Chip-firm Cyan seeks a greener path to AIM listing

The way Paul Johnson sees it, it was the venture capital funds that drove his company, Cyan Technology, into liquidation in 2002. So it's understandable that, when rebuilding and refinancing the company over the past few years, he avoided VCs.

But now the chip-design company is growing again and seeking a listing on London's Alternative Investment Market. And Johnson, the chief executive, is having a change of heart. "Now we might be getting money from VCs again...but through brokers," said Johnson in an interview, while doing a road-show presentation to investors.

The story of Cambridge, U.K.-based Cyan, which designs and sells low power micro-controller chips used for electronic products from washing machines to toys, exemplifies the twists and turns that many start-ups face.

Dream dashed

The tale began in June 2000, when Cyan spun out from Cambridge Consultants, a business consultancy in the technology sector.

The spin-out was built around a product family that, it hoped, would give such semiconductor industry giants as Intel and NEC a run for their money. Cyan designs specialised 16-bit microcontrollers, providing the electronic hearts for low-cost digital electronic products. It uses clever chip design to cut power requirements to the minimum - a vital requirement for many of today's products that use mobile or wireless communications, including personal digital assistants, electronic cash registers, remote data-telemetry systems, and security systems.

But Cyan's dream was dashed in 2002, after the end of dotcom fever. The tech companies on which Cyan was counting for sales were in a slump. And the VCs that initially funded the company decided against continuing their support. As a result Cyan entered voluntary liquidation.

The management then resuscitated the company. Johnson, then director of engineering, and Cyan's chief technology officer Chris Davis, decided to take money from their own pockets to keep the Cyan name alive by buying its intellectual property and assets from liquidators. Along the way, they convinced 110 individual investors to come onboard with them.

Johnson said it was his confidence in Cyan's products and the prospect of the industry that kept him going. He is now on a mission to meet with investors before the company’s plan to go public on AIM on 5 December.  The chip-making company is seeking to raise about £6 million.

Being listed on the AIM market, said Johnson, "gives the company credibility in the eyes of our customers. What they need to know is when they are going into production they would have the supply of chips. Being a public company would take away all of their concerns if we remove the start-up labels."

With the listing, Cyan expects to have a market capitalisation, in millions of pounds, between "the mid-20s to 27", said Johnson. The money raised will be used to fund working capital and production. Cyan has introduced design integration software, CyanIDE, to support its range of current and future microcontrollers. Since 2002, the company has achieved 75 design wins for its initial product.

Space for all

Cyan is still small, but Johnson argues that the market is big enough for all. The microcontroller market is estimated to be $15 billion. By 2010 the market will grow to $20 billion.

"Every electronic product that you have for an average person owns at least 25 microcontroller products that they aren't even aware of," said Johnson. Cyan, he argues, also has a good chance of retaining those customers it wins, because its products are tailored to each customer. "So this gives our business some stability. If their products are successful then they have to keep buying our chips."

Cyan is based in Cambridge, and has distribution points in more than 30 countries in Europe and the former Soviet Union. It is also eyeing expansion to Asia - especially China. It opened a sales office in Hong Kong earlier this year. And it plans to open another office in Shenzhen in mainland China. For that, Johnson plans to hire Chinese staff only.

"The instruction is 'to do it the Chinese way,'" said Johnson. "I think that’s an error of many companies that they go to China and first thing they do is to appoint an American or European as their general manager or CEO in their Far East operations."

Johnson said he still occasionally runs into the VCs that left Cyan in limbo three years ago and the reaction from them is "mostly curiosity more than anything else". "It makes me feel good and it just shows we were right in the first place," said Johnson.