Graphcore. A Cautionary Tale For Would-be NVIDIA Challengers

Once valued at ~$2.8 billion, the UK Unicorn is but a shadow of its former self

Graphcore is a UK-based startup founded in 2016 by Simon Knowles and Nigel Toon, two highly experienced veterans of the semiconductor & computing industries.

The duo set out to develop a massively parallel Intelligence Processing Unit (IPU) from the ground up. Just four years later, they completed a Series E funding round which valued the company at $2.77 billion, details here:

We’re delighted to announce that Graphcore has raised $222m of investment to help support the company’s continued global expansion and further accelerate future IPU silicon, systems and software development.

This investment brings the total funds raised by Graphcore to more than $710 million, with the company expecting to have over $440 million of cash on hand post-closing to support future growth. Graphcore is now valued at $2.77 billion, post-money.

Along the way, they were backed by an eclectic list of venture capital firms. Note the name Microsoft among the investor list. Microsoft will go on to play a hugely significant role in Graphcore’s fortunes. More on this later.

Over the course of the past nine months, a number of developments emerged which have had a devastating impact on Graphcore. In October 2022, it was reported that Microsoft terminated its partnership with the company, details here.

According to The Times, Graphcore’s deal to supply Microsoft with processors for its cloud computing platform, first announced in 2019, has since been scrapped as problems at the chip startup mount. It has been considered among the most promising UK startups, becoming a unicorn in November 2017 and hitting a valuation of $2.8bn in December 2020.

Investors are reportedly unhappy with Graphcore’s revenues, which reached just £4.5m last year against a valuation of more than $2bn. According to The Times, investors have also suggested the company is struggling to compete with American chip giant and rival Nvidia.

To add insult to injury, investors were reportedly writing down the value of their investments in Graphcore, details here:

Sequoia, which has been an investor in Graphcore since 2017, has opted to write down its investment in the Bristol-based startup, three sources familiar with the matter said. Matt Miller, partner at Sequoia, currently sits on Graphcore's board.

Then there was this article from May 8 last regarding former Graphcore engineers being hired by Meta:

“We recently welcomed a number of highly-specialized engineers in Oslo to our infrastructure team at Meta. They bring deep expertise in the design and development of supercomputing systems to support AI and machine learning at scale in Meta’s data centers,” Meta spokesman Jon Carvill told Reuters.

How did Graphcore go from the dizzy heights of a $2.8 billion valuation to being dropped by Microsoft, having investors writing down their investments and their Oslo-based engineering team being acquired by Meta? Where did Graphcore go wrong and what lessons can be learned by other NVIDIA-challenging startups in the world of accelerated hardware for AI? Let’s dig in…