Where top VCs are investing in open source and dev tools (Part 1 of 2)

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Where top VCs are investing in open source and dev tools (Part 1 of 2)

The once-polarizing world of open-source software has recently become one of the hotter destinations for VCs.

As the popularity of open source increases among organizations and developers, startups in the space have reached new heights and monstrous valuations.

Over the past several years, we’ve seen surging open-source companies like Databricks reach unicorn status, as well as VCs who cashed out behind a serious number of exits involving open-source and dev tool companies, deals like IBM’s Red Hat acquisition or Elastic’s late-2018 IPO. Last year, the exit spree continued with transactions like F5 Networks’ acquisition of NGINX and a number of high-profile acquisitions from mainstays like Microsoft and GitHub.

Similarly, venture investment in new startups in the space has continued to swell. More investors are taking shots at finding the next big payout, with annual invested capital in open-source and dev tool startups increasing at a roughly 10% compounded annual growth rate (CAGR) over the last five years, according to data from Crunchbase. Furthermore, attractive returns in the space seem to be adding more fuel to the fire, as open-source and dev tool startups saw more than $2 billion invested in the space in 2019 alone, per Crunchbase data.

As we close out another strong year for innovation and venture investing in the sector, we asked 18 of the top open-source-focused VCs who work at firms spanning early to growth stages to share what’s exciting them most and where they see opportunities. For purposes of length and clarity, responses have been edited and split (in no particular order) into part one and part two of this survey. In part one of our survey, we hear from:

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The 9 most unforgettable and effective startup pitches, according to investors at Goldman Sachs, Sapphire Ventures, and Kleiner Perkins

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  • Explaining what a startup is all about in a face-to-face meeting with a venture capitalist is one of the toughest challenges for any startup founder or CEO.
  • Having an impressive pitch deck is great, but that won’t be enough if you don’t wow a venture-capital investor when you meet in person.
  • We asked top venture capitalists from Goldman Sachs, Kleiner Perkins, Sapphire Ventures, Intel Capital, and Dell Technologies Capital about the most memorable and impressive startup pitches they’ve ever heard.
  • They said the CEOs of these nine startups impressed in their presentations.
  • Click here for more BI Prime stories.

Convincing investors to finance your startup can be tough.

An impressive fancy-looking pitch deck packed with data on what you’re building could help. But in many cases, you need to sell your idea and story in person.

It’s that face-to-face meeting with the venture capitalists you hope will be wowed by your story that will likely determine if you get the funding you need. And that’s not always easy.

Making a presentation to venture capitalists “is an art,” Sapphire Ventures President Jai Das told Business Insider. “It’s how well you narrate your story, how you create an option that a lot of people get interested in.”

We asked executives from major venture-capital firms about the most impressive startup pitches they’ve watched in their careers.

Here are the founders and execs from nine startups who wowed top investors from Goldman Sachs, Sapphire Ventures, Kleiner Perkins, Intel Capital, and Dell Technologies Capital:

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Almost $10B Invested In Privacy And Security Companies In 2019

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Close to $10 billion was invested in privacy and security companies in 2019, an all-time high in the last decade up more than five-fold from $1.7 billion in 2010.

Seed and early-stage deals represent 44 percent of invested dollars ($4.4 billion) with Series C+ and larger rounds at 56 percent ($5.5 billion) of all dollars in 2019. The growth in funding year over year is attributable to Series C+ and larger rounds adding $1 billion.

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Some of the largest rounds in 2019 include:

  • KnowBe4, based in Clearwater Florida, a platform for security awareness training, raised a $300 million Series C.
  • Rubrik, based in  Palo Alto, California, a data protection and management company raised a $261 million Series E.
  • 1Password, based in Toronto, a secure password manager providing businesses a safe way to share passwords, raised $200 million in a Series A.
  • OneTrust, based out of Atlanta, Georgia, is a privacy management and marketing compliance technology that helps organizations comply with global regulations like GDPR, raised a Series A of $200 million.

Year-over-year deal counts are down by a quarter, but will lessen over time. Much of the difference in funding round counts are attributed to the seed stage–down 40 percent–where we see the most reporting delays. We fully expect these numbers to go up during 2020, but not supersede 2018 round counts of 1,100. Reporting delays for funding amounts are less pronounced in Crunchbase data.

