150September 2015, hardware veterans
Nigel Toon and Simon Knowles were
doing the rounds of venture capital
offices in Silicon Valley and London,
touting their latest startup. The pair
had a dazzling track record – among
other achievements they had sold
their previous semiconductor company,
Icera, to NVIDIA for $435 million (£346
million) four years earlier. And their
vision for Graphcore – a new Bristol-
based venture – was bold: they were
building a new generation of micro-
chips known as intelligence processing
units (IPUs), designed for the rapidly
approaching artificial intelligence age.
Yet early reactions to their pitch for
series A financing were distinctly muted.
“In many cases we were laughed out of
court,” recalls Toon, Graphcore’s CEO.
Typically, Toon says, a partner in a
venture capital firm would be excited
by what they were doing. “But then
they’d go to their partner meeting, and
the first question would be: ‘What’s
AI?’ It’s stunning to think that was a
conversation happening [as recently
as] 2015.” From there, it was an uphill
struggle. “Even if they got the fact that
AI might be interesting, they’d say: ‘Your
business model is to build a chip for this
AI thing? Well, nobody’s made money
from chip investments in ten years.’”
Toon, who is 55 and has the mellifluous
voice of an old-school BBC continuity
announcer, says that chip development,
in the eyes of most investors at the time,
was considered highly capital intensive,
with returns failing to justify the upfront
financing required. “It’s not more
capital-intensive than software,” says
Knowles, Graphcore’s co-founder and
chief technology officer. “But software
has this joyful property that you can try
it out at small scale first, whereas witha chip, you’re all in. If it doesn’t work,
you’ve spent all your money.”
That was 2015. Fast forward to
today and, of course, AI hardware is a
white-hot category for investors, with
VC funding for AI companies in the
United States jumping by 72 per cent
in 2018 to a record $9.3 billion – a fifth
straight year of growth, according to a
report by CB Insights and PwC.
What changed over those three years?
Toon points to two things. First, in 2016,
traditional chip giant Intel acquired AI
software and hardware startup Nervana
for $350 million, raising eyebrows
all over the Valley. Second, Google
announced it was going to build its own
chips – evidence, Toon says, that existing
chips weren’t up to the task.
Knowles describes the impact of
Google’s decision as “seismic”. The
fact that Google thought AI was going
to be a sufficiently big deal to justify the
pain and expense of building its own
chip team helped make the Graphcore
founders’ case for them. He and Toon
had been arguing that it was worth
digging deep financially to develop new
processor hardware because existing
graphics processing units (GPUs) –
used, for example, in mobile phones,
games consoles and personal computers- weren’t designed for AI workloads such
as machine learning and deep learning.
By then, their startup was already
ahead of the pack in developing a new
processor architecture. Soon, top-tier
investors – including Atomico, one of
Europe’s best-known VCs – were beating
a path to their door. Atomico, which went
on to lead Graphcore’s $30 million series
B round in July 2017, was followed six
months later by one of the Valley’s
biggest guns, Sequoia Capital. At the
time Graphcore, having recently closed
Right: Graphcore engineer Joanna
Taylor belongs to “a semiconductor
team on a par with the world’s best”Previous spread: the Graphcore
IPU will “power world-changing
innovations for decades”its series B, didn’t need investment – but
the west coast investor wasn’t taking
“No thanks” for an answer. “They came
to see us here in Bristol and said ‘No, you
don’t understand, we want to invest in
your business’,” laughs Toon. “So we
work out terms and they invest $50m
into the company. And that’s one of the
very few investments they’ve made in
the UK, because they’ve got so much
opportunity on their doorstep.”
Sequoia partner Matt Miller, who now
sits on Graphcore’s board, admits he
was somewhat bemused to find himself
chasing down a company in Bristol. “We
knew there was an opportunity for a
new architecture that would be designed
from the ground up that could massively
accelerate our entry into this AI age, and
we were trying to landscape all of these
companies in China, the US and Europe,”
he says. “But our references were all
pointing to this one company in Bristol,
whom we hadn’t met yet.”
A roar of laughter distorts the line
from the Valley. “Lemme tell you, if you’d
asked me a month prior if I’d ever [sit
on] a board in Bristol I’d have said ‘No09-19-FTgraphcore.indd 150 19/07/2019 17:07