Distribution vets use their Insight to form IP company

At its heart, VTSI combines a highly technical sales channel and an infrastructure set up to streamline the legal aspects of selling IP. VTSI's executive team includes a practicing IP attorney who has developed a common IP licensing agreement to simplify the sales process-an approach similar to those offered by the Virtual Component Exchange and Xilinx Inc.

Once an IP sale is made, the IP supplier or an outsourced design center will provide engineering support for the core. The goal, Cook said, is to cultivate a network of “certified” design centers.

Analysts said the venture could be a boon to small IP developers better at inventing technology than selling it.

“Developing a good technology people want is hard, but setting up the distribution channel to get that into peoples' hands is equally har d. Most start-ups ignore that aspect,” said John Metz, an analyst at Metz International Ltd., Harvard, Mass.

OEMs win as well by getting timely access to technology they otherwise might have to develop themselves, he said.

Validation problem

But one analyst noted that selling IP, which often isn't even a physical product, involves more than data sheets and technically savvy salespeople.

“One of the problems is validation-how do you make sure the thing is going to work if you buy it,” said Jim Tully, an analyst at Gartner Dataquest in Surrey, England. “At the end of the day, that aspect amounts to a considerable cost of the sale.”

Companies like Technical Data Freeway have already tried and failed to find an IP distribution model that had the right amount of technical support to back up the sales effort, Tully said.

Additionally, pricing models are difficult to support when dealing with small IP vendors. EDA companies like Mentor Graphics Corp. and Synopsys Inc. discovered it 's easier to package IP together as a library with a single subscription fee than to negotiate each deal separately, according to Tully.

Cook said IP services like platform verification are currently handled on an outsourced basis by companies such as Zaiq Technologies Inc. and Faraday Technology Corp. He said VTSI may later seek venture capital funding to expand its business model to encompass that and other services, including virtual component warehousing and b2b e-commerce.

For the time being, VTSI's revenue will come in the form of commissions on IP license fees, or less commonly, as a percentage of royalties, Cook said. For overseas suppliers, there's also the opportunity to act as a receivables agent and collect a fee for those services, he added.

According to Logan, VTSI has developed profiles of more than 700 OEMs in North America detailing the most popular market segments and types of IP, as well as companies' design preferences in terms of silicon suppliers, platforms, and process leve ls.

By this time next year, the company hopes to have five regional managers and at least 15 sales engineers. VTSI will also offer online tools such as block diagram reference designs that will display drop-down menus of IP data sheets for a given block.

“Sophisticated designers may not need to be told what goes into a Fast Ethernet switch,” Logan said. “But what they may not know is who has the blocks they need.” OR