Company’s IPO shows good form, but it will be a tough act to follow

Oct. 30, 2003 — FormFactor Inc. has proven that a MEMS company could go public, even these days. But the company’s experience also highlights how many stars must align to make a compelling IPO — a sobering lesson for small tech startups looking to leap from late-stage venture funding to the public markets.

The Livermore, Calif.-based company went public in mid-June, offering six million shares at $14 each. The value proposition for the 10-year-old company, which makes wafer probe cards to test memory, microprocessors and other semiconductor devices, was twofold, according to Steve Cullen, director of semiconductor research at In-Stat/MDR.

First, he said, the company’s technology can save semiconductor manufacturers money. Its wafer probe cards feature arrays of microsprings that connect wafers to test equipment. By making many simultaneous connections, microsprings let manufacturers test more spots on a wafer in parallel.

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“They want to test the chips when they’re still on the wafer,” Cullen said. “It’s much cheaper because they don’t finish processing the bad ones.” The company claims Infineon Technologies AG, Micron Technology Inc. and Samsung among its customers.

Cullen said it was the MEMS processes used to make FormFactor’s microsprings that gave the company its competitive edge. However, the second factor that helped make the IPO viable was a semiconductor industry development that had nothing to do with MEMS. “We’re at the point where 300-millimeter wafers are starting to replace 200 millimeter wafers,” Cullen said. Manufacturers are buying new equipment.

If the IPO of FormFactor and those of a few other companies mean the dawning of a new market for public offerings, second-quarter funding data show that small tech companies are getting ready.

Late stage funding in micro- and nanotechnologies increased significantly compared to 2002 and the first quarter of 2003, according to a Small Times analysis of the PricewaterhouseCoopers/Thomson Financial Venture Economics/National Venture Capital Association MoneyTree Survey, which tracks venture activity in the United States.

Of the $242 million invested in 23 small tech funding events in the second quarter, $158 million went to late-stage companies in seven events. As a result of the later, larger rounds, small tech accounted for 5.6 percent of the total $4.3 billion deployed in the period — a significant increase over the first quarter’s $162.2 million.


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