This year’s IPO market has been a stalled car.
You know the feeling. You turn the key, the engine hums, you’re about to hit the road…and then the car stops. That’s sort of what’s happened in 2024, as the scattered IPOs of companies like Reddit and Astera Labs inspired hope that IPOs were back to the races. But in the end, while the IPO engine has hummed, the car hasn’t started.
At least, not yet. This week, AI chipmaker Cerebras filed its S-1, marking the beginning of its journey to the public markets. There’s hope that a runaway-success debut for Cerebras could finally get things motoring again. On the surface, that makes sense—entrenched in the AI boom, Cerebras is backed by big-name VCs like Benchmark and Altimeter, billing itself as a prospective challenger to Nvidia.
The company’s top line provides some strong support for that story. Cerebras’s 2023 revenue came in at $78.7 million, more than triple the prior year’s $24.6 million, with momentum on the rise. Revenue in the first half of this year surged to $136.4 million, up more than 1,400% from the first half of 2023.
What’s more, as deep tech investor Patrick Beatty pointed out to me, the company’s got a “proven team,” led by Andrew Feldman, who cofounded and sold SeaMicro, a server startup, to AMD for $357 million in 2012.
Look a little closer at Cerebras’s S-1, however, and it’s difficult to ignore some big questions. Cerebras has narrowed its losses, but they’re still substantial, totaling $127.2 million in 2023 versus $177.7 million in 2022. But there’s something else that every person I’ve spoken to brought up almost immediately when discussing the filing—Cerebras is heavily reliant on one customer.
In the first half of this year, a staggering 87% of Cerebras’s revenue was accounted for by G42, an Abu Dhabi-based company backed in part by Mubadala, Silver Lake, Microsoft, and Ray Dalio’s family office. (Microsoft reportedly has sought to pull back on its partnership with G42.) G42, an AI-focused data-center and cloud-services business, also led Cerebras’s $250 million Series F in 2021. (That round valued the company at $4.25 billion.)
I’ve seen some commentary out there that says something to the effect of “well, that’s a problem Nvidia has too.” And, again on the face of it, you’d be right. About 46% of Nvidia’s revenue links back to four unnamed customers, a group that reportedly includes Amazon, Meta, Microsoft, and Alphabet. So, yes, customer concentration is perhaps a feature that Cerebras shares passingly with the world’s most famous chipmaker—but there’s a difference. The stability of your customers matters deeply when so few mean so much. G42 is private, backed by the United Arab Emirates’ sovereign wealth fund among others, and was only founded in 2018. (Mired in geopolitical risk, G42 divested from China earlier this year amid U.S. pressure.) Nvidia’s mega-customers, by contrast, are established Big Tech businesses that generate hundreds of billions of dollars in annual revenue in aggregate.
Additionally, Cerebras’s ‘Nvidia Challenger’ moniker is going to be hard to live up to—the company would have to substantially take on Nvidia in AI training, while Cerebras’s inference business (an area less well-trod by Nvidia) is still nascent.
It’s still possible that public markets investors ultimately bite, but it would likely be more about AI generally than about Cerebras specifically.
“If you’re talking about chip investors who’ve done due diligence, I’d be surprised,” said Thomvest Ventures managing director Umesh Padval. “It may end up being about the FOMO of missing out on chip companies, in the market of AMD, Broadcom, and Nvidia. So, if they feel ‘I’m getting the next Nvidia,’ that could be the primary reason why there would be so much demand.”
In the end though, the name of the game is growth—and if Cerebras can convince investors that its own business and the broader market fueling it are real and expanding, the IPO engine may very well start.
“You have to continue to provide growth to keep investors excited,” said Simon Yu, Listed Ventures managing partner. “So, you don’t go public to just be stagnant, because then you’ll just die on the vine.”
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Nina Ajemian curated the deals section of today’s newsletter.
VENTURE DEALS
- Kailera Therapeutics, a Waltham, Mass.-based injectable and oral therapies developer for chronic weight management, raised $400 million in Series A funding. Atlas Venture, Bain Capital Life Sciences, and RTW Investments led the round and were joined by Lyra Capital.
- Impulse Space, a Redondo Beach, Calif.-based in-space transportation services company, raised $150 million in Series B funding. Founders Fund led the round and was joined by DCVC, existing investors Lux Capital, Spring Tide, Airbus Ventures, and others.
- Dexory, a London, England-based robotics and data intelligence company, raised $80 million in Series B funding. DTCP led the round and was joined by Latitude Ventures, Wave-X, Bootstrap Europe, existing investors Atomico, Lakestar, Capnamic, and angel investors.
- DataPelago, a Mountain View, Calif.-based universal data processing engine developer, raised $47 million in funding from Eclipse, Taiwania Capital, Qualcomm Ventures, and others.
- Numa, an Oakland, Calif.-based AI platform for auto dealerships, raised $32 million in Series B funding. Touring Capital and Mitsui led the round and were joined by existing investors Costanoa Ventures, Threshold, and Gradient Ventures.
- StrataPT, an Osprey, Fla.-based outpatient therapy billing platform, raised $25 million in funding. Council Capital led the round and was joined by others.
- Apono, a New York City-based cloud access management platform, raised $15.5 million in Series A funding. New Era Capital Partners led the round and was joined by Mindset Ventures, Redseed Ventures, Silvertech Ventures, existing investors, and others.
- Neeve, a San Francisco, Calif.-based cloud Platform-as-a-Service provider for smart buildings and spaces, raised $15 million in funding from Cantor Fitzgerald and RXR.
- Salient Motion, a Los Angeles, Calif.-based motion control systems developer for the aerospace industry, raised $12 million in pre-seed and seed funding. Cantos Ventures led the round and was joined by Andreessen Horowitz, AE Ventures, Hummingbird Ventures, and BoxGroup.