In our analysis over the last five years we found the five top countries for privacy and security investments include the United States, China, Israel, Great Britain and Canada in that order. For 2019, Israel jumps to the second spot after the U.S.

Top Exits In 2019

There were 85 venture backed privacy and security companies acquired in 2019 exiting at $4.8 billion. The largest exits of 2019 include Shape Security, a company providing defense against malicious attacks, which was acquired by F5 Networks for $1 billion. And Recorded Future a threat intelligence firm was acquired by Insight Partners for $780 million. The most active acquirers are Palo Alto Networks with five acquisitions and Akamai Technologies with three. Cisco, Fortinet, Mastercard, Microsoft, Proofpoint and VMWare all acquired two companies in this space.

Venture-Backed IPOs In 2019

Six venture-backed companies in privacy and security went public in 2019. They include California-based CrowdStrike, Cloudflare and Fastly. Also included are Denver-based Ping Identity, Boston-based Tufin and Mumbai-based Affle.

Leading Investors In 2019

Leading investors in security companies include established venture firms Bessemer Venture Partners, Accel, Battery Ventures, LightSpeed Venture Partners, Vertex Ventures, CRV, Kleiner Perkins, Norwest Venture Partners and Scale Venture Partners. Growth-stage investors include Insight Partners, Goldman Sachs and ClearSky. Corporate investors are also active in this category with Bain Capital Ventures, Dell Technologies Capital, Intel Capital and Salesforce Ventures. TenEleven Ventures and ForgePoint Capital are uniquely placed as firms specifically focused on cyber security investments.

Crunchbase will be at RSA 2020. You can find us at “How-To For Innovators” on Feb. 24, 2020. 

Based on Crunchbase data, companies exhibiting at RSA 2020 have collectively raised $3.8 billion in 2019. 

Methodology

Analysis is based on data in Crunchbase as of Jan. 28, 2020. For this report we look at reported–not projected–data, which means that 2019 numbers will increase over time, relative to previous years.

Privacy and Security include the following categories:
Cloud Security, Corrections Facilities, Cyber Security, DRM, E-Signature, Fraud Detection, Homeland Security, Identity Management, Intrusion Detection, Law Enforcement, Network Security, Penetration Testing, Physical Security, Privacy, Security

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date of funding rounds, acquisitions, IPOs and other financial events as reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of Funding Terms

  • Seed/Angel include financings that are classified as a seed or angel, accelerator fundings and equity crowdfunding below $5 million.
  • Early-stage venture includes financings that are classified as a Series A or B, venture rounds without a designated series that are below $15 million and equity crowdfunding above $5 million unless otherwise noted.
  • Late-stage venture includes financings classified as a Series C+ and venture rounds greater than $15 million.
  • Note: Fundings denoted by Crunchbase private equity are not included in this report.

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The future is autonomous: 5 reasons why automation will be tech’s major story in 2020

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This article wasn’t written by a robot, but it could have been. That, along with literally thousands of other uses, is why automation will be big news in 2020.

Over the course of 2019, it was nearly impossible to cover any major tech conference without discussing an innovation in robotics, artificial intelligence or a similar automation solution. Not every automated advance will be a surefire winner, but the body of evidence offers a convincing case that the field is moving rapidly and adoption will only continue to grow.

The global automation industry is expected to generate $238 billion by 2021, with sectors such as artificial intelligence predicted to double over the three-year span.

Rapid advances in AI and machine learning have propelled automation out of the research lab and into daily lives. The chances are fairly high now that customer service requests via online query or a phone call are being handled by a chatbot.

Here are five key reasons why automation will continue to be a significant story in 2020:

1. Robotic process automation

Two of the leading companies in the RPA space — UiPath Inc. and Automation Anywhere Inc. — raised a combined $858 million in 2019 alone, bringing theor total combined valuation to nearly $14 billion. Gartner Inc. has called RPA the fastest-growing software subsegment that it tracks.

