VentureBeat

The hardest thing about starting a chip company these days is the cost. A big team of engineers has to work for 18 months or more to create a custom chip. Then it takes $1 million for the templates, or masks, that the factory needs to stamp out the chips. It takes 16 weeks for the chips to run through the factory.

The cost can hit $65 million before all is said and done. eASIC, a start-up in Santa Clara, Calif., is working hard on attacking these problems so that chip start-ups — which are kind of a dying breed in the inappropriately named Silicon Valley these days — can flourish again. The company has figured out how to reset the cost equation so that even complex chips can be affordable to design and don’t take as long to make, said Ronnie Vasishta, chief executive of eASIC.

Since the ante for chips is so big, the number of custom chips that are being designed has declined for the past decade. But since eASIC debuted its start-up friendly design process in 2006, the company has won more than 120 customer designs. Today, it is launching a second generation of its design process, Nextreme 2, that may make its customers even more competitive with the biggest chip makers.

eASIC said it will let customers design 45-nanometer chips (the number refers to the microscopic width between circuits), with the first chips coming out sometime this fall. Previously, only the biggest of chip makers, such as Intel, had access to the 45-nanometer technology. eASIC will be using a contract chip manufacturer, Chartered Semiconductor, to make its 45-nm chips.

eASIC combines two traditional chips: the application specific integrated circuit (ASIC, a $20 billion market) and the field-programmable gate array (FPGA, a $3.7 billion market). As such, its competitors are big companies that range from Toshiba to Xilinx. Some companies such as Altera , On Semiconductor’s AMI Semiconductor division, and a partnership of IBM and Xilinx have tried to create hybrid models of ASICs and FPGAs. And companies such as Tensilica and eSilicon are also trying to cut the high cost and time it takes to design ASICs. But there are built-in trade-offs to the designs.  Vasishta says that eASIC’s recipe maximizes customization without requiring extensive chip rewiring.

ASIC chips are fast and low cost, but they are expensive to design and take years to finish. FPGAs are generic chips that can be programmed quickly at the last minute to fit a rapid product cycle. But they cost a lot and are slow.

eASIC can fuse these chips by creating generic chips that are inexpensive to make. But it allows for full customization by allowing the customers to add the final layer of metal on top of a nearly-finished generic chip. This kind of customization cuts factory turnaround times and costs because it doesn’t take much time (just six weeks) or special design work to add that last metal layer. The upfront design costs can be as low as $20,000 to $100,000, much lower than the cost of designing an ASIC.

The chips therefore have the hybrid benefits of the full customization of ASICs and the short turnaround times and flexibility of FPGAs. The promise of eASIC is that it can make it a lot easier for start-ups to get to market faster. That is why it has been able to raise $80 million to date from Khosla Ventures; Kleiner Perkins Caulfield & Byers; Crescendo Ventures, Evergreen Venture Partners and Advanced Equities. Most recently, the company raised a $48 million round in March.

Getting to 45nm is a big accomplishment, since only 14 other chip makers have made such announcements. Vasishta said that the company started with 90nm technology and decided to skip the 65nm generation. For the past two years, it worked on delivering a 45nm technology that would leapfrog many competitors and put the company in lock step with giants such as Intel in the technology race.

Customers are making chips for a wide range of applications, including security cameras, cameras, smart phones, and a variety of consumer electronics and computing gear. While ASICs often require huge orders to offset the engineering costs, eASIC doesn’t require minimum orders. Roughly 30 percent of the company’s customers are billion-dollar chip makers, while 40 percent are start-ups.

Customers are expected to use eASIC’s tools so that they can begin fabricating the first 45nm designs later on this year. The first product will be a new graphics chip, Vasishta said. Full told, eASIC customers should be able to get into the make with $150,000.

Breach Security has raised $6 million in a second round of funding to expand its business of making web application firewalls that stop hackers.

