A Changing of the Guard –

The flow of interest and money into the fabless space has created a sea change in the venture industry. Run your fingers down the long list of investors in fabless startups over the first half of the year and you notice something. Atlas Venture has moved into the lead as the No. 1 investor in semiconductor startups, having made five deals in the first six months of the year.

The old-timers are there, but not with the frequency of investors like Atlas, JPMorgan Partners (No. 2, with four investments), TPG Ventures, and VantagePoint Venture Partners. In fact, you have go pretty far down the list to find the firms that you might expect, like Kleiner Perkins Caufield & Byers; Mohr, Davidow Ventures (MDV); Sequoia Capital; U.S. Venture Partners; New Enterprise Associates; and Sevin Rosen Funds.

Are we witnessing a changing of the guard? A peek at the Web sites of Kleiner Perkins, Sequoia and MDV tells the story. These firms were founded by a generation of people that also founded the semiconductor industry.

Look at the rosters of such firms today and you see that people with backgrounds in semiconductors, electronics or science are in the minority. Instead people with business school backgrounds or operational experience dominate the older firms.

“As the generational change is taking place in the VC industry, portfolio investments are shifting as well,” says Chris Albinson, who heads up the communications infrastructure group at JPMorgan, and who has overseen 2003 investments into Canesta, Aristos, Portal Player and Sierra Logic.

The result is that different firms are pushing their way to the forefront of innovation and opportunity in the semiconductor space. Firms like Atlas, JPMorgan, TPG and VantagePoint are leading the way, but another crop is already as active as the old-guard players, including InterWest Partners, JAFCO America Ventures, and RBC Capital Partners.