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DFT Microsystems has proven that venture capital can be found if
you have a market-ready technology. The McGill University spin-off has
raised $4.5 million to commercialize a new testing system for microchips
- one with the same bells and whistles as bulky million-dollar machines,
but at a fraction of the cost.
Not all early-stage research leads to a commercial product, but every
so often you do hit pay dirt. Over the past year, DFT Microsystems has
captured the attention of the venture capital community with a technology
that has been over a decade in the making, with funding support from Micronet
and the Natural Sciences and Engineering Research Council (NSERC).
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Enabling microsystems innovation
Micronet is a Canada-wide network of investigators from universities, industry and government research organizations working cooperatively towards the development of the next generation of microelectronic systems. Its focus is one of pre-competitive research dealing with the development of Systems on a Chip for communications, information and instrumentation systems.
Micronet has an annual budget of about $4.3 million, which includes an award from the Networks of Centres of Excellence, industrial contributions and matching grants by the Natural Sciences and Engineering Research Council.
The NCE funds provide considerable leverage to the direction and industrial relevance of the research undertaken by Micronet's university investigators, who control an additional $7.5 million in research funding from alternate sources.
Over the last year, Micronet has continued to mobilize Canada's research talent in the academic, private and public sectors to strengthen the competitive ability of the Canadian microelectronics and information technology industries.
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Dr. Gordon Roberts, the James McGill Professor of Electrical and Computer Engineering at McGill University, along with his graduate students, has developed a powerful and cheaper alternative to the highly sophisticated machines that the semi-conductor industry currently uses to test analog/mixed-signal microchips.
Dr. Roberts explains: "With traditional electronic testing, you connect wires from the chip to the test equipment. We're switching it around. Instead moving the signal off the chip to test the equipment, I'm building the test equipment directly into the chip. I can't think of any other company out there that can make that claim in regards to analog measurements."
The result is that bulky, multi-million-dollar testing machines can be replaced by equipment that is a few millimetres in size and operates at the same speed as a chip's signal processes. Also, since up to 50 percent of the cost of chip production occurs at the testing stage, the technology offers the promise of cheaper microchip-enabled consumer products.
It would take several years of R&D before the technology would be ready for a commercial debut. For Dr. Roberts, the opportunity to move the system from the lab to the market arrived last year with his launch of two new companies - DFT MicroSystems Canada (DFT Canada), a Canadian corporation based in Montreal, and DFT MicroSystems, a Delaware corporation based in Philadelphia. Roberts is now President and Chief Executive Officer at DFT Canada, which counts several McGill engineering graduates among its staff, including many who have worked on Micronet?sponsored research projects.
The combination of proven technology and the calibre of its engineering talent helped convince a major venture capitalist that the company was a good risk. In October 2002, MSBI Capital of Montreal invested $420,000 in seed financing in DFT, and in July 2003 followed that up with an additional $4 million.
MSBI partner Chris Arsenault describes DFT as a company with a
strong intellectual property base and one that "is gaining tremendous
market traction for such an early-stage company. In addition to
collaborating closely with the founders in setting up operations
and attracting key individuals and strategic partners, MSBI is pleased
to have been able to provide financial support beyond seed financing."
Dr. Roberts credits Micronet, NSERC and organizations like the Canadian Microelectronics Corporation for making it possible to develop the technology to a stage where venture capitalists would be interested in investing.
"When we talked to venture capitalists, their reaction is that
we're not really a start-up. That's because we've developed a prototype
that demonstrates our claim. We don't say to people that this is
what we're going to do, because we've already done it. Our goal
now is to sell it," says Dr. Roberts, who maintains a Micronet-sponsored
research team at McGill.
DFT is expecting to make its first sale by the end of 2003 and for 2004 is projecting revenues of $2.5 million, growing to nearly $8 million in 2005.
"Because of groups like Micronet, the technological edge we have in Canada is enormous," says Dr. Roberts. "There's no question from a business point of view."
www.micronetrd.ca
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