Due diligence on DrAive is based on the four-pillar venture evaluation framework that includes market, team, business model, and deal. The strengths and weaknesses of the selected venture have been identified in the next sections.
Market
The company’s market is large enough to maximize brand awareness to customers. Additionally, the huge size offers a better bargaining position with clients, consumers, and partners. A larger market share also eases access to superior advertising technologies. DrAlve’s market for edge semiconductor chips will grow to $10 billion by 2024. Its sub-segment for artificial intelligence-optimized chips is estimated to expand at the rate of 80% per year for the next five years.
Similarly, it has two customer segments, which buy chips for driverless car producers and for original equipment manufacturers. The company has a strong support and subscription model as well. DrAlve has positive reputation in the market because it has already won several prestigious scientific awards. DrAlve earns a net income of close to $25 million, while net and gross margins are 90% and 35% in five years. The current market requires driverless vehicles, such as Volvo, Waymo, Uber, Apple, and BMW, which use IoT sensors, artificial intelligence, and computing power.
Team
DrAlve has had advanced talks with Asian semiconductor manufacturers who are willing to test their designs. They have also extended their research collaboration to include Stanford Institute for Advanced Artificial Intelligence. The company’s founder team is knowledgeable and highly experienced in design and technical infrastructure. For example, Chris Chips, the chief executive officer, holds a master of business administration from Stanford University and an undergraduate engineering degree from Texas A&M. He has prior work experience at McKinsey and other startup companies.
Similarly, the company’s chief technology officer has a PhD in Electrical Engineering from Stanford University, undergraduate Mathematics from Seoul University, and prior experience at Samsung and NVidia. He has also focused on systems integration and supply chain management. DrAlve’s chief science officer holds a PhD in Computer Science from Stanford University and undergraduate Biology from St. Andrews. Although he does not have previous work experience, he holds several academic scholarships, apart from focusing on all aspects of design architecture and AI and IoT technology development. Their experience and titles carry significant weight to ensure the sustainability of DrAlve.
Business model
The company does not aim to produce semiconductor chips but to generate their designs. This strategy is helpful in adapting to new market changes without incurring the storage costs of final products. Moreover, its strategic partners will manufacture and test the chips in the semiconductor industry. DrAlve will therefore incur lower inventory, reducing the working capital investment. The same strategy saves the company from losses that obsolete items could cause in the future.
Additionally, DrAlve combines advanced scientific expertise with global networks for outsourcing. The company has high adeptness in research and development, technology, and infrastructure. Its business model requires technical expertise in semiconductor design, artificial intelligence computing, Internet of Things (IoT) design and programming, as well as system integration of hardware and software. These special features make the company competitive in this information commodity era.
Weakness
DrAlve’s operating income varies, such that prices per chipset changes over time from $1 to $2. The cost of sold also declined from $0.3 to $0.1 per chip. Research and development costs rise from $4.5 million in the first year to $12million in year five.