What is propelling this segment of the tech market is a realization in the enterprise world that RPA really can handle mundane tasks and free up people to focus on other areas of the business. Companies are using RPA to process invoices and generate price comparisons, but the expectation is that RPA will move inexorably into medical, pharmaceuticals, and even the public sector.

“Of the 2,800-plus customers we have, I have visited hundreds of them and talked to thousands of people on the ground who use this technology, and there’s not a single one of them who would go back,” said Mihir Shukla, co-founder and chief executive officer of Automation Anywhere, during a 2019 interview with SiliconANGLE.

2. Artificial intelligence and machine learning

Venture capital funding reached nearly $10 billion in AI businesses last year, a doubling of investment from the previous period. When Microsoft Corp. surveyed senior executives, it found that 94% viewed AI as an important tool.

Is this indeed the “eternal spring” of AI, as former Google Brain leader and industry pioneer Andrew Ng speculated in an interview?

There is plenty of evidence to suggest that the field is blooming. AI-powered robots are already hard at work on manufacturing assembly lines, side-by-side with human workers. The healthcare industry is using AI to streamline drug discovery and monitor patients with virtual assistants. And 3,700 corporate earnings reports are being produced by the Associated Press per quarter without a single human reporter writing a word.

However, the focus on AI and machine learning may also shift strongly in 2020 from what the technology does to what it shouldn’t. Providing guardrails for AI was a hotly debated subject in 2019, and governments, such as the state legislature in Illinois, are becoming more active in limiting use of the technology in the workplace.

“Every product that we’re building is seeking to change a behavior,” said Charna Parkey, an applied scientist at Textio Inc., during a SiliconANGLE interview in November. “If you’ve got unmanned aerial vehicles and you’re trying to make a decision about where to drop the bomb, you need a human in the loop.”

3. Cybersecurity

The cybersecurity industry is facing a basic math problem. There are too many threats and not enough people to deal with them.

A study by the largest nonprofit group in the security industry found that there was a gap of nearly 3 million cybersecurity jobs worldwide. Meanwhile, according to a report from SelfKey, at least 5.3 billion records were exposed through data breaches in 2019 alone.

This may explain why investments in automated cybersecurity solution companies have been soaring, according to a study from Pitchbook and Dell Technologies Capital. Will this be enough to help businesses protect crucial data?

The answer is still to be determined, but enterprises are taking steps to confront the harsh reality.

In the same week this year that Pat Gelsinger, chief executive of VMware Inc., declared that the security industry had “failed its customers,” his company completed the acquisition of Carbon Black Inc., a security platform with an AI-powered data lake. And in December, Amazon.com Inc. Chief Technology Officer Werner Vogels, who frequently appeared at AWS events during the year wearing a shirt with the slogan “Encrypt Everything,” announced the release of several new automation tools for cloud security.

“We can’t just keep using brute force and throwing tools at the problem,” said Dave Vellante, chief analyst at SiliconANGLE’s sister market research firm Wikibon. “The focus really has to be on automation. So machine intelligence and analytics will definitely be part of the answer.”

4. Voice and digital assistants

It started with voice interface built into smartphones, and the technology has now shifted to the smart home thanks to the popularity of digital assistants such as Amazon Alexa and Google Home. The U.S. installed base of home smart speaker devices grew from 50 million units to 76 million over the past year.

There are signs that the coming year will see the deployment of voice technology for a variety of use cases well outside of the home. McDonald’s Corp. is testing voice-activated drive-throughs in Chicago, and Domino’s Pizza is developing a voice-recognition application to take telephone orders.

And the enterprise is headed down the voice technology road in 2020. Salesforce.com Inc. devoted much of its annual Dreamforce conference in November to the roll out of an AI-powered voice technology for the company’s business products and systems.

“This is the end of data entry and the beginning of data conversations,” Richard Socher, chief scientist at Salesforce, said during a Dreamforce conference presentation. “Voice is finally here.”

5. Autonomous cars

The year 2019 was not a promising one for the future of autonomous driving. Chief executives at Daimler AG and Ford Motor Co. conceded that deploying self-driving cars was proving to be a difficult task. The state of Arizona was sued after an Uber Inc. self-driving car killed a pedestrian in 2018.

