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Earlier this week, the New York Times shone a light<\/a> on some of the desperation that founders are experiencing as they try and fail to secure compute power for their nascent artificial intelligence startups, thanks to the big companies<\/a> (and even rich nations<\/a>) racing to snatch them up. One founder reportedly said of the graphics processing units, or GPUs, that he needs for his company: \u201c<\/strong>I think about [them] as a rare earth metal at this point.\u201d<\/strong><\/p>\n According to that Times piece, founders are trying numerous measures to amass the chips, including calling in favors from friends at large equipment vendors that might have GPUs to spare, and navigating an obscure U.S. government program called Access<\/a>.<\/p>\n At least one firm, the global investor Index Ventures, happened on an additional idea, it told the outlet. To help ensure its portfolio companies aren\u2019t hamstrung by the shortage, it struck a deal with Oracle to provide its founders with some of these sought-after chips (specifically Nvidia\u2019s H100 chips and Nvidia\u2019s A100 chips).<\/p>\n To learn more about the arrangement \u2014 one that other venture firms are undoubtedly trying to replicate \u2014\u00a0 we talked earlier today with Erin Price-Wright, a Bay Area-based partner with Index who focuses on enterprise software and AI and who, before joining the venture firm in 2019, was the head of product for Palantir\u2019s data analytics and machine learning platform. Excerpts from our chat have been lightly edited for length and clarity below; you can hear our longer conversation here<\/a>.<\/span><\/p>\n TechCrunch: Tell us about this partnership with Oracle.\u00a0<\/strong><\/p>\n Erin Price-Wright: Access to compute is one of the biggest challenges that AI companies face, and it\u2019s especially hard for an early-stage company to get their hands on GPUs. It\u2019s less about the cost in particular but the fact that something like more than 95% of GPU capacity is already allocated to large players in this space [because] they make these pretty big pre-commitments with cloud vendors. So if you\u2019re an early-stage company, and you\u2019re just trying to get started training, or fine tuning the model, there\u2019s usually a really long lead time between when GPUs are even available. It can be three months to a year in some cases and it\u2019s really hard to just get started.<\/p>\n If you\u2019re an early-stage company that\u2019s still figuring out what your product is, you don\u2019t even know how many GPUs you need. So even that process of discovery of understanding what your workloads are going to look like can be super challenging for early-stage companies. So we\u2019re partnering with Oracle to provide GPUs to our earliest-stage portfolio companies, because we want to help remove that barrier of access so that they can really focus on what matters from day zero. Ultimately, the goal is to help all of these companies graduate to their own cluster. We\u2019re not in the business of providing these massive GPU clusters to our companies. . .but we really want to give them a head start, so that they can start building faster as a way to help level the playing field.<\/p>\n How did the deal come together?<\/strong><\/p>\n We wanted to make sure that people who are building against very tangible business problems didn\u2019t feel like they had to change their business model or change the way they were representing themselves or change the way they were fundraising in order to just get access to GPUs. So it was really born out of seeing this pattern again and again with early stage companies where we were like, \u2018This is where Index as a fund actually has real leverage. And we can use our position in the market, our relationships, and the fact that we can kind of aggregate this demand across multiple companies to really provide value-additive services\u2019 [to our founders].<\/p>\n Did Index put a down payment together or has it purchased chips outright from Oracle? Are you giving Oracle a stake in these startups?<\/strong><\/p>\n We\u2019re not purchasing any chips outright. So the partnership with Oracle is that Index makes the pre commitment on the behalf of our startups and pays the cloud bill. Oracle manages the cluster \u2014 they\u2019ve been a fantastic partner \u2014 and then our companies get access to that GPU cluster for free.<\/p>\n So you\u2019re paying [this cloud bill] in advance. Did you have to talk with your own investors about that? That\u2019s not typical of what [a venture firm] would do historically.<\/strong><\/p>\n In terms of the actual structure of how the agreement works, I\u2019ll probably hold off on sharing too many of those details.<\/p>\n Is this an exclusive relationship? Is there anything to prevent other venture firms from doing the same thing?<\/strong><\/p>\n Yeah, of course [they could do the same], there certainly isn\u2019t [an exclusive relationship with Index].<\/p>\n One benefit that Oracle gets out of it is to meet the next generation of fantastic companies as early as possible. In the process of using our GPU cluster, we\u2019re actively helping our companies navigate the process of signing their own dedicated cloud deal. So the idea is not for them to [do] this in perpetuity; it\u2019s for them to develop relationships with Oracle and AWS and the other large cloud providers and sign their own dedicated contract.<\/p>\n One of your portfolio companies, Cohere<\/a>, counts Oracle as one of its backers along with Nvidia, which are two of the companies you most want to have involved with your portfolio companies right now.<\/strong><\/p>\n One of the ways we really can help our portfolio companies is making sure they\u2019re connected to the right people at the right time, so that they get the resources they need.<\/p>\n Index has at least 20 portfolio companies<\/a> that fall into the AI\/ML bucket, including Cohere [which has already raised $445 million<\/a>] and another company that recently raised a huge seed round<\/a>, Mistral AI in France. Is too much money being invested broadly in generative AI or are we still in the \u2018early innings,\u2019 as VCs like to say?<\/strong><\/p>\n We are in the early innings. I do think we\u2019re rapidly entering a cooling off period in terms of sentiment, especially for some of these very large rounds and especially from traditional VCs. There\u2019s still a really big gap between the promise and power of the core models of technology and what it\u2019s going to take for them to be actually used and useful across many use cases in the enterprise. There\u2019s just a huge infrastructure gap missing that needs to be filled, and it\u2019s not going to be filled overnight; it\u2019s going to take some time.<\/p>\n Over the coming 12 months, while I\u2019m still very excited about the power of the core technology and how transformational it\u2019s going to be for the world, I think we\u2019re going to see a little bit of a backing off as companies really grapple with it, figure out the ROI, kind of prioritize use cases and start actually building real things beyond maybe the one or two prototype demo apps that they\u2019ve been working on for the last six months. That\u2019s when we\u2019re going to start seeing the infrastructure emerge that\u2019s going to start supporting these use cases at scale.<\/p>\n How do you as an investor ensure that your AI companies don\u2019t overlap? And is that any harder or more difficult than when it comes to traditional startups?<\/strong><\/p>\n I don\u2019t think it\u2019s massively different than how we think about competition elsewhere. Everyone paints AI as this standalone category. But if I look forward even two years, let alone five or 10, every single piece of software that we use will have AI as its beating heart. There will be no piece of code, no software, no application, no website that you visit, that doesn\u2019t have AI as a core component of it. I almost think about it like SaaS. Is every single SaaS company the same? No. Every single SaaS company has a database, every single SaaS company has a front end, every single SaaS company has some interaction between the two. AI is kind of similar to a database in that respect. It\u2019s just kind of a core building block in how you build software.<\/p>\n We\u2019re very early in the market, so there\u2019s going to be some movement and some change as companies figure out how to use these tools and what specific problems to go after. But it\u2019s not different than how we think about traditional SaaS investing from my perspective.<\/p>\n<\/p><\/div>\n