Management team and founders
The four founders lead the management team: CEO Dr. Yannick Lévy, CTO Khaled Maalej plus Amaury Demol and Emmanuel Hamman. Having previously worked together at Sagem and Atmel for two years, the team’s skill set and expertise includes participation in standardisation bodies, complex signal processing and IC (integrated circuit) design and marketing.

Dr. Yannick Lévy received his PhD from the University of Notre Dame in Indiana, USA. As project leader for all head-end equipment at Sagem, Dr. Lévy played an active role in the digital video broadcasting (DVB) and digital audio visual council (DAVIC) organisations. At Atmel Corporation, he was the manager of the design/marketing team created in Paris by himself and other engineers from Sagem.

Khaled Maalej previously worked at SAT/Sagem and participated in the design of the first DVB-C receivers. He also led the project team for an ADSL/HDSL modem and a cable digital TV set top box design. Other project experience includes IC design for ATM, Ethernet, and MPEG2 interfaces. After Sagem, he was technical manager of the broadband communication business at Atmel.

Amaury Demol is responsible for information systems, networking and CAD software as well as developing advanced algorithms for the mobile DVB-T project. Amaury co-developed several complex IC (integrated circuits) designs at SAT/Sagem and Atmel.

Emmanuel Hamman is the systems and mobility manager at DibCom. He participated in the design of a DVB-C compliant QAM demodulator IC. Prior to that, he worked at SAT/Sagem where he co-developed several ASICs (application specific integrated circuits).

Board members
The management team is backed by a board consisting of many industry players whose non-executive chairman is a corporate veteran, Marco Landi, ex-GM of Texas Instruments Europe and Asia, and COO of Apple Computers. The current board includes nine members: two from industry (including the chairman), two management and five VCs

Additional board members include Fabian Ruechardt, ex-head of Siemens Semiconductor’s consumer and ASIC division and investment partner at Infineon Ventures; Xavier Lorphelm, founder of smart card company J source and investment company aXelerate partners, which was sold to Société Générale; Remy De Tonnac, ex GM of Gemplus Asia and North American operation, and now with Vertex Partners.

Vital statistics
DiBcom has gone through all the classic fund raising rounds including surviving through the long investment drought following the tech crash after 2001. DiBcom’s initial seed (Chilli S2/S3) funding came from some development and consulting contracts between June 2000 and January 2001. Khaled Maalej took care of the operations, while Yannick was busy trying to raise VC funding for the fledging start-up.

DiBcom raised a Chilli R1 round of €2.5 million in January 2001, from SGAM (SG Asset Management, the asset management subsidiary of Société Générale), the French banking group and two business angels. The R1 funding was based purely on team expertise and a business plan, as they didn’t have the cash resources to finish any prototype at that time. From the initial R1 funding, they managed to get some measurements and simulation results from field trials.

Not having any prototypes to demonstrate made it very difficult to raise the Chilli R2 second round venture funding. At the time, VCs were only investing in post-product and post-revenue companies. On top of this, it didn’t help that the market for mobile TV was still in its infancy and there was uncertainty about the potential market size. Despite these difficulties, the team had built a good relationship with Convergent Capital, a French venture fund and SGAM, both whom had faith in the DiBcom management team. They invested a Chilli R2 round of €3.0 million in March 2002. This allowed DiBcom to expand its team to 20 employees.

A Chilli R3 round of €10.7 million was subsequently raised in Jan 2004, in a better investment climate.

Investors clamour for Chilli R4 round and the expected bonanza
Five international investors have joined existing investors in the new Chilli R4 capital round of €24.5 million, one of the largest venture-backed financing rounds for a French IT company in 2005: Partech International which leads this round of investment plus Intel Capital, 3i, WI Harper and UMC. (For more details on these investors, please see the article “Five new DiBcom investors waiting for a bonanza”)

In what is expected to be a classic fabless success story and investment model that works very well for technology VC investors, additional late stage investors have been clamouring to get in.

The main objective of the new R4 funding round is to further accelerate DiBcom's growth strategy. To that end, the company has invested in sales and marketing as well as continued research and development aimed at the integration of DiBcom's technology into different types of device benefiting from mobile TV reception. The investment will significantly expand its sales and marketing presence in Asia and the United States as well as extend its mobile TV product roadmap.

Existing shareholders
The new R4 investors join existing investors SGAM Alternative Investments, one of the earliest investors. SG Asset Management is the asset management subsidiary of Société Générale, the French banking Group.