However, there are also signs that 2020 may be a year of small yet significant steps for autonomous cars.

In December, the California Department of Motor Vehicles announced a permitting process for companies seeking to deploy small autonomous trucks for commercial use. Nvidia Inc. also launched a new set of advanced processors specifically designed for self-driving vehicles.

And Volkswagen declared its intention to put a fleet of electric self-driving cars on the road during the 2022 FIFA World Cup in Qatar.

Even the coming 2020 presidential election in the U.S. has not been insulated from the automation discussion. One recent story documented how automation is perhaps the least understood issue on the part of both candidates and voters.

“Artificial intelligence, deep learning, machine learning —  whatever you’re doing, if you don’t understand it  —  learn it,” said Mark Cuban, the tech entrepreneur and reality TV star. “Because otherwise you’re going to be a dinosaur within three years.”

Photo: Tomasz Frankowski/Unsplash

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What Venture Capitalists (VCs) See For 2020

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With the underperformance of IPOs like Uber and Lyft as well as the epic implosion of WeWork, the venture capital market has softened a bit. But then again, this year should still be quite robust—with over $100 billion in investments across more than 10,000 deals, according to estimates from PitchBook.

So then what can we expect for 2020? Will things tighten up? And what are some of the attractive categories that VCs will target?

Here’s a look:

Ben Narasin, Venture Partner at NEA:

“In 2019, WeWork revealed the worst outcomes of lax corporate governance and the market appropriately punished them for doing so. Investors occasionally need to be flexible around terms in order to win the most exciting deals, but the growing discomfort many have felt over the last couple of years has solidified in the wake of very real negative consequences. In 2020, investors will require firmer governance and oversight structures to safeguard against negative impact and ensure these protections are mandated in their term sheets in a normal, plain vanilla manner that has been common over the history of the corporate form.”

Brian Hirsch, the Co-Founder and Managing Partner at Tribeca Venture Partners:

“The IPO market will slow down considerably but will be replaced by a surge in M&A as strategics find pricing to be more reasonable. As public equity investors have begun to shun startups without a clear path to profitability, those startups will turn to strategics for exits. When this occurs, price expectations will decline and come more in line with expectations of strategics that have struggled over the last few years to match public market tech multiples. The record amounts of cash sitting on corporate balance sheets will finally be put to work.”

Alex Niehenke, partner at Scale Venture Partners:

“We’ll see more action in public market and unicorn land: Airbnb’s IPO is hotly anticipated and won’t disappoint. But more interestingly I predict we’ll see another couple ‘surprises’ from business software focused companies like we did in 2019 with Zoom and Datadog. That is, super cash efficient, hyper growth companies operating at significant scale that garner significant public market premiums. I also believe we’ll see another big flame out, while the significance of WeWork is hard to replicate, the tide will turn on at least one hyper-burn, growth-at-all-cost company as funding sources look to reduce risk.”

Matt Murphy, managing partner at Menlo Ventures:

“The market will accelerate to a barbell strategy of firms clustering at Series A and late stage growth, the latter defined as rounds above $50M capital raised. The sweet spot of growth used to be $25-35M rounds and is now $50-100M. The rise of large global growth funds from traditional venture firms will amplify this trend. Series B and C will get harder unless metrics are near perfect.”

Tae Hea, the co-founding Managing Director of Storm Ventures and author of Survival to Thrival: Change or be Changed:

“Next year we will see an explosion of SaaS B2B startups leveraging AI to help businesses get a competitive edge in the new data economy. Amazon and Google’s biggest revenue stream is now their web service offerings, and this is because they have years of data about their customers, whether through search habits, the posts they share, the products they buy, or the music they listen to. They were the first to turn data into a competitive advantage in what is now known as the Data Economy. Depending on what a business wants to achieve—high store foot prints, more sales, increased market awareness—their data has to come from multiple sources so that more in-depth conclusions can be drawn from it. For example, you not only need to know how many people visited the store, but also at what time. Not just how many sales, but who too, and which touch points you had with your customer before they transacted with you, which adverts they were shown and where all the interactions occurred.”

