Making industries “garage ready” for startups


One of the most important events in the history of modern computing was the advent of “fabless” (“fabrication-less”) semiconductor companies.  The story of fabless semis is similar to the recent history of internet startups: various forces led to an order-of-magnitude reduction of startup costs, which then led to a surge of innovation.

Before the 1980s, if you wanted to invent a new semiconductor, you had to both design and manufacture it. This meant you had to build a large manufacturing plant, something only large companies like Intel, Motorola, and IBM could afford. Hence, semiconductor design was generally too expensive for venture-backed startups.

In the 1979, two computer scientists published a seminal book that argued for the separation semiconductor design and manufacturing. Followed by years of investment by DARPA and others, an industry emerged where chip designers used software (“EDA software”) to design and test semiconductors, and then sent standardized specifications to “foundries” that did the manufacturing (most of which were located in Taiwan – the largest in the world to this day is Taiwan Semiconductor Manufacturing Company).

This dramatically lowered the cost of starting semiconductor design shops, and in turn led to a massive wave of startup innovation. These startups designed chips for cell phones (Qualcomm), Wifi (Atheros), computer graphics (Nvidia), and much more.  Most were funded by venture capitalists and located in Silicon Valley.

Tech sectors tend to get really creative when they become “garage ready”:  a Steve Jobs and Steve Wozniak, or a Larry Page and Sergey Brin, can, with very little capital, change the world. It happened with semis in the 80s and happened in the 90s and 2000s for internet companies.

Eventually every vertically integrated, capital-intensive sector becomes garage ready. Someday, for example, we will have “fabless” gadget design and biotech research, enabling a small shop in Brooklyn or SoMa to create an iPhone killer or next-generation cancer drug.

Next post: Always have 18 months of cash in the bank
Previous post: Why is enterprise tech so far behind consumer tech? Because it can be.

Views expressed in “content” (including posts, podcasts, videos) linked on this website or posted in social media and other platforms (collectively, “content distribution outlets”) are my own and are not the views of AH Capital Management, L.L.C. (“a16z”) or its respective affiliates. AH Capital Management is an investment adviser registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply any special skill or training. The posts are not directed to any investors or potential investors, and do not constitute an offer to sell -- or a solicitation of an offer to buy -- any securities, and may not be used or relied upon in evaluating the merits of any investment.

The content should not be construed as or relied upon in any manner as investment, legal, tax, or other advice. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any charts provided here are for informational purposes only, and should not be relied upon when making any investment decision. Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, I have not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. The content speaks only as of the date indicated.

Under no circumstances should any posts or other information provided on this website -- or on associated content distribution outlets -- be construed as an offer soliciting the purchase or sale of any security or interest in any pooled investment vehicle sponsored, discussed, or mentioned by a16z personnel. Nor should it be construed as an offer to provide investment advisory services; an offer to invest in an a16z-managed pooled investment vehicle will be made separately and only by means of the confidential offering documents of the specific pooled investment vehicles -- which should be read in their entirety, and only to those who, among other requirements, meet certain qualifications under federal securities laws. Such investors, defined as accredited investors and qualified purchasers, are generally deemed capable of evaluating the merits and risks of prospective investments and financial matters. There can be no assurances that a16z’s investment objectives will be achieved or investment strategies will be successful. Any investment in a vehicle managed by a16z involves a high degree of risk including the risk that the entire amount invested is lost. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by a16z is available at Excluded from this list are investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets. Past results of Andreessen Horowitz’s investments, pooled investment vehicles, or investment strategies are not necessarily indicative of future results. Please see for additional important information.