The Carlsbad, Calif.-based company creates a security appliance, dubbed WebDefend, that can check incoming traffic for malicious software at a high speed without slowing down a web site, said Mike Pierce, chief executive of the company. The company licenses the appliance for a $75,000 one-time fee. WebDefend protects more than 15,000 commercial sites such as Overstock.com, Audiotel, and Sovereign Bank. Sites like these can’t be slow, but the risk of a security appliance is that it could slow down the site for Internet visitors as the appliance scans for possible attacks.

The investment shows that the security sector is hot enough to see frequent new fundings. Identity theft and regulations requiring companies to protect consumer data are driving corporations to improve security.

As identity theft or embarrassing web hacks grow, everything in the security technology chain is getting a makeover. IBM bought Watchfire for an undisclosed sum last year to improve security for applications. Chip makers such as Pixim, which are selling chips for security cameras being installed in places such as China, have raised money. Cisco has started a security camera business. Accertify received money from Intel Capital to protect merchants against credit card fraud. And Webalo is protecting company data from being stolen via mobile browsers on purloined cell phones.

“At the time we started, the bad guys weren’t as sophisticated and were preoccupied with defacing web pages,” Pierce said. “Now it has escalated to the point where they do it for profit. We have had to take our products to the next level.”

Enterprise Partners of San Diego, SRBA No. 5 of Los Angeles, and Evergreen Venture Partners of Israel participated in the round. To date, the company has raised $32.5 million since its founding in 2004. The company has 65 employees.

The company’s most direct competitor is Imperva, which raised a $20 million fourth round in April. Others include Citrix Systems and F5, both of which provide load-balancing servers but also have features such as a web application firewall.

Breach Security is trying to stand out because it inspects Internet packets more deeply than other products do without slowing down a site. It does so in real-time, protecting against attacks where speed is of the essence. Pierce said the company can install the appliances within a day.

Do chip start-ups really exist anymore?

Not seeing many, we were going to propose changing the name of Silicon Valley to Social Networking Valley. But now eASIC, a maker of rapid-turnaround custom chips, comes along to remind us that it’s still possible for start-ups to raise more money in the semiconductor field.

eASIC says today they have raised $48 million in a new round of venture funding from Khosla Ventures and Kleiner Perkins Caufield & Byers. The company says its combination of speed-to-market and customization gives it the benefits of two different kinds of chips: field programmable gate arrays (FPGA), which have a fast turnaround, and application specific integrated circuits (ASIC), or low-cost custom chips.

It takes a big bet like this to get funding for a chip company these days. Asked if he had any trouble raising money, Ronnie Vasishta, CEO of eASIC, said, “We didn’t go out to pitch widely among VCs this time. Maybe we might have got that reaction about not being a social networking company if we had. The shine has gone off the silicon a little bit. But we have a very big opportunity.”

The ASIC industry is about $20 billion, but the number of ASICs being designed has fallen. Only the highest-volume chips can be made as ASICs, given the high upfront costs. The FPGA industry, meanwhile, is about $3.7 billion.  ASICs go into just about every major consumer electronics product, from TV sets to set-top boxes and game consoles. eASIC has a chance to steal some of this share from the ASIC business and enable new devices where entrepreneurs aren’t counting on selling millions of units at the outset.

It has been eating away at the ASIC share, on and off, because FPGAs can be made in rapid product design cycles. Vasishta says that by making chip design easier and less expensive, eASIC could make life easier for chip startups and thereby enable more of them, even if they aren’t doing Facebook applications.

Normally, it takes $1 million of design resources and a 16-week production process to make an ASIC. Santa Clara, Calif.-based eAsic can create custom chips without the up-front engineering costs and deliver its chips within four weeks. The upfront design costs are typically only $20,000 to $100,000, said Vasishta.

eASIC can do this because it spent about five years, from 1999 to 2004, figuring out how to customize a generic chip with a minimum amount of headaches. It can now do so, Vasishta says, by laying down a single layer of metal on top of a nearly-finished chip at the very end of a manufacturing process. In the past, other companies have tried to do this, including Vasishta’s alma mater, LSI Logic. But too often those attempts required more elaborate customization procedures on multiple layers in the manufacturing. Hence, they weren’t as fast or low-cost, he said.