Tyler Jewell, managing director at Dell Technologies Capital:

“The overwhelming interest and rapid adoption of Kubernetes as an orchestration platform has pushed microservices complexity right into the hands of developers. 2020 is the year where the developer industry settles on the best architecture for designing and building cloud-native applications–large systems of scale with state that operate on-demand and elastically. The strong interest in service mesh to simplify how microservices talk to each other is table stakes. Serverless is an approach that eliminates and hides all architecture decisions away from developers. Reactive architecture is emerging as a set of proven design principles for building stateful cloud apps. 2020 is the year where the developer standards, frameworks, and businesses around service mesh + reactive + serverless begin to coalesce to chart a path that works for all developers writing in any programming language in any cloud.”

Ramneek Gupta, Managing Director & Co-Head of Venture Investing at Citi Ventures:

“Machine learning is unique in that it gets better at making predictions and personalizing experiences as more consumer data becomes available. However, companies need to consider data privacy and security as machine learning continues to evolve.

“Machine learning at the edge, where machine learning models are purposefully designed to be run on consumer devices (as opposed to the cloud), will allow companies to create personalized experiences while adhering to strict privacy requirements because data never leaves the consumer’s devices. Personalization has continued to be a critical factor in a successful business model, and as we head into 2020, machine learning at the edge is a tool that will allow companies and customers to balance information sharing with user privacy.”

Sunil Kurkure, Managing Director at Intel Capital:

“Companies that are using technology to address legislation like the CCPA and pressing consumer privacy trends will be at the forefront of 2020.”

Michael Proman, Managing Director at Scrum Ventures:

“While the majority of venture investments have historically come out of Massachusetts, New York and California, there will be a greater emphasis from top-tier VCs on secondary startup markets (especially the Midwest— i.e., Chicago, Minneapolis, Kansas City, Madison, Detroit, Indianapolis, Nashville, etc) as operational (SG&A) costs within coastal markets continue to skyrocket.”

Arjun Chopra, partner at Floodgate:

“The promise of quantum computing is undeniable. Google recently announced it used quantum computing to identify the outputs of a random number generator–a feat it achieved in under four minutes. While the veracity of their claims have been challenged because getting a stable QC to do ‘real work’ has proven to be elusive, this feat is no mean one. If the same task was to be done by a supercomputer, it would take 10,000 years to complete! While we are still in the dark days of QC, a lot of nations have thrown their heft (and their checkbooks) into this ‘race.’ China, Japan and the US are all vying for dominance, and we should expect to continue to see more progress in this field in 2020 and beyond.”

Gen Tsuchikawa, CEO and Chief Investment Officer of the Sony Innovation Fund:

“As 2020 gears up to be “year 1” for massive roll-outs of 5G networks in US, EU and APAC, this will raise an interesting set of challenges for start-ups as 5G will require a structural overhaul of the technology stack above the wireless link alone. Similar to how the datacenter became a software battleground and spurred a whole new breed of start-ups on this new fabric (e.g. containers, DevOps), 5G opens up a nearly blank slate for start-ups to truly innovate for delivering the promises of 5G to the many connected vehicles, venues and sensors.”

Tom (@ttaulli) is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction.

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Where top VCs are investing in cybersecurity

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Security is one of the toughest things to get right; a hacker only needs to win once, but businesses have to get it right every single time.

Not every company faces the same field of threats. That’s what makes security particularly difficult — there are no panaceas, and the cybersecurity startup field is crowded. So much so, some entrepreneurs complain that the vast number of solutions on the market are weighing down chief security officers with a deluge of data but not the clear visibility they need.

Or, as one of the cybersecurity-focused VCs we surveyed called it: “startup fatigue.”

Many of the rising cybersecurity startups focus on the same or overlapping problems could lead to a “cybersecurity consolidation,” one that’s dictated by customers and not necessarily the businesses themselves.

But there’s usually one element that feeds into everything — data.

As hacks and breaches become more common, companies and customers alike are reevaluating their relationships with data. Customers want more ownership of their data and the ability to give it out granularly, while an increasing number of businesses are shifting away from central banks of data and leaning towards a “zero data” approach.

