Element 14, which claims to be the largest silicon chip start-up in Europe, has been backed by Atlas Venture and Bessemer Venture Partners. It will be based in Cambridge and Bristol but registered in Delaware to make a US listing easier.
The company hopes to emulate the success of ARM Holdings, the microchip designer, whose cross-shareholding agreement with Acorn was unwound earlier this year. Element 14 will use the fresh finds to develop and sell a digital signal processor chip that will be used in mobile phones, set-top boxes and hard disc drives.
Stan Boland, chief executive, said it hopes to design its first chip by autumn next year. "It will offer top performance, lower power consumption and ease of programming," he said.
Element 14 will be competing against giants like Texas Instruments but claims its technology will give it an edge.
Mr Boland said the market for DSP devices is expanding rapidly. The number of DSP chips in issue is predicted to double between 2002 and 2005.
Such processor chips will be vital in enabling customers to access the Internet via portable devices such as mobile phones and laptop computers. This portable market has been identified by Microsoft and other big players as the new key area for Internet expansion.