Ambit Design Systems

Twenty years ago today, Cadence announced it was acquiring Ambit Design Systems. Actually, the anniversary of the announcement is really September 3rd, but since that is a public holiday this year, I slipped it a day. The actual acquisition didn't close for over a month, for all the usual due diligence reasons, plus one unusual one.

As is standard in a VC-funded company, the conditions for acquisition require each round of finance to approve the acquisition voting as a round (to protect, say, the A-round selling out at less than the B-round paid). Ambit got up to round I, I think, so 9 rounds of investment over its drawn-out life. One of those rounds was by LSI Logic when they decided to use our synthesis tool, BuildGates, extensively. Since they were the only investor in that round, LSI Logic had to approve the acquisition. They were in a position to block the acquisition and were, of course, also a customer of Cadence for design tools. I wasn't involved, but it would have been interesting to have been a fly-on-the-wall in that negotiation.

I was the VP Engineering at Ambit. But I wasn't there from the beginning, I had joined Ambit just a year earlier after the acquisition of Compass Design Automation by Avant! (which closed at midnight on Thursday, and I quit on Friday, and started at Ambit on Monday—I worked for Avant! for 8 hours).

Twenty years ago was still the era when acquisitions of EDA startups had good exit valuations. Cadence paid $260M for Ambit. That wasn't even a record at the time, they had paid over $400M for CCT (shape-based routing) and would pay something closer to a rumored $1B for Silicon Perspective (mainly because it contained an uncapped earnout clause).

Cadence had tried to develop their own synthesis tool called Synergy but it never got traction in the marketplace. I don't have any insight into how good or bad Synergy's technology was, but I can guess from the behavior of the Cadence sales force after the Ambit acquisition that the sales force would have ignored it. They were used to deal where they tried to get everything except synthesis, and they were not going to jeopardize the big deal with an immature synthesis tool. Ambit salespeople had nothing else to sell than a synthesis tool, so they were more focused. This is the difference between two types of salespeople, what I call hunters and farmers.

When you are a startup, winning any business is good. We started to be really successful, going from less than $1M in revenue the year before I arrived, to over $10M the following year. We never got to the end of the year after that since by then we were part of Cadence. But in addition to revenue, some business is truly strategic, such as LSI Logic, which had come with both an investment and the credibility that a public endorsement from a top ASIC vendor brought.

During the year that I was at Ambit, I knew that Philips Semiconductors (now NXP) was Cadence's biggest customer at the time. I also knew the management of the CAD organization well from my time at VLSI Technology and Compass, since we had a major agreement with Philips (and I'd been based in Europe for over 5 years). Philips had a very centralized CAD organization: the decisions made in Eindhoven about what tools to purchase were pretty much mandated through the whole company. Winning Philips was therefore very important. If we could win the evaluation, there was the possibility of being the "standard" synthesis tool inside a big account, thus, getting a series of big orders.

As VP Engineering, there wasn't a whole lot I could do about the Philips account and an evaluation happening in Europe. But I prioritized bugs at Philips to do what I could to make the evaluation successful.

But becoming the standard synthesis tool inside Cadence's biggest account had another upside: Cadence would pretty much have to acquire us. BuildGates won, and Cadence did.

Timing is everything. I firmly believe that if Ambit had got its synthesis tool working solidly a couple of years earlier, then we wouldn't have been successful. The market was not yet looking for an alternative synthesis tool. One thing that changed was that, eventually, the ASIC companies (like the aforementioned LSI Logic) were not happy that they had to deal with a monopoly synthesis tool. But the monopoly was not on synthesis technology, Ambit's was clearly good, and maybe even Synergy's had been. The monopoly was on ASIC vendor library support. You can't sell a synthesis tool without library support. But monopoly ASIC vendor library support was something the ASIC companies could do something about, they owned those libraries. So they did. More and more ASIC vendors announced support for BuildGates, without an obvious business justification other than being able to get cheaper synthesis tools even if they didn't win any new ASIC designs. After all, our penetration of their customer base was growing, but still pretty small.

It turned out that the BuildGates synthesis tool was pretty good, but pretty good isn't enough to get the average customer to switch. However, there was one area where we were more than pretty good. We could handle huge designs without requiring them to be split up into many smaller blocks. If you had a huge design, and couldn't get it synthesized, you would buy a license or two just for that design, and not care whether Ambit stayed in business. In fact, even if you had split the design up into small blocks already, breaking up the time budgets for the whole design was often poor, so sucking the entire design in and synthesizing it in one go would produce much better results. Our AEs soon learned not to fall into the trap of doing a benchmark on one of the small blocks, but to take on the challenge of the entire design. Overnight, the benchmark might be over and we'd won.

So a few weeks later, 20 years ago, I joined Cadence for the first time.

Sign up for Sunday Brunch, the weekly Breakfast Bytes email.