Convergent Capital, Crédit Agricole’s Private Equity, Vertex Venture Capital Israel, Cipio Partners, and Freescale Semiconductor (previous equity held by Motorola Ventures), all reconfirmed their support for DiBcom and its market opportunity with follow-on investments. Clipperton Finance, an advisory firm specialising in high-tech and media, assisted DiBcom.

According to Dr Lévy, “Technically, we definitely achieved the business plan expectations. We were able to prove perfect mobile reception even under the worst reception conditions. Proof of this: Mercedes, Audi, VW, and others are using our chips for mobile TV reception. Business wise, the market did not pick up as fast as our initial business plan said. But we managed to control the development of the company accordingly. So I think we spent our money in a wise way.”

DiBcom currently has 70 employees with 50 in R & D, 15 in sales and marketing and five in general administration.

Value proposition
DiBcom develops and markets semiconductor devices that enable low-power mobile and portable TV reception at speeds exceeding 150 mph. DiBcom has been shipping DVB-T (digital video broadcast – terrestrial) mobile receiver ICs used for terrestrial digital TV since 2002.

The market for mobile digital TV is split into three different groups and standards. One is a proprietary system offered by Qualcomm (Media FLO), with its BREW platform, the other is an alternative standard developed in South Korea supported by huge investments from SK Telecom, Samsung and LG. They are increasingly targeting the European market. The competing Asian standard, digital multimedia broadcast (DMB), is a derivative of digital audio broadcast (DAB).

Finally, there is the DVB-H standard that, like the successful GSM standard, was developed in Europe by an industry-wide research program consisting of many diverse participants. DVB-H, like GSM, has the advantage of being adopted in various countries including most of Europe (UK, France, Germany, Spain, Netherlands, Switzerland), as well as South Africa, Malaysia and Australia. As an example, France is undertaking two trials, one led by Canal plus and SFR (Vodafone) that uses Nokia handsets (with proprietary Nokia chips) and a Nokia transmission platform; and the other is Orange, which is using Sagem handsets (Sagem, is the biggest handset vendor in France) and a Thales transmission platform.

The U.S. market, utilising the same DVB-H standard, operates in a different frequency range. However the inherent algorithms and technical solutions are the same (OFDM) and DiBcom has already modified its design for this market.

Clientele
DiBcom’s technology has been used by a number of blue chip customers in the automotive, notebook PC, cell phone, and portable media player market segments.

DiBcom was one of the first companies to target mobile TV receivers using digital broadcasting technology (DVB-T). DibCom’s customers include Delphi Automotive, Hirschmann, Lear, Eastern, Nera and Hitop in the automotive market; Hauppauge, Avermedia and Intel in the PC market; and it has many cell phone design wins, including Siemens.

According to Dr Lévy, “Currently, our revenue comes from mobile DVB-T applications, e.g. car, laptop PC, portable LCD TVs. We had €8M revenue last year in these markets. We are the leader in the car and laptop PC market (recognised recently by the Intel Capital investment in DiBcom).”

Partners
Crown Castle is an operator providing Freeview services in the UK. It is also a major DVB-H network operator in the U.S and will be the first to launch a commercial DVB-H network in 2006, using DiBcom’s solution. This deployment could lead to massive volumes for digital TV on cell phones.

DiBcom has partnered with Motorola Semiconductor, now Freescale, on the RF and 3G-application processor side for a long time.

The new investment from Intel will bring Intel’s massive resources to bear in adopting DiBcom’s solutions and promoting mobile TV for the mobile PC market. This will be similar to what Intel did for the Intel Centrino platform (which brought Wi-Fi to the mainstream market).

DiBcom is also working with Microsoft on the promotion of WinCE, Windows Media DRM and VC1 (Windows Media 9) solutions for DVB-H.

The Chilli perspective
Current mobile technology is severely limited in terms of transmission bandwidth required by video and TV broadcasts. While the next generation (3G) allows a theoretical speed of 2 Mbits/sec transmission capacity, it is shared amongst many users and may not provide sufficient capacity for quality TV transmissions which can require up to 5 Mbits/sec bit rates. Overcoming this challenge can be done by new compression techniques standardised around DVB-H (digital video broadcast - handheld) which require complex mathematical signal processing, but also mandates low power consumption in order to maintain battery life.

We believe that DiBcom has a several-months lead in this market due to its early start and accumulation of expertise in this specific domain. This provides further leverage due to its penetration of key customer accounts with first and second-generation products.

