Cerebras Systems’ Successful IPO Shakes Up the Market
Cerebras Systems had a remarkable IPO recently, pulling in billions of dollars. This outcome is a significant achievement for the company, its founders, and its key investors.
One of the key beneficiaries is Benchmark, holding 9.5% of the company’s stock. Eric Vishria, a general partner at Benchmark, has been involved with Cerebras since its inception in 2016, co-leading an early $25 million investment round.
Interestingly, this success wasn’t something Vishria initially expected. He mentioned to TechCrunch that he joined the meeting somewhat reluctantly.
“We had five founders and one deck, and it was our first hardware investment in a decade,” Vishria said, reflecting on that initial encounter. “I was a venture capitalist for about 18 months before that.” He previously co-founded RockMelt, which was later sold to Yahoo for a significant sum.
Benchmark is known for being picky about hardware investments, and Vishria often questioned why he even attended that meeting. He recalls muttering to himself, and at one point, even messaged an assistant asking why he was there.
However, by the third slide of the presentation, his skepticism faded as CEO Andrew Feldman began outlining Cerebras’ ambitious vision.
Vishria noted that the first slide was just a title, the second featured the impressive team, and then came a revelation: “GPUs aren’t really useful for deep learning,” Feldman posited, explaining that the new chip was far superior to traditional CPUs. That struck a chord with Vishria—he suddenly understood how a graphics processor could be ideal for AI.
The meeting took place a while ago, well before Google’s significant research advancements that would shape modern AI. At the time, Cerebras was introducing an entirely new, large chip aimed at AI training, but the market was not ready.
Intrigued, Vishria reached out to various partners, discovering that many were also unfamiliar with hardware. They suggested he bring in a founding partner with deeper technical insight for discussions about chip packaging and cooling.
Despite his limited understanding of the technology, Vishria arranged for Feldman to present to Bruce Dunleavy, a founding partner at Benchmark. The pitch didn’t resonate much with Vishria, jokingly likening it to a dog watching TV, lacking comprehension. Afterward, Dunleavy expressed doubts about the project’s viability, noting the challenges faced by others in similar ventures. Still, he sensed potential.
Although Cerebras had a solid team with prior success, including a profitable exit with SeaMicro, the path wasn’t easy. Over the next eight and a half years, they encountered numerous challenges, including inventing a unique cooling method to prevent the large chip from overheating. They even needed machinery that could simultaneously drill multiple screws without damaging the wafer.
Benchmark investors occasionally questioned their commitment to such a risky endeavor.
The hardware was quite costly. Even after raising $500 million, the chip was still in the development phase, and the ongoing VC bear market meant more fundraising was necessary.
Vishria recalls the struggle: “The company still doesn’t have a lot of traction, so yeah, that was the real challenge.” But things took a turn 18 months ago when Cerebras’ chip, built for training, proved to excel in running AI models and generating responses. As this realization hit, the growing demand for such technology surged, bringing in substantial customers and revenue.
Though they attempted to go public in 2024, scrutiny from the U.S. government over national security, particularly regarding a significant investment from the Abu Dhabi-based G42, and concerns over potential financial losses by retail investors delayed the process.
Ultimately, that delay turned out to be fortuitous. Now, with OpenAI and AWS also as key clients, Cerebras has seen significant revenue growth and even achieved profitability last year.
Vishria continues to support the Cerebras team, underscoring the need for tenacity and adaptability.
However, it remains a challenge for investors, as funds often come from outside of their usual comfort zones. At its IPO opening, Benchmark held shares worth $3.3 billion, which could exceed $5.3 billion if values remain high, though a standard six-month lock-up period restricts immediate selling.
Benchmark initially purchased a large portion of those shares for about $18 million, with later purchases totaling approximately $250 million. This indicates the firm may have invested around $270 million for what could become a highly valuable asset.
Interestingly, employees at venture firms typically earn bonuses when their investments perform well. Vishria humorously remarked on his assistant’s role in scheduling that initial meeting, expressing confidence that they would reap rewards.
