Deal of the Week
Berkeley-founded Arize AI got bought for nearly a billy 🐐.
As AI models are non-deterministic in nature — do the same prompt and you can get different answers — you need ways to evaluate their performance and accuracy across different use cases and environments, and ultimately try to improve performance over time.
As usage in the enterprise, particularly with agents, is set to explode (see Goldman chart, which is probably on the low side). If companies are going to have thousands of agents running around doing actual work, they need a way to understand when they are working, when they are going wrong and how to improve them over time.
So no surprise someone wanted to pay the big bucks for Arize.
Congrats to Jason Lopatecki and team.
America’s Finance Machine
America has a few reasons why it is the largest economy in the world:
Massive internal market
Optimism for commerce
Insanely well endowed with natural resources (see below on massive oil export expansions, among other things)
Talent magnet for immigration — some reports have immigrants as the founders of ~60% of privately held startups valued at $1B or more
Friendly neighbors and natural borders (give Prisoners of Geography a read)
And finally, financial engineering!
For a finance nerd, this is a fun one. Nvidia teamed up with some large asset managers for a $500B residual value guarantee. The scale is absurd. $500B is nation-state money — larger than the annual federal budget of Canada.
So what is this? It is a financing mechanism with some of the largest asset managers in the world that effectively establishes GPUs as a securitisable asset class. What this really means is that GPUs start to get financed in a similar way to aircraft, as these asset managers are viewing them as more fungible than they previously were.
If investors become comfortable that an Nvidia GPU has meaningful resale value several years from now, they can lend more against it. That lowers the upfront capital required to build a data center and potentially lowers the cost of capital for Nvidia customers.
Why is this good for Nvidia?
Cheaper financing = better economics. If Nvidia GPUs are cheaper to finance than competing hardware, the returns on buying Nvidia improve. That makes the hardware itself more attractive.
It broadens Nvidia’s customer base. For such a huge company, Nvidia’s revenue is still fairly concentrated among hyperscalers like Amazon, Microsoft, Meta and Google. The problem is that many of those same customers are increasingly building their own chips — Amazon has Trainium and Google has TPUs. They are basically Nvidia’s biggest customers and future competitors at the same time.
It helps the neoclouds compete. If Nvidia can make it easier for companies like Nebius and other GPU clouds to finance huge clusters, it creates a stronger alternative buyer base outside the hyperscalers. That is ultimately very good for Nvidia’s long-term business.
Also, in other news, SpaceX said they were going all in on Nvidia hardware as they expect to try to ramp up compute capacity rapidly.
Which raises the question - Is Nvidia undervalued??
The bears will say circular financing…
Nvidia is effectively helping finance customers so those customers can buy more Nvidia GPUs.
The bulls will say this is exactly what sophisticated capital markets are supposed to do. Take an expensive productive asset, create financing around it, lower the cost of capital and dramatically expand the market.
Capitalism is beautiful… provided the residual values hold up.
Quick Takes
Looks like the Stripe deal for OpenRouter is on at $7B. Nice win!
More tokens = more revenue? (Also very smart from A16Z to just start posting lots of beautiful charts).
Summary by the #️⃣ & 💰:
9 Berkeley-founded companies funded
$105M of capital raised from the 10th August to 16th August
💡 Got any ideas or feedback on how to improve this weekly digest? Just hit reply.
Acquisitions
🐻 Jason Lopatecki, Co-Founder & CEO. BA EECS. Article
Closed Rounds
🧬 Epicrispr Biotechnologies. $90.0M Series C 🇺🇸 Programmable epigenetic medicines. 💰 Octagon Capital, Janus Henderson Investors, Fidelity
🐻 Benson Cheng, Founder & VP Operations. BS Biology. Article
📈 River Markets. $8.5M Seed 🇺🇸 Prediction-market prime brokerage. 💰 Haun Ventures, Coinbase Ventures, Y Combinator
🐻 Antonin Parrot, Co-Founder & CTO. MFE. Article
⛏️ Princeton Critical Minerals. $16.0M Series A + Grants 🇺🇸 Critical-minerals processing technology. 💰 SOSV
🐻 Sean Zheng, Co-Founder & CEO. PhD Environmental Engineering. Article
🧠 Overstory Health. $1.4M Early Stage VC 🇺🇸 Behavioral-health treatment programs. 💰 Undisclosed
🐻 Alon Krashinsky, Co-Founder. BS Business Administration. Article
🏢 Castellan AI. $0.4M Angel 🇺🇸 AI for property management. 💰 Undisclosed
🐻 Stephen Fong, Co-Founder. BS Business Administration.
🗣️ HeyHuddl. $0.03M Seed 🇺🇸 AI meeting thought partner. 💰 Speechmatics
🐻 Chris Berkner, Co-Founder. Postgrad Chemical Engineering.
🧪 Newfound Materials. Seed 🇺🇸 AI-driven materials discovery. 💰 Activate, Greentown Labs,
🐻 Matthew McDermott, Founder & CEO. PhD Materials Science & Engineering.
🏭 Tensr. Undisclosed 🇺🇸 Autonomous robotic factories. 💰 Y Combinator
🐻 Eric Berndt, Co-Founder & CEO. MS & BS EECS. Article
Date Built By Berkeley Started | Companies Funded | Total Raised ($M) |
7/8/24 | 836 | 233,175 |
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