This market is not as straightforward as it first appears. Mobile TV is based on complex technology with large amounts of signal processing required as well as computational demands not normally associated with fixed TV reception. It requires careful partitioning of the design responsibilities, which together overcomes the constraints associated with mobile TV.

Flexibility of design and key partnerships Although the specification in the U.S. is the same, the frequency is different so the chip had to be modified slightly to suit the U.S. frequency requirements. This demonstrates the flexibility and speed of response by the DiBcom team, which is normally lacking in larger companies.

The success in this sector will therefore be based on complete solutions that require partnerships with key players who have the expertise and tangible assets. In order to deliver a complete design solution, one must deliver a design that consists of the antenna, RF interface, tuner, demodulator and channel decoder processor.

DiBcom has partnered with Freescale Semiconductor and Microtune for its RF technology, tuner design and has successfully demonstrated its solution with Crown Castle.

Choosing a leading foundry as a strategic investor will ensure volume deliveries when the market takes off. One of the biggest disadvantages for fabless companies is that they are last in the pecking order when there are frequent capacity shortages. Choosing UMC as a key supplier of chips for several years and allocation during shortages will more than pay for the cost and risk of having a single source. Having more than one strategic corporate investor also balances the different needs/goals of the financial and corporate venture investors.

Competition
DibCom, with its vast new set of investors and partner relationships, will face increasing competition from other leading players in the market, namely TI, Qualcomm and possibly Frontier Silicon.

DiBcom is fortunate in that different players are focused on different markets and have different strengths. For example, in the automotive market segment, DiBcom is currently the primary player in town whereas in the PC market, it faces Philips Semiconductor. DiBcom’s major differentiator is its quality in portable reception conditions (small antenna externally connected or embedded in the laptop); extremely low power consumption as well as its roadmap including DVB-H mobile TV solutions.

In the mobile phone arena, DiBcom will encounter major players like TI, Samsung, Philips, ST, and Infineon. DiBcom has the advantage of being early to market as well as having a lower cost implementation backed up by its patent portfolio. Of all the majors, TI is the only serious player with a strong position in this market which it will have to defend. The others are not too focused in this market, at least until the volumes get to millions of pieces. Besides, the other two potential competitors, namely ST and Infineon, are in slight disarray due to recent management changes, turbulence and unclear directions.

Other than IDMs (integrated device manufacturers), DiBcom will also encounter fabless companies like Siano/Frontier silicon and numerous chipless semiconductor/IP companies like TTPCom. But until there is silicon in the hands of potential customers, DiBcom will have several months lead time as well as validation by the DVB-H task force and existing commercial relationships.

The market will eventually polarise into two or three major platforms as cell phone vendors and operators select their platforms. DiBcom has a good chance to be a central player on one of these platforms due to its unique chip set, partnership and patent portfolio. Once the DVB-H technology is widely adopted in a standard PC/notebook environment, DiBcom will have a strategic advantage due to it close relationship with Intel and its ability to hold a central control over this new emerging market.

DiBcom has the advantage in that it is not only the first company with a DVB-H chip in the market, but that it also offers key technical advantages, in terms of low power consumption resulting in longer battery life and powerful signal processing in support of mobile TV.

DiBcom has already proven that it can ship volume quantities from several 100k to a million units.

Funding and future prospects
All in all DiBcom has so far raised €41 million over a five year period. Taking into account the different exchange rates during this period, we feel that this is slightly on the low side compared to a similar sized company in the U.S. European fabless companies tend to survive on half of the amount typically consumed by a U.S. based company in a similar field. They do this with a reduced headcount and being more conservative with their sales and marketing budgets.

On the other hand, it could be argued that European start-ups are more efficient in their use of capital and generate quicker cash flow from customer shipments. It is somewhat regrettable that this is not adequately reflected in the valuations of European companies. It is little wonder that such companies become the acquisition targets of the more leveraged U.S.-based companies.

Let us hope that DiBcom doesn’t go the same way and instead sustains itself for a proper global IPO and becomes a self-sufficient global fabless player that can acquire other complementary technologies, channels and companies. However aligning current investors’ short to medium term interest and exit plans with those of the company’s long term goals will provide quite a challenge for the new board.

According to Dr Lévy, “the total raised so far is €40.7 M (approximately $50 million), which should be enough to achieve an IPO/exit. The company may need an additional $10M mezzanine round before an IPO could be envisaged, but not before 18 months.”

On the market development front, there are still concerns about the costs of handsets, battery power, usage time and quality of video (both colour and sharpness of images), especially when on the move at high speed. DiBcom is well positioned to address these challenges with its low power technology, low costs, patents and partnerships.