, it doesn’t extend 150 feet. It reaches 10 meters, and says it has limited its range to that because Hollywood content owners fear that anything greater could subject it to hacking or access by others.

(Updated to correct reference to Artimi’s total funding)

SiBeam, a start-up based in Sunnyvale, Calif. company, has emerged from secrecy with a chip it says transfers uncompressed high-definition video to an HDTV from a set-top box or other source.

Transferring high-definition video wirelessly is something several companies are offering — all of them in various stages of development and each using different technology. This could permanently remove wires from your home. Few of the companies offer the transfer uncompressed like SiBeam though.

There’s an explanation of its technology here.

However, it’s not clear at all who is going to buy this technology, and whether consumers really care about uncompressed versus compressed (SiBeam says uncompressed is more secure and may appeal to content producers worried about pirating).

It uses 60GHz technology using standard CMOS.

Artimi, a company with U.S. headquarters in Santa Clara, has raised $26.5more than $50 million in funding to develop its chip using ultrawideband technology, focused on portable devices. UltrawideBand can transmit up to a whopping 500 megabits of data a second — roughly 10 times today’s Wi-Fi speeds. Another player, Tzero has raised more than $38 million. Then there are WiFi-focused companies like Palo Alto’s Airgo Networks which say their technology can do just as well. Airgo was snapped up by Qualcomm after raising $130 million. There’s also Ruckus Wireless, which has raised $30 million (see coverage).

SiBeam itself has raised $38 million from Foundation, NEA and US Venture Partners.

“The big question is do consumers want any of this stuff, (and) how much extra is this going to cost them,” says Brian O’Rourke, analyst at In-Stat, to the Mercury News