Teller of hard truths to starry-eyed technologists
By Jonathan Guthrie
Published: March 31 2010 03:00 | Last updated: March 31 2010 03:00
Is Plastic Logic , the pioneering producer of low-cost computer chips, up for sale? Hermann Hauser, the UK's best-known technology investor, hints as much. Amadeus Capital Partners , the venture capital firm he co-founded in 1997, has a stake in the company, which launched its Que e-reader in January. A sale would probably realise a multiple of the $200m (€149m, £134m) in investment Plastic Logic has attracted so far.
"We're in very interesting negotiations with . . . well, that would be a separate interview," says Mr Hauser, who seems a little rattled by the Financial Times's interest in his private dealmaking. A tall, urbane Austrian-born entrepreneur and investor based in the UK since his student days in Cambridge, he clams up, promising that "you will hopefully hear [more] about this in the autumn".
Mr Hauser founded or helped finance 20 companies before founding Amadeus, and has since backed more than 60 early-stage start-ups. As a serial backer and founder of technology companies, he is the kingpin of the high-tech cluster that has grown up around the university city and won renown for innovation. It has even been dubbed "Silicon Fen" in recognition of the Cambridge Fens area's emulation of Silcon Valley.
The 61-year-old Mr Hauser is proud that he has made early investments in four companies that have achieved valuations at some point of more than £1bn - Arm Holdings, CSR, Illumina and GlobespanVirata.
A hefty exit valuation of Plastic Logic by putative buyers could show that its technology really is as fruitfully disruptive as claimed by its promoters, led by Mr Hauser, who is a director of the business. The Que e-reader is one of the first commercial outings for plastic chips developed by a team from the University of Cambridge's venerable Cavendish Laboratory, whose many breakthroughs over more than 100 years include the discovery of DNA, and is where Mr Hauser obtained a Phd in physics. The low manufacturing cost of the chips could vastly extend the applications for microprocessors in everyday use.
"Right now, Plastic Logic has a very single-minded focus on the e-reader market," says Mr Hauser, explaining that this focus illustrates an "important, almost philosophical point about how you do venture capital in high-tech". He reels off a long story about a typical interaction with a would-be technology entrepreneur, which can be boiled down to: the starry-eyed scientist starts off with three brilliant ideas but, by the time he and Mr Hauser have finally written out a business plan, only one innovation remains. "You have to do one thing and you've got to do it better than anybody else in the world," he says.
Explaining business truths to technologists has been Mr Hauser's life's work. The trick is to see the potential of new breakthroughs without being dazzled by the science. The "order of priority" for the factors that fuel commercial success are, he says: "Number one, the size of the market; number two, the quality of the team; number three, the quality of the technology."
Commercialising scientific research is now intrinsic to UK university activity. But technology transfer was a fledgling field when Mr Hauser co-founded Acorn Computer, a pioneer of personal computing in the UK, in 1978. He had bumped into Cambridge technologist Chris Curry, who suggested starting a business to make a microcomputer with the best specifications in the country. "My response was: how much would the start-up cost?" he recalls. "Chris said: 'Fifty quid from me and fifty quid from you.'" I said: 'I've got fifty quid, so we can do that.'"
Acorn was highly successful for five years but ran into problems and was taken over. But the company's fate brought Mr Hauser a useful insight: his skill was not managing established businesses but creating new ones. "That is not very easy to do. But I have a great affinity with it,"he says. Indeed, he is an acknowledged expert on technology transfer. Last week, he published a report for the UK government on the subject, which proposed the creation of a chain of technology and innovation centres to bridge the gap between academic research and its commercialisation.
Mr Hauser says the UK produces great science and at last has a cadre of serial entrepreneurs to commercialise it. The big difficulty is lack of new money for venture capital investment, thanks to the credit crunch. Amadeus, for example, was forced to impose a cost-cutting regime on investee companies last year to reflect a shortage of follow-on funding.
Amadeus has about £500m under management, employs 30 staff and generates returns typically of about 15 per cent a year. "It has been a tough ride recently," Mr Hauser admits.
Nevertheless, the advent of smartphones and other devices that connect wirelessly to the internet means we are all living though a "fifth wave of computing", Mr Hauser says.
The chips in 90 per cent of mobile devices use architecture created by Arm, the chip design business that was set up by Mr Hauser in 1981 as a unit of Acorn and later spun out. Arm had only been started because Intel refused to produce a chip to Acorn's specifications. Now, according to Mr Hauser, the mobile computing revolution means Arm-designed chips are outselling those made by Intel "10 to one". This may be one consolation to Mr Hauser for failing to talent-spot Bill Gates: the young programmer could not persuade Acorn to install his MS-Dos operating system in the 1980s. He went to IBM instead, forging the partnership of software and hardware that defined the PC era.
For now, the focus is on Amadeus companies such as Icera, a wireless chip company, and Xmos, creator of Software Defined Silicon chips and, of course, Plastic Logic. Although the company's research base remains in Cambridge, its corporate office has moved to Mountain View, California. Google has its headquarters in Mountain View too, which is a pointer to the ubiquity that Plastic Logic's backers hope its technology may achieve.
"Plastic Logic is using the simplest invention in plastic electronics, a single transistor that switches a particular pixel on or off," says Mr Hauser. The real potential, he explains, is in creating plastic integrated circuits capable of complex functions, a feat that Plastic Logic co-founder Henning Sirringhaus has just achieved. Mr Hauser says: "Plastic electronics will spawn dozens of companies taking advantage of different aspects of integrated circuits in the same way that silicon has."
For any acquirer of Plastic Logic, however, it is a moot point whether the buyer would get rights to the wider potential of org-anic semi-conductors, which may extend to new types of solar cell. A buyer might get an interesting e-reader company and no more.
Having participated in the first wave of innovation in computing, Mr Hauser will extract full value from what looks like the newest surge.
Backer to the future
Hermann Hauser has backed a succession of innovative UK businesses including:
Arm Holdings Mr Hauser started the chip design business as a unit of Acorn Computers in 1981 with "no people and no money". He helped spin it out from Acorn, by then part of Olivetti, in 1990. Arm is listed on the London Stock Exchange and has a market capitalisation of more than £3bn, thanks to the widespread use of its chips in mobile phones and other devices.
CSR Originally known as Cambridge Silicon Radio, this business came to prominence as a designer of chips for Bluetooth wireless headsets. Amadeus, the venture capital firm co-founded by Mr Hauser, backed the spin-out from a consultancy in 1998. Shares in CSR, which floated in 2004, have been volatile, recovering some lost ground in the past 12 months to give the company a valuation of about £870m. Solexa This genome analysis business received early-stage investment from Amadeus. Solexa's aim was to cut the cost of genetic analysis to make it more accessible to patients and physicians. It was bought by Illumina , a California genetics business, in an all-share transaction that valued the UK company at about $600m in 2007.
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