October 31, 2023: This Quick Take might scare you

Today’s article covers the recent CentML news and it’s significance to us as technologists.

Let’s dive in.

A Noteworthy Funding Round

Toronto-based startup, CentML, recently raised an impressive $27 million USD in what's being referred to as an "extended seed" round.

This round saw participation from a diverse range of investors, including Gradient Ventures, TR Ventures, Deloitte Ventures, Nvidia, Radical, and a few angel investors.

What makes this funding round particularly interesting is the term "extended seed". This round is an extension of the original seed round from last year, which has now increased the total amount raised from $3.5 million to a whopping $30.5 million. This extension included both equity and SAFE investments, possibly at different valuations.

The Unusual Participant: Nvidia

One of the participants in this round, Nvidia, is a notable mention. CentML's technology could potentially reduce the demand for AI chips, making Nvidia's participation intriguing. Other participants, such as Gradient, Deloitte Ventures, and TR Ventures, are corporate venture capital arms of Google and Thomson Reuters.

Why the Large Seed Round?

CentML is a company that's perfectly positioned to raise funds during the current AI hype cycle. The founding team comprises professors and PhD students from the globally renowned UofT computer science department, known for its cutting-edge AI research.

CentML's technology aims to improve the performance of machine learning models, reducing the need for AI computing and AI chips. This is a perfect solution for a market currently facing a shortage of AI chips due to supply issues.

The company's competitors, such as MosaicMl, have either been sold for substantial amounts ($1.3 billion USD) or have already raised massive funding rounds ($85 million USD for OctoML). This positions CentML as an attractive risk for investors.

The Potential Market Capture

The AI chip market, valued at $53 billion USD, is facing significant supply issues. If CentML can deliver on its promises, it could capture a large portion of this market. The company claims that its optimization technology can save companies 80% of the required computing power. Given the team's pedigree, there's a strong belief that they can build this product. If successful, this could represent a multi-billion dollar opportunity.

The Risks Involved

However, there are risks involved. There's a timing risk, as every chip cycle goes through boom and bust periods. Changes in the demand and supply dynamics for AI chips could potentially dampen the desire for optimization software.

There's also a perception risk. Some developers may be skeptical about the possibility of optimizing models without encountering performance issues.

Key Takeaway for Tech Founders

The AI hype cycle is far from over. Companies like CentML are leveraging this hype and the current market conditions to their advantage. As tech founders, it's crucial to stay informed about these trends and understand how they could potentially impact your own ventures.

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