The Unshaken Moat: Physical Design Software’s Dominance in SaaS
PLUS: Google-acquired founder building something new
Announcements
We've made incredible strides, and here are some of the standout acquisitions from the past few weeks:
Dopt: Acquired by Airtable. Originally showcased on September 2022, and the acquisition was confirmed on July 2024.
Augmend: Acquired by Datadog. First highlighted on June 2023, with the acquisition announced on August 2024.
Teal: Acquired by Mercury. Featured on June 2023, with the acquisition finalized on September 2024.
But that's not all! Stay tuned—next week, we’ll be unveiling something new and exciting! You won’t want to miss it!
Behind The Scenes
The history of software has shown that nearly every category has experienced waves of disruption, driven by technological shifts. The cloud revolution, in particular, drastically lowered the barrier to entry for software development. Companies could now build software using just a credit card rather than investing in costly data centers, allowing cloud-native businesses to rise and compete across most industries.
However, one industry stands out as an exception: physical design software. Companies providing CAD, EDA, and simulation software have only grown stronger over time. In contrast to other software sectors, this field remains dominated by a few key players.
Here’s a quick snapshot of the current landscape in physical design software:
Design Software: General CAD tools from Autodesk, Siemens, Dassault Systèmes, and PTC.
Domain-Specific Solutions: Specialties like Building Information Modeling (Autodesk), Electronic Design Automation (Synopsys, Cadence), PCB Design (Altium), and Plant Design (Hexagon).
Simulation & Validation: Tools from Ansys and Altair that feed into the product lifecycle management process.
Key Historical Highlights
The Birth of CAD: In 1957, Patrick Hanratty, considered the father of CAD, developed one of the first computer-aided design systems at GM. By the mid-1960s, companies like Renault and Ford recognized the potential of digital design, leading to the foundation of Dassault Systèmes.
The Early CAD Market: Five key companies dominated the market: Applicon, ComputerVision, Auto-trol, Calma, and M&S Computing (Integraph). Their systems, sold at exorbitant prices ($150,000 in 1972), were tied closely to hardware, which was critical for CAD functionality at the time.
The Disruption of the 1980s: The rise of engineering workstations and personal computers revolutionized the industry, enabling new companies like Mentor Graphics, Autodesk, Cadence, Bentley Systems, PTC, and Synopsys to focus purely on software, leaving hardware to third parties. This shift significantly lowered the cost of CAD solutions, offering 80% of the functionality at just 20% of the cost, which proved highly disruptive.
Industry Consolidation: From the mid-1990s to today, consolidation has created an oligopoly, with general CAD controlled by Autodesk, Dassault, PTC, and Siemens, and EDA dominated by Synopsys, Cadence, and Siemens EDA.
The Big Question
The industry's structure has remained largely unchanged since the 1980s. The key players have switched to subscription and cloud models, but major shifts in the competitive landscape have yet to occur. Can this oligopoly be disrupted, and if so, what technology or market shifts would be required to make that happen?
For full version of this article, you can read them here.
Geeks of the Week
Startup Name: Creatify AI
Geography: US
One-liner: Generate engaging short video ads for your brand from any URL.
Founder(s) Background: Head of Content Moderation Engineering at Snap, Research Engineer at Facebook AI Research (FAIR).
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One-liner: An AI assistant that automates employee inquiries.
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