Graphcore founders Simon Knowles and Nigel Toon
Graphcore said it will use the funding to support its global expansion and to accelerate the development of its intelligence processing units (IPUs), which are specifically designed to power artificial intelligence software. The company has already shipped tens of thousands of its chips to customers including Microsoft and Dell.
The Series E funding round, which comes less than a year after Graphcore raised a $150 million extension to its last round, values the company at $2.77 billion, up from $1.5 billion in 2018.
Graphcore CEO and co-founder Nigel Toon told CNBC in July: “We’re now at the point where we’re not really looking for venture investors in the business. We’re more interested in companies that would be long term investors and holders of the stock, perhaps, in the public markets, if we ever reach that point.”
At the time, Toon said going public is “ideally what we would like to do” but he stressed “lots of water still has to flow under the bridge before we get to that point.”
Total investment in Graphcore now stands at $710 million and the four-year-old company has $440 million of cash on hand.
The latest funding round was led by the Ontario Teachers’ Pension Plan Board while other new investors included private equity investor Baillie Gifford, venture capital investor Draper Esprit, as well as funds managed by Fidelity International and Schroders.
On Tuesday, Toon said in a statement: “Having the backing of such respected institutional investors says something very powerful about how the markets now view Graphcore. The confidence that they have in us comes from the competence we have demonstrated building our products and our business.”
He added: “We have created a technology that dramatically outperforms legacy processors such as GPUs, a powerful set of software tools that are tailored to the needs of AI developers, and a global sales operation that is bringing our products to market.”
Serial chip entrepreneurs
Graphcore was founded in June 2016 in Bristol, England, by Toon and Simon Knowles, who sold their previous chip company, Icera, to Nvidia for $435 million in 2011. The pair formed the initial idea for Graphcore in a small pub called the Marlborough Tavern in Bath in January 2012.
Today, the company employs around 450 people in Bristol, Cambridge, London, Beijing, Oslo, Palo Alto, Seattle, and Hsinchu in Taiwan. It expects the number to grow to 600 by the end of 2021.
But the rapid growth hasn’t come cheap. It made a pre-tax loss of $95.9 million on revenues of $10.1 million in 2019, according to an annual report filed on U.K. business registry Companies House.
Santa Clara heavyweights Intel and Nvidia are two of the obvious front runners in the AI chip market given their expertise in chip making. The companies haven’t disclosed how many of their AI-optimized chips have been sold. However, over a trillion computer chips are expected to be shipped in 2020, according to market data website Statistica. In 2019, Intel’s slice of the overall chip market came in at 15.7% and it has been the market leader every year since 2008, with the exception of 2017 when Samsung took the number one spot.
Graphcore’s Toon criticized Nvidia’s plan to buy U.K. chip designer Arm from SoftBank for $40 billion, saying it is bad for competition.
“We believe that Nvidia’s proposed acquisition of Arm is anti-competitive,” he said. “It risks closing-down or limiting other companies’ access to leading edge CPU processor designs which are so important across the technology world, from datacenters, to mobile, to cars and in embedded devices of every kind.”
Google, Amazon and Apple are also working on their own AI chips.
Sequoia backs Nvidia and Graphcore
Previous investors in Graphcore include the likes of Microsoft and BMW iVentures, as well as venture firms like London’s Atomico and Silicon Valley’s Sequoia, which has also backed Nvidia.
Last month, Sequoia partner Matt Miller told CNBC: Graphcore “are in this position where they always have people coming at them trying to give them more money. So, they do not need funding. They are well funded for the next several years, but they definitely have people trying to invest in the company.”
He added: “I don’t think that you have to take on Nvidia because the market is so huge. Taking on Nvidia is like this huge task. It’s a huge company with billions of revenue and incredible teams doing all sorts of wonderful things. I think that what Graphcore has the opportunity to do is be a very strong player in the AI microprocessor market. It continues to have great progress with many of the cloud providers, and many people want to be diversified. They don’t want to be all in with one chip.”
Graphcore launched its second generation IPU earlier this year despite disruption from the coronavirus pandemic.