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VCs Backs Freescale Spinout

SAN FRANCISCO, June 8 (Reuters) – A group of venture capitalists is investing $20 million in a new memory chip company created by spinning off a unit of Freescale Semiconductor, the chip maker that was bought by private equity in 2006.

The new company, EverSpin Technologies, will focus on developing and selling MRAM (magnetic random access memory) — a memory technology that promises to provide an alternative to existing memory chips that is cheaper, faster and uses less power.

As part of the deal, Freescale will transfer MRAM technology, related intellectual property and products to EverSpin and will retain an equity stake in the new company.

It will also take a seat on EverSpin's board.

The deal is expected to be announced on Monday.

Chandler, Arizona-based EverSpin will continue to supply MRAM products to Freescale's existing customers, as it seeks to expand the market for these chips.

MRAM has been in the works since the 1990s, but the technology is yet to be widely adopted. In recent years, companies like International Business Machines Corp (IBM.N: Quote, Profile, Research) and Toshiba (6104.T: Quote, Profile, Research) have shown interest in using the chip to power products.

“The decision to form a new company is intended to accelerate the adoption of MRAM across the entire suite of new applications,” said Lisa Su, Freescale's chief technology officer.

“Freescale has recognized that the business opportunity will increase with a focused, independent company,” Socolof said in a statement.

New Venture is one of a handful of venture capital firms that specialize in carving out units within large companies and providing venture funding to them.

Rather than looking in dorm rooms and garage shops for the next big idea, these venture capitalists shop inside the research departments of large companies for marketable technologies that can be spun off into standalone businesses.

Venture capital firms Draper Fisher Jurvetson, Epic Ventures, Sigma Partners and Lux Capital are also investing in EverSpin.

By Anupreeta Das