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AI powered Chip-maker raises $200 million with eye on IPO

U.K.-based chipmaker Graphcore announced Tuesday that it had raised $222 million of investment as it looks to handle U.S rivals Nvidia and Intel.

Graphcore said it will utilize the financing to support its worldwide expansion and to accelerate the development of its intelligence processing systems (IPUs), which are specifically created to power artificial intelligence software. The company has already shipped 10s 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 business 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 actually looking for venture financiers in business. We're more thinking about companies that would be long term financiers 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 worried "great deals of water still needs to flow under the bridge prior to we get to that point."

Overall investment in Graphcore now stands at $710 million and the four-year-old company has $440 million of cash on hand.

The most recent financing round was led by the Ontario Teachers' Pension Plan Board while other brand-new financiers included private equity financier Baillie Gifford, venture capital financier Draper Esprit, along with funds managed by Fidelity International and Schroders.

On Tuesday, Toon stated in a declaration: "Having the support of such highly regarded institutional financiers says something really effective about how the markets now view Graphcore. The confidence that they have in us originates from the skills we have actually demonstrated developing our products and our organization."

He included: "We have produced a technology that considerably outperforms tradition processors such as GPUs, a powerful set of software tools that are tailored to the requirements of AI designers, 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 offered their previous chip business, Icera, to Nvidia for $435 million in 2011. The pair formed the preliminary idea for Graphcore in a small bar called the Marlborough Tavern in Bath in January 2012.

Today, the business utilizes 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 quick development hasn't come low-cost. It made a pre-tax loss of $95.9 million on revenues of $10.1 million in 2019, according to an annual report submitted on U.K. organization computer registry Business House.

Santa Clara heavyweights Intel and Nvidia are 2 of the obvious front runners in the AI chip market given their know-how in chip making. The companies have not revealed the number of their AI-optimized chips have actually been offered. Over a trillion computer system chips are anticipated to be delivered in 2020, according to market information website Statistica. In 2019, Intel's slice of the general chip market was available in at 15.7% and it has actually been the marketplace leader every year given that 2008, with the exception of 2017 when Samsung took the number one area.

Graphcore's Toon criticized Nvidia's plan to buy U.K. chip designer Arm from SoftBank for $40 billion, stating it is bad for competitors.

" We believe that Nvidia's suggested acquisition of Arm is anti-competitive," he stated. "It runs the risk of closing-down or restricting other companies' access to leading edge CPU processor styles which are so important across the innovation world, from datacenters, to mobile, to cars and in ingrained 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, in addition to endeavor companies like London's Atomico and Silicon Valley's Sequoia, which has actually also backed Nvidia.

Last month, Sequoia partner Matt Miller told CNBC: Graphcore "are in this position where they constantly have individuals coming at them attempting to provide more cash. So, they do not need funding. They are well funded for the next several years, however they absolutely have individuals attempting to buy the business."

He added: "I don't believe that you have to handle Nvidia because the market is so substantial. Handling Nvidia resembles this big job. It's a huge business with billions of income and extraordinary teams doing all sorts of wonderful things. I believe that what Graphcore has the opportunity to do is be a very strong player in the AI microprocessor market. It continues to have fantastic development with a number of the cloud service providers, and lots of people want to be diversified. They do not want to be all in with one chip."

Graphcore introduced its second generation IPU previously this year despite disturbance from the coronavirus pandemic.

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