By minimizing the amount of information companies store or collect, it’s validation that even some larger startups don’t even trust themselves to secure data properly.

Not only that, there’s as much mistrust inside their own networks. That’s where “zero trust” comes into play — where you don’t trust, but you certainly verify. The idea is that you get no extra special access inside a company’s four walls. Many big companies, like Google, treat all employees the as if they present the same level of security risk whether they’re in the office, at home, or in a coffee shop down the street.

“You should be able to run your whole business out of a Starbucks,” said Google security chief Heather Adkins at Disrupt SF.

Why the mistrust? Because security isn’t just a technology problem, it’s a people problem. And it’s not only people creating the solutions, it’s people with the solutions to create these startups to begin with.

We asked ten leading cybersecurity VCs who work at firms that span early to growth stages to share where they see opportunity in this sector:

In addition, we did a deep-dive interview with Arif Janmohamed at Lightspeed about how he and his firm are targeting the sector and what he sees as the next-generation of cybersecurity startups. Be sure to check it out.

Now, let’s get to the data.

Answers have been edited for clarity.

Amit Karp, Partner at Bessemer Venture Partners

In cybersecurity, what are you most interested in right now from an investment perspective?

Unfortunately, the cybersecurity landscape is overcrowded with many vendors that offer point solutions. I believe CISOs are tired of deploying additional security products which for the most part have overlapping functionality. So I am very cautious with additional tools that are deployed inside the enterprise perimeter (network, endpoint, etc.).  I am looking for companies that can be deployed quickly and demonstrate immediate value to CISOs, and do not overwhelm the CISO with many new alerts.

What are the most interesting trends in the space, particularly ones you think are under-appreciated by other investors?

I think there are still many opportunities to improve application security. The combination of every company becoming a software company on the one hand and development environments becoming more chaotic on the other hand, results in many new risks and opportunities in securing your software. This includes securing third-party APIs or open-source components which are outside your control and giving developers and devops engineers more security tools while not hindering the pace of development.

Another interesting trend is micro-segmentation and authorization — with the adoption of zero-trust frameworks and authentication becoming a solved problem — deciding who gets access to what has become increasingly important.

Are there any startups in cybersecurity you wish existed, but haven’t seen yet?

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The president of Dell’s VC arm explains how AI made chip startups hot, and why he bet on a new one led by 3 star engineers from Apple and Google

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  • Chip startups are hot, according to Scott Darling, the president of Dell Technologies Capital, which just invested in a new company led by three engineering stars from Google and Apple.
  • Dell Technologies Capital is one of the investors in Nuvia, which launched late last year and quickly raised $53 million.
  • Chip startups are drawing investor attention thanks to new technologies, led by AI, that require machines with more processing power.
  • Darling said “in a handful of years” AI would become a pervasive tool and create opportunities for startups.
  • Click here for more BI Prime stories.

Scott Darling, the president of Dell Technologies Capital — the IT giant’s venture-capital arm — remembers a time when investors shied away from chip startups because they were considered too risky.

That’s because investing in hardware companies, particularly chipmakers, entailed enormous costs — and risks. You need substantial amounts of money for a chip startup to gain any traction. Mistakes can lead to serious setbacks.

“The cost of doing silicon development is substantial,” Darling said. “It’s daunting. These companies have very substantial burns. You have manufacturing costs. The costs of a mistake are not easily remedied.”

But times have changed. Chip startups are hot in the eyes of investors thanks to new technologies that require machines with more processing power. One of the latest, Nuvia, came out of stealth mode late last year, quickly raising $53 million from investors, including Dell Technologies Capital.

Nuvia, which hopes to build new processors for data centers, also stood out because its founders were engineering stars at two iconic Silicon Valley companies: CEO Gerard Williams was Apple’s chief architect for nearly a decade, and Manu Gulati and John Bruno, who are both senior vice presidents for engineering, are from Google.

“It really is an incredibly experienced and capable team, and we believe the market in the data center for their technology is really substantial,” Darling told Business Insider.

It was not Dell Technologies Capital’s first foray into artificial-intelligence chips. Darling’s team has also invested in Graphcore, the AI-semiconductor company founded in 2016 whose chip is already being used to power Azure, Microsoft’s cloud platform. Microsoft is also an investor in that startup.

