25th January 2009
Just over three years after starting his technology firm, Sean Mitchell is facing into 2009 with money in the bank, a completed product and big plans for the future.
Mitchell is co-founder and chief executive of Movidia, which is building chips for mobile phones, allowing people to edit video clips on the move.
While incorporated and headquartered in Dublin, Movidia is already an international firm, with operations in Romania and Hong Kong and investors from as far a field as Belgium and Canada.
The firm made major progress in recent months, sealing a $14 million (€10.8 million) funding deal with venture capitalists after a year-long fundraising process. Last week, it launched its first product, a multimedia processor for mobile phones.
The processor – with the working title of MA1110 – will be demonstrated in Barcelona next month at the Mobile World Congress, the premier event for the mobile phone industry. Mitchell is hopeful that the world’s biggest phone makers will be impressed enough to start placing orders with Movidia, leading to mass production of chips later this year.
“Our tack is pretty clear now – to get products into the market and secure some wins this year,” he said. “We want to get people to evaluate the technology and then design it into phones that appear on the market in 2010. Everything we do from here is linked to that.”
By Mitchell’s own admission, building a semiconductor company is fundamentally different from building a traditional business. Movidia will not have any revenues until late next year at the earliest, will have “losses of millions and millions for years’’ and will need investors with deep pockets and lots of patience.
The rewards are potentially huge, however, with Movidia operating in a market that is estimated by Juniper, a British telecoms research group, to be worth as much as $7.3 billion annually. Movidia has ambitions to capture a decent share of that market.
For Mitchell, the funding and the product launch move Movidia into the next stage of its development when it can focus fully on developing and selling its technology. ‘‘It is time to get our heads down and get the product out there,” he said.
The company started in 2005 with a realisation by Mitchell and David Moloney, the co-founder and chief technical officer of Movidia, that phone systems had not kept pace with other developments in technology. High-resolution screens, cameras, music players, internet searches and social networking sites all require a lot of processing power, and the existing systems were ‘‘not fit to cope’’, according to Mitchell.
“To get the full PC-type experience, mobile phones had to change,” he said. From that realisation, the pair had to ‘‘zoom in on something specific’’, and talks with industry players quickly showed that video applications were high on the agenda.
With the rise in popularity of online video sites such as YouTube and social networking sites including Facebook and Bebo, Mitchell believes that the firm has found the right niche. When the Movidia chip is built into phones, users will be able to edit and share video footage – a task that previously involved using a computer.
Making and selling chips is an expensive business, and Mitchell expects Movidia to raise ‘‘multiple rounds’’ of funding. ‘‘The international benchmark for building a company like this is $40 million or $50 million before being cash generative,” he said.
The company will raise more funds next year and Mitchell said its existing investors – who put up $14 million last October – had ‘‘set aside substantially more’’ for future investment. They range from Enterprise Ireland and the AIB Seed Capital Fund to Celtic House Venture Partners in Canada, Capital-E in Belgium and Emertec Gestion in France.
Mitchell would not comment on the exact stake held by the funders, but indicated it was significant. ‘‘The reality is that the VCs end up with a sizeable proportion of the business, but you’re betting that you are left holding a smaller piece of something big,” he said.
He said that the funding process took about a year to complete and involved meetings with about 40 funders. ‘‘It is a sales process and you have to cast the net pretty wide,” he said. ‘‘It can be a very destructive process, in that you can be completely consumed by it.” Mitchell said that Paul Costigan, the company’s chief operating officer, was instrumental in the funding process. Costigan previously founded and sold chip firm Massana and was also chief operating officer of Chipidea, a Portuguese firm that was sold for $147million in cash. He is now based in Hong Kong for Movidia. Mitchell said that the company had a strong focus on Asia, where mobile technology and consumer trends are ahead of Europe. It has six staff in the Hong Kong base,14 in Dublin and 30 in a development centre in Romania. The company opened the Romanian base early in its development, because ‘‘labour costs in Ireland are significantly higher than anywhere else’’, Mitchell said. ‘‘In Hong Kong, the rates are about half what they are in Ireland. In Romania, they are about a quarter, so you can get four engineers in Romania for the price of one in Ireland.” He also expressed concern about the lack of engineering graduates in Ireland. ‘‘We went out to look for people with three or four years’ experience, and they were difficult to find. The number of people taking these courses has dropped off. It does worry me; it is a huge problem and it will be very damaging for the country in the future.” Mitchell himself is a product of Ireland’s closely knit semiconductor sector. After graduating from electronic engineering at Trinity College Dublin 20 years ago, he completed a master’s degree and went to work for Silicon & Software Systems in Dublin. That job took him to Holland and Germany over a five year period, before a move in 1994 to a young firm called Silicon Systems. It went on to become Parthus Technologies, floating on the stock exchanges in London and New York, and Mitchell became vice-president and general manager of one of the company’s four business divisions. In 2003, he left Parthus and joined Silansys, a young chip firm. Within months, Silansys was acquired by Frontier Silicon in Britain, in a cash and share deal reported to be worth about €6 million. Mitchell and Moloney were both shareholders in Silansys and benefited from the deal, which resulted in Mitchell working for Frontier Silicon. When Moloney went to Trinity to work on a PhD in the area of high-performance computing, the pair kept in touch and discussed business ideas. ‘‘We always saw eye to eye and said we’d like to do something together in business. That gave rise to the ideas for Movidia,’’ Mitchell said. Another former Parthus employee, Martin Mellody, is vice-president of engineering at Movidia, while Dr Valentin Morrison, who ran a digital video centre at Dublin City University, manages the Romanian centre. The founders funded the business personally at first, before an investment from Enterprise Ireland and business expansion scheme funding. Prize money of €100,000 from a SeedCorn competition also came in useful. ‘‘It may not seem like much in the scheme of how much we’ll need, but it bought us another month of life during the fundraising process,” said Mitchell. He said he had learned many lessons during the setting up of the business and the funding process. ‘‘If we knew then what we know today, we might never have started,” he joked. ‘‘We understand how to build products well – it doesn’t always work out as you plan, but you can keep it under some control,” he said. ‘‘But you also have to think about how to position a company and how to raise money. Without cash, you’re dead.”
The Sunday Business Post