Silicon Valley was built on the invention of the semiconductor and the companies that semiconductors spawned. But most venture capitalists are now more interested in backing Internet startups, which are cheaper and can deliver faster returns.
- Bloomberg News
- SK Hynix memory chips. The South Korea company is the world’s second-largest maker of memory chips, but its parent company wants to boost chipmaking in Silicon Valley.
For SK Telecom Americas, which represents the interests of South Korea’s SK Telecom Co. in the U.S., the lack of innovation in core hardware is a problem. So the company has started a new program, the SKTA Innovation Accelerator, to try to bridge the funding gap.
The move was motivated in part by SK Telecom ‘s acquisition in 2011 of a stake in Hynix Semiconductor Inc., a large maker of memory chips whose customers include Apple Inc.
Venture capital investment for traditional hardware startups has declined over the years to the point where innovative companies are no longer getting funded, according to Min Park, the president of SK Telecom Americas. The dearth of capital also means fewer opportunities for companies like SK Telecom to find and incorporate innovations.
“We all agree it’s a serious problem,” Mr. Park said.
The telco has now opened a facility in Sunnyvale, Calif., that is expected to house as many as 11 startups. Entrepreneurs are offered as much as $1 million worth of capital, professional services and development tools, and they are paired with mentors in technology, marketing and other core areas so they can quickly develop a minimum viable product. The idea is for startups to graduate in eight to 12 months.
If the startup develops and meets its milestones, it can raise more funding–perhaps from SKTA’s corporate venture group and other venture firms and strategic partners–and ultimately get acquired.
So far, the accelerator has received more than 300 applications and has already funded two startups, with more in discussions, Mr. Park said. For the first year, it’s allocated $7 million to $10 million for investments.
SK Telecom Americas is also partnering with Walden International and Tallwood Ventures, two firms that have a history of investing in hardware, and is advised by Ken Lawler, now a senior adviser to Battery Ventures.
Mr. Lawler built his career on investing in semiconductors, but the venture community has “pretty much abandoned it” and the government, especially after its problems backing clean-tech startups, can’t be counted on to help. So the money has to come from strategic partners like SKTA, he said.
“Is this model necessary, yes. Is it sufficient, no, [but] this type of pioneering is absolutely necessary and the right way to go,” Mr. Lawler said. Also, he added, it’s a place to send the hardware entrepreneurs who contact him looking for funding and “give them a little hope.”
Write to Deborah Gage at deborah.gage@wsj.com. Follow her on Twitter at @deborahgage
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