- Formality, a Paris, France-based AI-powered contract management platform, raised €8 million ($8.9 million) in funding. Partech and Serena led the round and were joined by the Bank of Public Investment’s €2.4 million ($2.7 million) investment.
- Thread AI, a New York City-based composable AI infrastructure platform provider for enterprises, raised $6 million in seed funding. Index Ventures led the round and was joined by Greycroft and angel investors.
- Future Trash, a Los Angeles, Calif.-based game development studio, raised $5 million in funding from TIRTA and General Catalyst.
- Indiegraf, a Vancouver, Canada-based independent news publishing platform, raised $2.2 million in seed funding. StandUp Ventures led the round and was joined by Coralus and Mucker Capital.
PRIVATE EQUITY
- Bain Capital acquired PowerSchool Holdings, a Folsom, Calif.-based cloud-based software provider for K-12 education, for $22.80 per share in cash, or approximately $5.6 billion.
- Authentic Brands Group, backed by BlackRock, CVC Capital Partners, HPS Investment Partners, and others, acquired Champion, a Winston-Salem, N.C.-based athleticwear brand. Financial terms were not disclosed.
- Consolidated Equipment Group, a portfolio company of Dominus Capital, acquired Agile Manufacturing, a Granite, Iowa-based agricultural, industrial, and construction material handling equipment manufacturer. Financial terms were not disclosed.
- Körber Supply Chain Software, a Körber and KKR joint venture, acquired MercuryGate International, a Cary, N.C.-based transportation management systems provider. Financial terms were not disclosed.
- KPS agreed to acquire Catalyst Acoustics Group, a Springfield, Mass.-based acoustical solutions provider. Financial terms were not disclosed.
- Mercer Global Advisors, backed by Oak Hill Capital, Genstar Capital, and Altas Partners, acquired Kiely Wealth Advisory Group, an Oak Ridge, N.C.-based wealth management firm. Financial terms were not disclosed.
- NewSpring Franchise acquired a majority stake in Great Harvest Holdings, a Dillon, Mont.-based fast-casual bakery and café franchise group. Financial terms were not disclosed.
- Nordic Cold Chain Solutions, backed by Endeavor Capital, acquired Minus Works, a Long Island, N.Y.-based sustainable packaging manufacturer focused on the cold chain. Financial terms were not disclosed.
- Prosperity Partners, backed by Unity Partners, acquired Wiener and Garg, a Rockville, Md.-based tax preparation, planning, advisory, and accounting firm. Financial terms were not disclosed.
- Stax, backed by Greater Sum Ventures, HarbourVest Partners, Blue Star Innovation Partners, and others, acquired BlockChyp, a Lindon, Utah-based payments platform. Financial terms were not disclosed.
- TPG Capital acquired a majority stake in Surescripts, an Arlington, Va.-based health information network. Financial terms were not disclosed.
EXITS
- KPS acquired Innomotics, a Nuremberg, Germany-based electric motor and large-drive systems provider, from Siemens for €3.5 billion ($3.9 billion).
- GTCR and Recognize agreed to acquire TRANZACT, a Fort Lee, N.J.-based direct-to-consumer insurance services provider, from WTW for $632.4 million.
- Masdar acquired a 50% stake in Terra-Gen, a San Diego, Calif.-based renewable energy producer, from Energy Capital Partners. Financial terms were not disclosed.
- Omnicom acquired LeapPoint, a Reston, Va.-based digital advisory firm for marketing, from Renovus Capital Partners. Financial terms were not disclosed.
OTHER
- BlackRock acquired Global Infrastructure Partners, a New York City-based infrastructure investor. Financial terms were not disclosed.
- Mizuho Financial Group acquired a passive, non-voting minority stake in Golub Capital, a New York City-based middle market lender. Financial terms were not disclosed.
IPOS
- StandardAero, a Scottsdale, Ariz.-based aerospace engine aftermarket services provider, raised $1.4 billion in an offering of 60 million shares priced at $24 on the NYSE. The company posted $4.8 billion in revenue for the year ending June 30, 2024. Carlyle backs the company.
- Moove Lubricants Holdings, a São Paulo, Brazil-based automotive, agricultural, and industrial lubricant producer and distributor, plans to raise $437.5 million in an offering of 25 million shares priced between $14.50 to $17.50 on the NYSE. Cosan and CVC Capital Partners back the company.
- Cerebras Systems, a Sunnyvale, Calif.-based semiconductors and supercomputers designer and producer and AI services provider, filed to go public on the Nasdaq. Alpha Wave, Altimeter, Benchmark, Coatue, Eclipse Ventures, and Foundation Capital back the company.
FUNDS + FUNDS OF FUNDS
- OceanSound Partners, a New York City-based private equity firm, raised $1.49 billion for its second fund focused on technology companies serving the government and highly-regulated sectors.
- Prospect Partners, a Chicago, Ill.-based private equity firm raised $225 million for its fifth fund focused on pre-lower-middle market companies in the specialty services, niche manufacturing, and value-add distribution sectors.
PEOPLE
- AE Industrial Partners, a Boca Raton, Fla.-based private equity firm, added Leonard ‘Butch’ Dollaga as a managing director. Previously, he was chief of legislative affairs for the U.S. Navy.
- ATL Partners, a New York City-based private equity firm, added Ted Sisko as an operating partner. Previously, he was at Warburg Pincus.
- Revelstoke Capital Partners, a Denver, Colo.-based private equity firm, added Matthew Dubbioso and Michael Nutting as partners. Previously, Dubbioso was at New Mountain Capital and Nutting was at Marlin Equity Partners.
