"When Viktor Ariel set up TransChip, a developer of single chip camera solutions for mobile phones, in September 1999, venture capitalists advised him not to bother with camera phones, but to go into optical networking instead," reports an article in the Jerusalem Post (free registration required).
"'Until last year, the VCs didn't believe a market for camera phones would develop,' admitted Ariel, the company's chairman and CEO. 'It was extremely frustrating. We must have met about 150 VCs worldwide, and there was not a single VC in Israel that we didn't meet, but none of them were interested,'" the article says.
In order to understand and develop valid business models for the worldwide camera phone business, it's crucial to understand all the players involved, including the chipset vendors, such as TransChip.
TransChip's products
The company's main product line consists of camera modules that include an image sensor, a programmable image processor and and a real-time jpeg codec, the article says.
TransChip's advantages, according to Ariel, include better photo quality, smaller size modules that competitors' products because they use one rather than two or more chips and lower prices.
He says TransChip's module costs less than $10, compared to Toshiba, which costs $12 - $14 per unit, and OmniVision, which charges $10 - $11.
Getting funding
Ariel invested his own money into TransChip and then $500,000 from Weinstein, a professor at Tel Aviv University. Weinstein introduced Ariel to others investors from whom he received $700,000.
Ariel thought it would be easy to raise additional funds, but when the Internet bubble broke, he had a tough time. But at the end of 2001, Prof. Alan Oppenheim, a professor at MIT, Ray Stata, the founder and chairman of Analog Devices, and Dr. Andrew Viterbi, co-founder of Qualcomm invested $5 million in the company, the Jerusalem Post says.
The company received $5.5 million in April 2003, led by TransChip's first venture capital funding, from Mission Ventures. In February 2004, TransChip raised $19 million, led by Redpoint Ventures and JP Morgan Fleming Investments.
Money and scheduling
The lack of funds has hurt TransChip's efforts to be a leader in the field. However, the company has survived as an independent entity when others either have exited the business or been acquired.
TransChip employs 70 people, with one person in the United States. The company's biggest customer is Arima Communications in Taiwan. TransChip first sold Arima one camera phone module and is now working on three other designs, including a two megapixel version.
Ariel conservatively estimated revenues for 2004 of $5 million - $10 million and hopes to break even in 2005. In order to continue its growth, the company want to go public.
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