Based in Santa Clara, California, Magma Design Automation Inc. develops software that computer chip designers use to produce complex integrated circuits (ICs). ICs are interconnected layers of semiconductors—electronic components etched onto thin silicon chips that direct the passage of electrical current. They are used in computers, as well as a variety of electronic devices. Magma's electronic design automation (EDA) products, which improve chip performance and help manufacturers to get new chips onto the market faster, include Blast Create, Blast Plan, Blast Fusion, and Blast Noise. These applications are used by a number of leading firms within the technology and electronics industries, including Broadcom, NEC Electronics, Texas Instruments, and Toshiba. In addition to its California headquarters, Magma has a number of other U.S. locations, including sites in Los Angeles, San Diego, and Orange County, California; Boston; Austin and Dallas, Texas; Durham, North Carolina; and Newcastle, Washington. Internationally, Magma maintains locations in the United Kingdom, Taiwan, The Netherlands, Korea, Japan, Israel, India, Germany, France, China, and Canada.
Magma was founded by entrepreneur Rajeev Madhavan and three other EDA industry players: Lukas van Ginneken, Hamid Savoj, and Karen Vahtra. With Madhavan at the helm as CEO, the company raised $115 million in venture capital, which was in ample supply at the height of the dot-com craze.

After training at Bell Northern Research in Canada, Madhavan worked for Cadence Design Systems, performing due diligence reviews of companies that Cadence wanted to acquire. While performing this work, Madhavan was inspired to start his own firm. His entrepreneurial run began in 1992, when he played a role in starting LogicVision Inc., a firm that made chip testing tools. Two years later Madhavan started the EDA firm Ambit Design Systems Inc., which was eventually sold to Cadence for $260 million in cash.

Cisco Systems Vice-President Andreas "Andy" Bechtolsheim provided the initial funding to start Magma, which established headquarters in Cupertino, California. This capital was immediately used to develop a product that stood out from the offerings of other industry players. As Magma President and Chief Operating Officer Roy Jewell explained in a November 29, 2005 interview with Chris Hall of DigiTimes.com: "What Rajeev did from Day 1 was establish a world-class R&D team, and our idea was to develop a system, built from the ground up, for IC designs that would incorporate processors at 0.13-micron and below. That meant that, in addition to active circuit components, the system looked at interconnects as an active part of the design and one that also had to be optimized."

In the same interview, Jewell shed some light on the company's strategy for acquiring customers, commenting: "We didn't try to take a shotgun approach in penetrating the market; rather, we tried to select some bigger customers that were right at the sweet spot of our technology. We would have some success with a customer and then build out a much broader business as a result of those successes. We were asked to tackle their hardest designs, the ones that were in trouble, and we went in and solved those problems and got those designs to market. From that success came bigger opportunities for engagement with those customers." Magma's first product, a physical design system called Blast Fusion, hit the market in April 1999—two years after the company was founded. In June the technology giant Intel made an undisclosed investment in Magma, and the firms began working to optimize Magma's products for computer workstations that used Intel's processors. Two months later the company formed Magma KK in Shin-Yokohama, Japan, to serve a growing customer base in that country. Magma ended 1999 by gaining its largest customer to date, Fujitsu Microelectronics Inc., which reported great success in reducing design times with Blast Fusion.