Cerebras IPO makes billions for Benchmark but VC Eric Vishria almost didn’t take the meeting

The Cerebras Systems IPO was a smash hit on Thursday, generating billions for itself, its founders, and its major investors. 

Among the big winners is major shareholder Benchmark, which owns 9.5% of the company. One of the firm’s general partners, Eric Vishria, has been a Cerebras board member since 2016, the year the AI chip maker was founded, having co-led its $25 million Series A round. 

But these billions only happened for Benchmark because Vishria met with the startup almost against his will, he told TechCrunch. 

“It was five founders and a deck, and it was our first hardware investment in 10 years,” Vishria told TechCrunch about that first meeting. “I had been a venture capitalist for like, 18 months.” (Prior to being a VC, Vishria sold the social browser startup he co-founded, RockMelt, to Yahoo for a reported $60-$70 million in 2013.) 

Benchmark is famously selective in the companies it chooses, and backs hardware companies so rarely that Vishria was kicking himself for giving time to Cerebras. 

“Why did I take this meeting?” he kept muttering. At one point, he even messaged his assistant, who manages his calendar, and bugged her: “Why did you let me take this meeting?” Vishria recalls. 

But his grumpy attitude vanished by the third slide, as co-founder and CEO Andrew Feldman laid out Cerebras’ grand plans. 

“The first slide is the title slide. The second slide is the team. And I was like, ‘Oh, that team is really good.’ And the third slide is something along the lines of ‘GPUs actually suck for deep learning. They just happen to be 100 times better than CPUs.’ And as soon as he said it, a light bulb went off,” Vishria recalled. “I was like, 'Oh, my God, of course. Like, why would a graphics processor be the right thing for AI?'” 

Still, this was years before Google’s famous Transformer paper — the 2017 research that laid the groundwork for modern AI — which eventually led to ChatGPT. Cerebras was pitching a new kind of giant-sized chip, designed for AI training, one the processor world was not prepared to manufacture. 

Vishria was intrigued enough to discuss it with some Benchmark partners, who quickly told him that they also didn’t know enough hardware. They said if he wanted this deal, he would have to bring in one of the original Benchmark founders from the 1990s, who did understand. 

Undeterred, Vishria scheduled a meeting to have Feldman pitch to founding partner Bruce Dunlevie, who grilled the founder about chip packaging and cooling and more. 

“Most of that meeting was like a dog watching TV for me,” Vishria joked, because he understood so little. After the pitch, Dunlevie warned that what Cerebras was attempting would be hard. Others have tried and failed. But he thought this team had a shot. He, however, worried there'd be no market for the chip. 

Although Vishria didn’t fully understand the tech, he was convinced that if Cerebras “could make AI faster” there would be a market for it, and this team had the chops to succeed, he said. They had previously sold a startup, SeaMicro, to AMD. 

"The advantage of having had a successful exit previously, is it erases some of the uncertainty in the venture capitalists' minds," Cerebras CEO Andrew Feldman tells TechCrunch. "We hadn't just fallen off the back of a turnip truck. We were an experienced team."

Hardware is hard

What followed was 8.5 years of grind as Cerebras dealt with struggle after struggle to build its product.

Feldman and his Cerebras co-founder and CTO Sean Lie had to invent new cooling methods to prevent a chip of that size from burning when drawing power. They had to invent a machine that could drill 40 screws into the wafer simultaneously without cracking it. And so on.  

The Benchmark investor repeatedly thought to himself, “What are we doing?” 

Plus, hardware is expensive. At the point where the company raised half a billion dollars from a long list of investors, its chips were still being developed. It had to raise again in the 2022 VC bear market.  

“You don't have a lot of traction on the company yet, so yeah, that was where it got really tough,” Vishria recalls.

But around 18 months ago, everything changed. Cerebras' chips, designed for training and successfully being manufactured by TSMC, the world's largest contract chip manufacturer, turned out to be even better for inference -- running AI models to generate responses, rather than teaching them in the first place. Just as that realization hit, the AI world grew insatiably thirsty for that kind of compute. It had a big customer and revenue.

Instead of another private round, Cerebras tried to go public in 2024, only to wind up stuck in U.S. government scrutiny over national security concerns triggered by a large investment by its only major customer, Abu Dhabi-based cloud provider G42. Public investors also weren’t keen on its dependence on G42 coupled with huge losses. 

The delay was a blessing in disguise. Today, OpenAI and AWS are large customers, too. Cerebras doubled revenues and declared a profit last year.

Vishria gives all props to the Cerebras team for “persistence, ingenuity, but also adaptiveness,” he says.

But this is also a feather in the investor's cap for finding a winner so far outside the firm's usual comfort zone. Benchmark owned 17,602,983 shares worth $3.3 billion at the IPO's opening price of $185 price, and over $5.3 billion if the first day of trading’s price of over $300 price holds. It can't sell shares until after a six-month lockup expires -- a standard restriction that prevents insiders from selling immediately after a company goes public.

The firm bought about 80% of those shares in early rounds for around $18 million, various disclosures indicate and Vishria confirmed to TechCrunch. It bought the remainder at pricier later rounds which cost it around $250 million, Cerebras disclosed in its S-1.  

So all told, the venerable VC firm spent maybe $270 million for this stake that is worth multiple billions or more, depending on how the stock price holds.

VC firm employees get bonuses when investments deliver big returns — so as for Vishria's assistant, the one he gave grief for okaying that first meeting? He laughed and said, "I think she'll do well, very well.'"