Etched fields funding offers at $40B+ valuation, sources say

Although it’s only been a couple of months since Etched raised $700 million at a $21 billion valuation, the AI chip startup is already being plied with investment offers at double or more its value, according to people familiar with the company.

Etched is reviewing incoming bids that range from $40 billion from top-tier investors to $50 billion from lesser-known backers, one person said. These fundraising talks are early, so terms of any deal, should one happen, may change. Etched declined to comment.

While this may seem like a fast time-table to raise another mega round, Etched is pursuing a particularly expensive segment of the AI industry: building full AI hardware systems powered by its own proprietary chips. The person familiar with these offers said that if it raises as much as its last round, this could give Etched a cushion of as much as 3.5 years of runway.

There are reasons why VCs are hot to own a piece of Etched. The four-year-old startup shows promise of challenging Nvidia. Not only did quant trading firm Jane Street lead the last $700 million round, it is also a customer that took delivery of an early system. Etched said in July that it had already secured $1 billion in customer orders, including the one from Jane Street, after manufacturing its test chip at a TSMC factory this summer.

Co-founder and COO Robert Wachen previously told TechCrunch that investors are so enthusiastic because Etched has designed two new components from scratch to speed up inference — the computing process that happens after a user submits a prompt.  

The company claims its chips can process more tokens faster and at a lower cost than Nvidia’s. That’s the reason its processors have been so attractive to Jane Street for whom a microscopic advantage in speed can yield massive profits.

The startup has also impressed investors with its ability to attract engineers from Nvidia, with roughly 15% of Etched’s 400-person workforce having previously worked at the chip giant, according to the Wall Street Journal.

Etched also operates a new 10-megawatt datacenter in Silicon Valley and established a facility in Taiwan to coordinate production near TSMC.

Co-founders Gavin Uberti and Chris Zhu famously met in an advanced math course at Harvard, while Wachen was Uberti’s roommate and they dropped out to pursue the company.

In terms of fast rounds at big leaps in valuations, Etched already has a history of them. The startup announced a $300 million round at a $10.3 billion led by Sequoia in July. It announced the $700 million round at a $21 billion valuation in September. Back-to-back funding rounds, which essentially act as a single financing split into two tranches with separate valuations, are increasingly common among the buzziest startups.

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Marina Temkin is a venture capital and startups reporter at TechCrunch. Prior to joining TechCrunch, she wrote about VC for PitchBook and Venture Capital Journal. Earlier in her career, Marina was a financial analyst and earned a CFA charterholder designation.

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