through activities such as applications development and new features.
        When this partnership works well, it often leads to an expanded relationship, such as co-development of future products. It could also lead to acquisition by your partner. In the event this partnership does not lead to acquisition, you must be able to extricate yourself and make your company attractive for other potential acquirers.
        The exception: If your product is a component of subsystem (hardware or software), rather than a complete system, your

  technology is being thoroughly checked out. The close collaboration helps to build trust between the two parties, increasing the chance of a successful M&A.
        There are ways to optimize the financial returns for the investors and the entrepreneur in an M&A. When this option appears likely, it is worthwhile to remember that there are “right” times and “wrong” times to get yourself acquired.
        The “worst” time to get bought out is when you are out of money, as you will be at the mercy of the buyer. The next worst time is when you have successfully raised money and are on your 		 
 

customers are tool makers, not chip makers. Since you are not selling into fabs, your field support requirement is greatly simplified, and you may not need a customer-support partner at all.

4 – Focus on what you do best
The previous two points on

 

  way to building up the company, but the milestones achieved at the time of acquisition do not allow you to add much enterprise value.
        The “best” time to be acquired is when the following combined conditions are reached:		  
 

partnership are also examples of focus. Because start-ups are so limited in resources, it is critical that they focus on what they do best while they let go of almost everything else through outsourcing and partnership.
        This is much easier said than done, as most entrepreneurs instinctively believe nobody can do the job as well as they can, and it is unthinkable to leave the job to others. The urge to do everything by one’s self – until the money runs out and it’s too late to reverse course – has killed many a good start-up.
        Even if the entrepreneur is persuaded to let go, it will still take a lot of effort to stay focused for an extended period of time. There is no guarantee of success if you stay focused, but it is a guarantee of failure if you don’t.

5 – Prepare for an M&A
Some VCs lament that there is little or no chance for a semi conductor equipment company IPO. But the reality is that there have been hardly any technology IPOs in the past two or three years, and the dry spell will not cease until the public equity market returns. Merger and acquisition (M&A) will remain the primary exit option for some time to come.
        So, rather than dreaming about an elusive IPO, the entrepreneur should focus on running the business, increasing its value and getting it acquired, while at the same time not cutting off a possible IPO should the stock market roar back.
        Many successful M&A have started with a partnership. That’s because in a working relationship, the people on both sides get to know each other better while the critical
 

  
You have used up most of the money you raised from the last round (to build up the company’s value), but you are NOT out of money;
You have explored and planned but not yet raised the next round of financing, which invariably leads to dilution of all existing shareholders’ ownership;
You have tangible, measurable and meaningful milestones to justify a higher valuation than previously.

        But one also needs to be opportunistic. It is not advisable to try too hard to optimize acquisition timing at the risk of missing the exit opportunity altogether. The old adage, “A bird in hand is better than two in the bush,” is still sound advice.

SUCCESS IS STILL POSSIBLE
Start-up financing has been extraordinarily difficult in recent years. Some find the environment too tough and give up. I think it merely calls for new strategies. If investing in semiconductor equipment start-ups were so simple and trivial, everybody would be doing it, and it, would no longer be an area in which you want to invest.
        Investors who can see through the problems and help guide the start-up to find solutions will be richly rewarded. Start-up entrepreneurs who can find and implement these solutions will enjoy the fruits of success for their innovative hard work.

David K. Lam, founder of Lam Research, is an investor and coach for high-tech companies. He is also chairman of David Lam Group and a venture partner of DynaFund Ventures. Email: david@davidlam.com.