David Srodzinski: a new kind of Scottish entrepreneur

After having worked for five large multi-national corporations, David Srodzinski decided to venture out and set up his own company, Elonics, at the end of 2003. Having had a chance to explore different markets and funding opportunities with support from Scottish Enterprise, Elonics started to take off in January 2005 when it started expanding its team.

Elonics is based in Livingston, Scotland, at the Alba Centre, which hasn’t given up on its ambitious goals for a becoming a world class system and silicon design cluster – despite the recent setback, when a leading EDA vendor laid off a lot of people. Some of these people have recently joined Elonics.

Srodzinski has a wide range of experience, which started in Wales at Sony Bridgend, where he was a development engineer in the TV and satellite receivers unit. He continued to work in consumer electronics, at Philips Semiconductors in Southampton and then moved to Seagate, where he worked on disk drive amplifiers and motor control ICs. After a brief spell at Wolfson Microelectronics, he joined Level 1 Communications in Glasgow, Scotland, a high speed silicon network design centre, which was later acquired by Intel. [Intel’s acquisition was a stock for stock merger worth $2 billion and approximately 18 million Intel shares in the heady days of 1999.]

Venturing out is fun, but full of challenges
Having worked at so many larger corporations, seeing the missed opportunities and the massive potential gains from starting a new company, Srodzinski ventured out and set up Elonics as a sole founder in September 2003. He assisted Scottish Enterprise (a Scottish government body tasked with promoting industry, innovation and entrepreneurship in Scotland) in initiating a new prestigious industrial fellowship programme, with which he became one of three to first pilot.

Previously, the entrepreneurial fellowship programme was only geared for PhD academics spinning out of universities, but with industrial fellowship, the same programme was geared for entrepreneurs with industry experience and wanting to venture out on their own. Scottish Enterprise recognised the need to back home grown companies with high growth potential, as they are more likely to create longer term, higher, productivity sustainable jobs. Scottish Enterprise, through its national high growth start-up and technology programme, is very active in supporting technology start-ups in Scotland.

With a Scottish Enterprise bursary (grant) that pays for basic living expenses and access to a mentorship programme through SE’s national high growth start-up team, Srodzinski spent a year researching the new opportunities in the optical networking market and developed a business plan for Elonics. His initial business plan was to create a core technology, but after pounding the streets and talking to various venture capitalists which talked the talk of ‘innovation’ but were not interested in pre-technology plays, he decided on a different route.

With the help of Scottish Enterprise and the experience gained during the first year of formulating the business, he achieved a $600K seed funding from a combination of bank loans, redeemable shares and grants in November 2004.

Building the core team
Recognising that most UK technology companies are perceived as being poor in exploiting technology, Elonics decided to hire people with commercial and management experience early on. Steve Wood, who was previously a business development manager at Wolfson, joined Elonics, as well as Alf Sheppard, who has vast experience of dealing with customer account management as well as foundry and supply chain relationships.

Elonics’ initial business model is to exploit its technology capabilities in a number of channels: currently concentrating on offering high quality, high value consultancy and design services, with a view to licensing some of its core IP (intellectual property) currently in development, and later consider the option of becoming fabless as the opportunities arise.

Elonics currently offers design services in a highly specialised niche market, which commands a premium price compared to standard commodity services. It currently has 11 people, of whom seven are technical and four are in commercial and management roles. Elonics has already gathered one of the most experienced independent design teams in the UK with around 100 man years of experience. Further rapid expansion is planned for 2005/06 due to the demand for its offerings.

According to Srodzinski, rather than wait for opportunities to land on their desks, they are out there creating opportunities in a very proactive business model. If they come across an idea, they will research the market and the underlying technology. This allows the company to identify which prospective customers can get the best benefit from its value proposition and which exploitation route offers the best long term value add. Examples of such exercises include power semiconductor/sensor designs and a UWB (ultra wide band) R & D project.

Typical customers of Elonics would be large OEMs (original equipment manufacturers) and IDMs (integrated semiconductor device manufacturer vendors) with applications in wireless, low power and RF.

The majority of Elonics business and growth is in the USA. It has sufficient knowledge and agency relationships to start addressing further market opportunities in Korea, Japan and China, which will commence Q4 2005.

Breaking even
The company is currently bootstrapping itself and is paying itself from its own cash flow. It is now cash flow positive. Currently, there is no push for external venture capital but this could change when it finalises plans around new opportunities. Srodzinski can envisage raising a Chilli R1, series A, venture round sometime in 2006.

The Scottish diaspora and network effect
Srodzinski takes full advantage of the many Scottish people who are spread around the globe and with the help of Scottish Enterprise, Scottish alumni networks and Connect Scotland, this creates many networking opportunities to meet and leverage from the Scottish global diaspora.

Advice for entrepreneurs
Srodzinski believes that entrepreneurs have to take a certain degree of calculated risk themselves before others will back you up and provide the necessary support. Scotland is a fantastic place to start a business. If you have ideas and a vision, you will get good support from the various government agencies and networks. There are many incubation facilities in Scotland that specialise in supporting technology based companies, not to forget the many universities that produce world-class engineers.

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© Chilli Publishing Ltd 2005

04OCT2005