The chip architecture is fairly modular itself and that makes it more predictable to manufacture, Vasishta said. Thus, the chip has the flexibility of a FPGA — which are typically easily programmed but available at high costs — without the additional costs of one. Vasishta also says that his chips consume 10 percent to 20 percent of the power of an FPGA.

A chip design takes perhaps a couple of months. Then, once the design is finished, a customer can get a chip out of the factory in four weeks. By comparison, ASIC chips normally take about 18 months to deliver.

Also participating in the round were Crescendo Ventures and Evergreen Venture Partners. eASIC’s chief financial officer, Craig Klosterman, also invested in this round.

The company says that it has customers with a wide variety of applications such as portable video devices, cell phones, wireless base stations, routers, gateways, video surveillance, digital displays plus others.

Khosla Ventures, headed by founder Vinod Khosla, participated in earlier rounds. Earlier investors also included Advanced Equities Inc. To date, the company has raised $80 million.

Part of the reason is that the company spent a lot of time in development with ST Microelectronics, the European chip maker. eASIC has been shipping the 90-nanometer version of its chips since 2006 and it has customers among the top-20 semiconductor companies as well as a number of consumer systems companies.

Featured companies: ActiViews, ChemShop, Freedom-2

ActiViews raises $5M for medical-imaging systems — Israel’s ActiViews, a developer of technology for enhancing MRI and PET scans, raised $5 million in a first funding round. Investors included Ofer Hi Tech and Evergreen Venture Partners.

ActiView’s system provides real-time analysis of medical images used to guide invasive surgical procedures. Current practice often requires multiple scans, which are expensive and involve radiation exposure that can cause further harm. ActiView’s technology is designed to reduce the number of scans required to locate tumors for biopsy or removal.

Cambridge Major Laboratories acquires ChemShop — Cambridge Major Laboratories, a Germantown, Wisc., provider of outsourced chemistry services to the pharmaceutical industry, acquired ChemShop of the Netherlands. The release is here.

The companies didn’t disclose terms of the deal. The combined company will have 140 employees at three sites in the U.S. and Europe.

Freedom-2 raises $5.4M for removable-tattoo inks — Freedom-2, a Cherry Hill, N.J., developer of permanent but easily removable tattoo inks, pulled in $5.4 million in a second round of funding raised by its holding company, Freedom-2 Holdings. Independent investors provided the funding.

The company’s Infinitek ink system uses bioabsorbable pigments that are encapsulated in microscopic polymer beads. Tattoos inked with the system are permanent, but easily removable by laser treatment htat breaks the beads, allowing the body to reabsorb the pigment.

Knocka.tv is a new video site from the creators of ICQ, the successful early instant messenger service.

The site, yet to launch publicly, boasts a new form of television that is “hyperinteractive” and “democratic” and while there are more than enough video sites out there, the pedigree of its founders and the frenetic promotional video on Knocka’s preview site intrigues.

This ad features tiny clips of user-generated video, spliced together and set to a perpetually shifting soundtrack. Among other things, we see sexy women strip teasing, a man dressed in a lab coat destroying an iPod in a blender, and a brief animated clip of a creature with a cleaver lopping the heads off of cute animals.

At some points, a counter in the lower left corner seems to measure the number of people watching at the moment. In two clips, it says “producer online now,” suggesting that viewers may be able to engage the content’s creator as they watch.

The site is in private beta, and we’re trying to find out more. It looks like the company wants to build a network of producers and make an online TV station that will let viewers to interact with the content (and perhaps each other) to determine what gets played. Whether Knocka will allow embeds is unknown, but the interactive functions it is touting suggest a desire to be a destination site. If this is the case, Knocka will have to be both revolutionary and highly successful to attract and keep the content producers it’s going to need.

Update: Alarm:Clock says the company raised $1 million from Evergreen Venture Partners, an Israeli firm, in June.