Alain Labat, the former President & CEO of VaST Systems, told me on a phone call this week that his story, in a way, is very simple: “When we got acquired by Synopsys in 2010, 5 years ago now, our management and investors clearly saw an opportunity to start our own investment bank and advisory company, so that’s what we did.
“We believed then, and still believe, that if you need a big bank from New York or a huge amount of money [to begin your enterprise], the right people are the Goldman Sachs or the other Wall Street guys. But for a technology-based company, you need something different.
“And so, at the advice of our investors, we started Harvest Management Partners specifically for those companies who need something different. Coming from VaST as we did, with a great deal of true operational experience, we felt we could offer much-needed guidance to those companies who were not a good fit for Wall Street.
“Teaming up with Foundation Capital, NEA, ZenShin Capital, and Alan Bruce Brokerage, there was consensus among the group: There’s a need here in Silicon Valley to help entrepreneurism, technology-based companies that are not yet $200 million enterprises or growing at Google-like speeds.
“At the time, we also had a gentleman on the board, the former president of Motorola Automotive before that group was acquired. [His input] inspired us to build an automotive franchise, given that automotive was already about 30 percent of our business.
“In that same time frame, Chrysler contacted us and said they needed help sourcing critical technology; they needed advice on either acquiring technology or companies that fit with Chrysler’s road map.
“It’s been 5 years since all of this came together, and in that time we have been very successful. In fact, we are about to have another major multi-billion dollar company sign up with us.”
I asked if Harvest MP’s board perhaps understood earlier than most the importance of the automotive market for the semiconductor supply chain.
He said, “It’s funny you would ask about that. Back when we did our second round of investment, one wouldn’t want to mention automotive, because people simply wouldn’t give you money for that.
“Automotive then, oh my gosh! It was like EDA is now. No one will give you money today if you mention EDA, so don’t waste your time. It was that way back then for automotive. But things have completely changed. Today if you want to raise money, you have to have an automotive angle.
“When we sit down with C-level executives in semiconductor companies today, they are all very interested and committed to their automotive business. Clearly you can see that the game is changing when a company like Nvidia is doing a direct relationship with Tesla. That sort of thing implies a lot of disruption in the automotive supply chain.
“The focus is no longer so much on the mechanical [aspects of the car], or the power train. Instead, it’s all about the infotainment, the user experience, the thing that actually sells cars today.
“And that trend is what has driven our relationship with the FCA Group, the Fiat Chrysler Automobiles Group. The user experience that arises from the hardware selected for the infotainment system.”
I asked if Tesla can be specifically credited for forcing a re-think around the automotive supply chain.
Alain answered, “Possibly, because I believe Nvidia establishing a direct relationship with Tesla is changing the supply chain. Now you see companies like Delphi or Bosch, companies working on the infotainment platform, going straight to the silicon suppliers, bringing Tier 1 companies into their relationships. That is a very significant change.
“We believe that our job here at HMP is to make sure our clients recognize that change, and that they have the pulse of what’s happening at the silicon level.”
Emphasizing Pride of Place in the evolving automotive supply chain, Labat continued: “I like to mention, as an example, that there’s a gentleman at Stanford who has been working on a startup for 4 years. Now he has a product, but has yet to receive his first funding.
“[Luckily, he’s in the Valley], because unless you’re here, you cannot expect to see what this eco-system is trying to do for such enterprises. Having early technology, looking at early companies, seeing the differentiation – it makes a big difference if you are here.”
Referencing Harvest Management Partners’s DAC event this past June at the Four Seasons Hotel in San Francisco – an evening hosted in tandem with the FCA Group, Intel, ANSYS, and Mentor Graphics – I asked if Mentor CEO Wally Rhines keynoting there helped validate the importance of the automotive market for EDA companies, especially given Mentor’s dominant position in the automotive space compared to others in EDA.
Labat was effusive: “In Wally, I see an appreciation of the many opportunities in automotive for the companies in EDA. A company can claim to be in automotive, but in fact it takes a special kind of leadership – someone with deep knowledge, someone like Wally at Mentor – to capitalize on that opportunity.
“In both Wally Rhines and [Mentor President] Greg Hinckley, I see leadership that validates our work. They are both true witnesses to the fact that there are big opportunities for EDA in automotive, and in the larger semiconductor supply chain.
“When Nvidia started down that path 10 years ago, they were very alone. Now if you talk to any competent CEO today, whether in EDA or semiconductors, they have an automotive road map. ”
I suggested to Alain that, as a result of these changes, automotive companies today are more like system integrators than the traditional car manufacturers of yore.
Alain disagreed “I take a different view. If you look at the 11 brands in the FCA Group – Ferrari, Maserati, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Abarth and Ram – they are each different, but to a car, their value is in the branding.
“It’s too simplistic to consider car manufacturers as OEMs. The true value of what they produce is in the branding. After that, the challenge is in what’s happening below in the semiconductors.
“In my mind, thinking from an FCA Group perspective, there’s a huge amount of repositioning going on today between the semiconductor suppliers and the Tier 1 and Tier 2 companies. Toyota, for instance, has thousands of software developers, and BMW is the same.
“Basically, the game is completely changing. You cannot rely only on a Tier 1 company to get your infotainment platform, it takes so much more.
“To make things even more complex, your platform and its development must include full visibility of a huge number of cyber-security management issues, issues that go all the way down to the architecture of your CPU.
“If you don’t understand these things, if you can’t implement full cyber-security in your car, the other two or three major pieces of your infotainment system will be of far less [importance] to the customer.
“And yes, there are multiple regional and industry safety standards in place, with more coming, all designed to help prevent auto accidents. Attending to those standards [during the complex process of product development] from the point of view of the automotive supply chain is important not only for safety reasons, but also to avoid the costs of massive recalls.”
“All of these business and technology issues are hugely complex,” Alain reiterated, “and why companies looking to be part of the automotive infotainment supply chain need the help of companies such as ours.
“There’s a major shift in the automotive industry today in the midst of a very fast changing world. It’s a challenge for the OEMs, for the suppliers who are working to meet their needs, and for everyone who sees the car as a platform on wheels.
“I believe Nvidia CEO Jen-Hsun Huang first coined that phrase, and it is one that’s become more relevant with each passing day.”
“When you buy your car today,” Alain concluded, “you look almost exclusively at the driver experience. You don’t look under the hood, you don’t look at the horse power of the engine anymore. Instead, it’s all about the user experience.
“And more and more, that experience will be tied to your mobile experience. Again, an incredible change and challenge for the OEMs when it comes to the manufacturing and release of their products.
“By the way, those challenges are the same [at all price points in the automotive market]. It’s the same if you’re buying a Ferrari, a Maserati, or only paying $20,000 for your car.
“It’s really mind boggling to see it. The old models for automotive manufacturing are gone. Now it’s about everything in the cyber-experience – from security to entertainment to mobile connectivity. Changes that are accelerating with each passing day, as are the opportunities.
“At Harvest Management Partners, we’re excited about those opportunities, and believe there are many more ahead for us on our own road map.”
About Harvest Management Partners LLC
Harvest Management Partners LLC. is an investment bank based in the Silicon Valley. It specializes in visionary thinking, financial assessment, strategic marketing, plan of action development and wide-band negotiation in the arenas of mergers & acquisitions and advisory services.
HMP was involved in the Intel acquisition of DOCEA Power, and the Mentor Graphics acquisition of Tanner EDA and Nimbic.