Chip startups were considered risky

The change in attitude toward chip startups is refreshing, Darling, who has worked in Silicon Valley since the 1980s, said.

“There was a period like 10 years ago when the venture community considered silicon investments as kind of unworkable,” he said.

But recent trends have made investing in chip startups more attractive, he added. One is the state of the venture-capital market itself.

“There’s a lot more money available in the venture world than there used to be,” Darling said. “So the absolute size of the dollars required for a silicon team is not as daunting on a relative basis.”

How AI made chip startups attractive

There’s a bigger reason for the attention chip startups are getting: the rise of AI.

AI has been a field of study in tech for decades, but it became a vibrant and commercially viable tool only in the past six years. This coincided with the emergence of more powerful computers and the dramatic increase in the amount of data to build effective AI systems.

“The amount of data being created continues to explode exponentially,” Darling said. “It’s exploding because people are using denser data types, not just text but audio and video.”

There are also more ways to collect data through sensors and other devices “everywhere from your cars to your homes to traditional manufacturing industries.”

Collecting and harnessing vast amounts of data require more computing power, meaning machines with more powerful processors. And that has become a major challenge. “If we continue with the current computing and power efficiency, we’re going to run into roadblocks.”

‘The golden age for hardware’

This has triggered a race to find ways around these roadblocks.

Tech companies, led by the traditional-chip giants like Intel and Nvidia, are now scrambling to come up with more powerful processors.

Nvidia took an early lead after it became evident that its graphics processors, which are used for gaming and high-end graphics for blockbuster movies, could provide the processing power needed for AI systems.

But the need is so great that startups are joining the fray.

One of them, Nervana, was acquired by Intel four years ago. One of its founders, Amir Khosrowshahi, calls the investor interest in chip companies “the golden age for hardware” startups.

Last month, in a move that surprised some analysts, Intel bought another AI-chip company, Habana, for $2 billion.

Apple recently made its own AI move by buying Xnor.ai, an edge-computing AI startup, for about $200 million, according to GeekWire. The company was apparently upset over its former chief architect’s decision to jump ship to launch Nuvia. Apple last month sued Williams, accusing him of breaking his employment agreement. Williams accused Apple of spying on him and invading his privacy.

Darling declined to comment on the dispute. He also downplayed media reports that Nuvia was focusing any one company.

“This is an attempt to build a much more compute- and power-efficient device,” he said. “I guess it’s competitive in the sense that, you know, we’re trying to do something better that is out there, but it’s not targeted at any specific company.”

If it’s geared toward at anything at all, he said, it is at the challenge posed by AI, which Darling predicts will usher in dramatic changes in the world of tech and beyond. And these changes will become evident in just a few years.

5 years from now

Darling said he likes to tell friends “who are not technologists” that five years from now, “when you touch a product that is not AI-enabled, meaning you can’t talk to it, it doesn’t adjust to your needs and your desires and customize itself to you, it’s going to feel like what it feels like to us today to get into a car from the 1920s or something like that. It’s just going to feel very primitive.”

“And all of this is going to happen in a handful of years,” Darling said. “So when you have that pervasive a trend, you have the opportunity for new companies that are going to develop custom technology to run those workloads. And that’s what’s happening with this flowering of hardware companies.”

Darling has witnessed and been part of dramatic changes in technology. He worked for Intel for 17 years and for Apple for three years between 1980s and the early 2000s. This gave him a front-row seat to the dramatic transformation of Silicon Valley.

His own attitude toward technology is informed by personal experiences. The son of a US State Department employee, Darling lived in different parts of Latin America as a child. He and his family were in the Dominican Republic during the civil unrest that led to a US military intervention.

The experience of living in a poor country had a profound effect on Darling, who returned to the US when he was 15.

“We lived next door to someone who lived in a cardboard and tin shack,” he said. “What does that teach me? If you got enough to eat and a roof over your head, you’re blessed. The plenty that most of us have in Silicon Valley is a blessing beyond measure. The privilege of working on technology that hopefully advances and helps the human condition is a blessing and a gift.”

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