In what might be billed as “The Natural History of a Startup,” tiny, San Diego-based Sequoia Communications is making the rounds, hoping to lure W-CDMA baseband chip vendors into using its newly minted transceiver chip.
Sequoia, with 50 employees today and funding through 2008, began in 2000 when a Nokia Corp. CDMA engineer left the company to pursue a single-architecture, multimode transceiver chip for the 3G market.
If there’s a slight variation on the startup plot line here, it’s that Nokia Ventures (now BlueRun Ventures) pumped money into Sequoia in 2003 and Motorola Ventures followed suit in 2005. Other investors include IBM Corp. and a handful of venture capital players.
Sequoia plans to use what it considers its unique innovation and the tacit endorsement of the world’s two largest handset manufacturers to convince baseband suppliers to incorporate its chip into their products.
(Sequoia is making the rounds with its “SEQ7400.” In short, the company claims it offers the reduction in size, cost and power consumption and ease of integration perennially sought by chipset and handset vendors for advanced handsets.)
Discontinuity an opening
According to Sequoia, a “discontinuity” between various iterations of GSM transceiver technology and the technology necessary for W-CDMA allowed it to jump into the game and innovate.
“In the wireless world, a startup needs a big discontinuity in order to get into the market,” said Dave Shepard, president and CEO at Sequoia. (Shepard previously spent 17 years at Texas Instruments Inc., including its wireless business.) “Being a bit better at something that’s been done for 10 years doesn’t get you anywhere. So, 3G provides that discontinuity. You couldn’t just tweak the architecture of your chip, you had to start over. That gave us a ‘green field,’ where there aren’t any solutions out there. A startup can get there faster and that’s what we did.”
With Sequoia’s tri-band transceiver compatible with any radio frequencies used in wireless, Shepard said, the company can pursue any baseband vendor serving any handset maker in the world. In the context of 3G growth, which has caught even Motorola off-guard, Shepard-as with most CEOs at startups-finds the prospects promising. Backwards compatibility of Sequoia’s transceiver chip with EDGE broadens the market, he said, as does a simple evolution to 4G technologies.
Ringing endorsements
Motorola Ventures apparently feels the same way.
“We’re looking for companies with innovative technologies and strong management teams going after the right markets,” said Reese Schroeder, a managing director at Motorola Ventures. “A company like Sequoia certainly fits that description. They have all the qualities we’re looking for in a space that could be relevant to Motorola. Our customers want their phones to work anywhere they go, so we think that multi-mode and multi-band chipsets like Sequoia’s are going to be very important.”
Schroeder added: “The operative word is ‘could.’ We’re really looking for companies with the strong potential to make an impact on our products.”
Motorola, famously, is late to the 3G market, which has fed growth for those who embraced it in a more timely manner. Does Motorola’s investment in and support of Sequoia imply that the transceiver company is part of the handset vendor’s multiple-chip vendor strategy?
“It’s too early to get that specific,” Schroeder said. “But, obviously, we made our investment in Sequoia because they’ve got a promising technology.”
As for the complementary investments in Sequoia by the world’s leading handset vendors and arch-rivals, Schroeder points out that the wireless industry’s famously tangled web of relationships makes seemingly strange bedfellows somewhat commonplace.
“It’s not unusual,” Schroeder said. “If you look at our portfolio, we have investments with the venture- capital arms of other companies that some might consider competitors. It makes sense in this context. For young companies to be successful, they need to develop a strong customer base that oftentimes means multiple customers in a particular space. It’s something we actually expect is going to happen in this corporate, venture-capital world that we’re living in.”
