Invest Like the Best with Patrick O'Shaughnessy
01:00:30 · Gavin Uberti, Patrick O'Shaughnessy
[01:00:30] S1: This is one of the things that people come to me and say, Gavin, almost none of your experiments works. I only got to get lucky once. [01:00:35] S0: So one idea for one of these stories that I'm asking about, you know, difficult moments in the company's history is around the ability to raise capital to fund the thing. I think when you started it, you knew you'd need capital, but you did not know you'd need the quantum of capital that you've ultimately raised and are spending to build the solution. And you hadn't raised money before. These are all new things, right? There was moments where it was really, really difficult because I was there, I saw it moments where it was extremely difficult to raise the money that you did, without which the company would not exist. It would have died. And like many great stories, there are many near death moments. But money specifically in this new world, this isn't software. You don't just need a little bit of money. Maybe you could tell the story about the true hardest part about raising money early on, before you had something that you could show people and be so proud of in performance that you could show them blow their socks off. It was just you guys talking about an idea. But talk about the early difficulties raising money because it was pretty hardcore.
01:01:30 · Rob Wachen, Gavin Uberti
[01:01:30] S3: We've had some intense moments. It reminds me of probably early twenty twenty four before we raised our series a. And we were at this point where we had done enough of the architecture, done enough of the design that we knew that the chip architecture was sound. We had to go build it. There was a lot more to do. We were ready to go into what's called the physical design stage. We needed to sign an agreement with a physical design vendor, which it will cost you at least $4,050,000,000 dollars. And then we had this realization as the models were getting bigger and bigger and you're seeing these giant MOE models come out, that we were going to need to build the entire cluster, not just the chip, but we were gonna need to build boards, we're gonna need to build interconnects, we need to build cold plates, we're gonna need to figure out all of the networking and everything, and that this was gonna cost a lot more than the $15,000,000 we had in the bank. [01:02:17] S1: And you're like, man, that was scary. That like, you're sitting in that moment, and you think, holy crap, we can't afford this, and I began looking at it like, how hard is it to go back to Harvard?
01:02:17 · Gavin Uberti, Rob Wachen
[01:02:17] S1: And you're like, man, that was scary. That like, you're sitting in that moment, and you think, holy crap, we can't afford this, and I began looking at it like, how hard is it to go back to Harvard? [01:02:30] S3: At the end of twenty three, we put together this like memo. We spent like a hundred hours on this because we're like, we have no idea how people are gonna believe us when we ask for the amount of money we're about to ask for. And it was like 30 pages. It was like extremely technical and in-depth of all the different things we needed to build and like all the milestones we needed to hit and how the market was gonna evolve and all the new use cases and the cost per token and all this modeling. And then we went and talked to investors and every major investor in the Valley passed immediately. They were just like, okay, two kids that just finished Harvard, haven't taped out a chip, no test chip. Inference, who knows if this is gonna be a big market? Everything's gonna be training. The model's still hallucinating. This could all be a bubble. You know, at the time, the biggest semiconductor fundraisers for a series a was around like $4,050,000,000 dollars. We were looking at this and we were just like tallying the bill. And we're like, we think we're gonna spend a $100,000,000 in the next twelve months. We really wanna do this. Like, if we want to actually get to scale and, like, actually get the performance we're talking about, like, this is going to be extremely capital intensive. How the hell are we going to pull this off?
01:03:33 · Gavin Uberti
[01:03:33] S1: I think that one of our key ways we got started with this process, we thought to ourselves, what is the cheapest possible way we could do this? Decided, well, made almost nothing, and if I ate nothing but ramen, then we would go ahead and spend basically just the money for the mass, left hand amputer tape out, and that would be that, and if so, could go ahead and do it on $30,000,000, an insanely low number, And that we actually went out and got a debt provider, they wanted to go ahead and lend us the money we needed to go across this threshold. From there, I think it was first to go catalyze a series of other, hey, maybe we can go do one more thing, one more thing, one more thing.
01:04:11 · Rob Wachen
[01:04:11] S3: Yeah. So we're at this moment where we're like, if we really want to build this company, because like, we're not going to half ass it. We're not going to go do a test chip and spend years on it and like, let the entire AI market boom while we could be building the product. Like, if we're going do it, we're going go all the way. We're gonna need to find a way to get a $100,000,000. I mean, I remember Gavin and I were like sitting down in the office in Cupertino late at night, just like looking at each other and we're like, could we cut 500 k here? Could we cut a 100 k here? How long could we convince everyone not to take a salary? And we're like, holy fuck, the math is not going to close. We we really need to solve this. And there was a period of a few weeks where you kind of just go into survival mode, and you call every person that could possibly know an investor, and you're like, we need a $100,000,000 to do this. If we do this, we think this could be one of the most important companies of all time. Do you know somebody that wants to take an aggressive bet? That wants to, like, believe in us? Like, here's all the information. Like, we're an open book. Here's the team. It's great people. We've been working super hard. We've done these things in record time, but we have these, you know, 100 things to go. Like, do you want to do this? And like, the snowball starts and you get a million here and 2,000,000 here and you're like, okay, we're not going to run out of money this month. You get a $5,000,000 check, $10,000,000 check. You're like, okay, maybe I can buy those FPGAs. And, you know, the snowball happened where, you know, we were very lucky that we ended up putting it all together. We had a board meeting. I show you the spreadsheet and we look at it and it's like a 103,000,000. It's like, these are all like soft commits. And we all look at each other and we say, we're gonna take it. And that was the series a and it's been much easier since then. And we've raised almost a half dozen rounds since then. Many of them from those investors just doubling and tripling down. That's allowed us to get to market so quickly, like, this rack would not be possible had we not have been so aggressive.
01:05:59 · Gavin Uberti, Patrick O'Shaughnessy
[01:05:59] S1: I also think, like, suppliers too, I think deserve a little bit of a commendation here. Yeah. That TSMC was willing to work with us back before we'd raised any of that $100,000,000, back when it was still really, really scary synopsis, actually went ahead and let us get some of their emulators on extremely favorable terms where we pay over many years, basically a big loan. It takes a lot of belief from your partners to go do this, but at the end of that, you come out with this very strong team, and all the folks who back you are not in it just out of pure financial incentive, they believe. [01:06:32] S0: Why did TSMC believe, do think?