On October 21, a brand new ticker opened to Nasdaq merchants: NBIS, a truncation of Nebius, a fledgling participant within the AI cloud infrastructure area.
Informal observers may very well be forgiven for questioning the place this firm had come from, as there had been little in the best way of the standard fanfare that surrounds most startups’ journey to IPO — no roadshows; no horn tootin’; no confetti-laden ceremonies; nothing, not a peep. That’s as a result of Nebius is an uncommon beast: a public firm, however a startup in nearly each sense of the phrase.
Nebius has really been public for 13 years, floating in Might 2011 as Yandex N.V. — the Dutch holding firm of Russian web big Yandex (typically dubbed the “Google of Russia”). On the tail finish of 2021, Yandex N.V. hit a peak valuation of $31 billion, however within the wake of Russia’s invasion of Ukraine in early 2022, every thing modified. Nasdaq halted buying and selling in Yandex N.V. shares that February because of sanctions imposed on Russian-affiliated firms, and a 12 months later Nasdaq mentioned it could delist Yandex altogether. However Yandex efficiently appealed on the idea that it was restructuring — a course of that will take an extra 16 months to completely full.
A part of this included offloading all its Russian property, which was the place a lot of the actual enterprise worth lay. What remained underneath Yandex N.V.’s possession was a random assortment of infrastructure and enterprise items that simply occurred to be positioned outdoors of Russia. This divestment concluded in July, with Yandex N.V. altering its identify to Nebius AI, an AI cloud platform replete with its personal Finnish knowledge middle.
The brand new enterprise was to be spearheaded by Arkady Volozh (pictured above), the Russian Yandex co-founder and former CEO who was faraway from a European sanctions record in March after he publicly condemned Russia’s assault on Ukraine.
The core Nebius enterprise sells GPUs (graphical processing items) “as-a-service” to firms needing “compute” — that’s, processing energy and sources to hold out computational duties akin to working algorithms and executing machine studying fashions. Final month, the firm debuted a holistic cloud computing platform designed for the “full machine learning lifecycle,” spanning knowledge processing, coaching, fine-tuning, and inference.
With the restructuring full, and Volozh free to run the present from the corporate’s new HQ within the Netherlands, Nasdaq green-lighted Nebius to recommence buying and selling final month. The state of affairs was just about unprecedented, although: a public firm whose buying and selling was placed on pause, solely to renew practically three years later underneath a brand new identify and fully totally different enterprise proposition?
In some ways, it could’ve made sense to have delisted and grown with non-public capital, the great old school startup means. However as Volozh defined to TechCrunch earlier this 12 months, constructing infrastructure is capital intensive, and the simplest and most cost-effective option to entry capital in what’s at present one of many hottest areas in tech is by way of the general public markets. However there was by no means any certainty on how the general public markets would reply to this unusual new entity. No person actually knew what to anticipate.
A month in, and Nebius has loved a considerably tepid re-entry to public life; it’s considerably down on its $18 billion market cap earlier than buying and selling halted in February 2022, which was to be anticipated, and it has since yo-yoed between $3.5 billion and $4.75 billion, with some indicators that it’s beginning to settle.
“We couldn’t predict what would happen, it could be $5 per share, or it could be $50 per share — this has never happened before, nobody really knows how to treat it,” Volozh informed TechCrunch in an interview in London this month. “It’s still volatile, but it’s stabilizing, and the good thing is that it has stabilized above the cost of the assets, which means that the market believes we will be able to build a business here. How big a business, we’ll see.”
Nebius competes with all the standard hyperscaler cloud behemoths, although arguably its extra direct rivals are different various cloud startups akin to CoreWeave, which has raised a ton of money this 12 months. With CoreWeave within the midst of increasing from the U.S. into Europe, Nebius is transferring within the different course, asserting plans this week to increase its presence to the U.S. with a brand new GPU cluster in Kansas Metropolis (on the Missouri facet) scheduled to go stay in early 2025. The corporate has additionally opened “customer hubs” in San Francisco and Dallas, with plans for a 3rd in New York by the top of the 12 months.
However whereas the cloud infrastructure enterprise is its bread and butter (accounting for two-thirds of its income, as per its first earnings report final month), there’s a triumvirate of further companies underneath the Nebius Group umbrella. This contains an autonomous automobile firm referred to as Avride, primarily based in Texas; a Swiss-based generative AI and LLM firm referred to as Toloka; and edtech platform TripleTen, positioned in Wyoming.
Drive time
Avride descends from the worldwide division of Yandex’s self-driving unit, which spun out of a three way partnership with Uber in 2020. Whereas Alphabet’s Waymo is now main the best way within the burgeoning robotaxi realm, not too long ago securing a $45 billion valuation, Yandex was an early trailblazer in Russia, with Volozh noting that the corporate had been on the cusp of beating Waymo to launch the primary totally autonomous vehicles on public roads, earlier than the warfare put the kibosh on plans.
“They [Yandex] were set to launch the first taxis on public roads with nobody at the wheel, in a real city (Moscow), several months before Waymo launched in San Francisco,” Volozh mentioned. “Journalists were invited to a big event in March, ’22, but that launch never happened. People had to pack all their things and go in a matter of weeks.”
The group that had been engaged on Yandex’s autonomous automobile undertaking transitioned over to Avride, a brand new model it launched final 12 months, finally transferring to Austin by way of Tel Aviv.
“This is the same 250 people,” Volozh added.
Final month, Avride introduced a big multiyear partnership with Uber, which noticed Avride’s sidewalk meals supply robots land on Uber Eats beginning in Austin, although the partnership will even carry Avride’s self-driving vehicles to the Uber platform later (Uber has signed different comparable offers, together with with Google’s sibling firm Waymo).
Whereas Yandex had sufficiently deep pockets to fund autonomous automobile initiatives, Nebius doesn’t — it has a pair billion {dollars} within the financial institution from its Russian divestment, and it’s laser-focused on constructing its cloud infrastructure enterprise. And because of this Volozh says that Avride might want to discover further companions in the long term.
“They have enough budget for this year and next year,” Volozh mentioned. “We’re financing them, but they need to use this time to find new partners, because it’s very capital intensive to build fleets. It needs real investment.”
Apparent companions may embody automotive producers, nevertheless it may very well be any entity that’s prepared to take a position billions, with Volozh including that it could be prepared to surrender management in Avride if wanted.
Toloka, in the meantime, is a platform that makes a speciality of knowledge labeling and high quality management for big language fashions (LLMs) and associated AI methods — it’s very like Scale AI, which was most not too long ago valued at greater than $13 billion. Toloka has clear synergies with Nebius’s core infrastructure enterprise, however the prospects aren’t the identical. Nebius works largely with generative AI startups in search of compute, whereas Toloka works with larger firms akin to Amazon and Hugging Face that wish to enhance their LLMs.
Each Toloka and Avride might finally comply with an identical path to that of ClickHouse, creators of the eponymous open supply database administration system that spun out of Yandex in 2021. Whereas the business ClickHouse entity secured big-name backers akin to Index Ventures, Benchmark Capital, and Coatue, Nebius has retained a minority stake.
“ClickHouse became very popular, and we were approached by investment funds to create a business around the open source project. Now they have revenues, and they’re growing,” Volozh mentioned.
TripleTen, however, is one thing of an outlier within the Nebius group of companies, in that it’s just about a direct-to-consumer product that provides on-line coding bootcamps for these wishing to transition into the know-how sector. One thought Nebius is dabbling with is to place itself as a supplier of a “full stack of services” to AI firms, from knowledge facilities and GPU infrastructure, to schooling. And this highlights the state of affairs that Nebius has discovered itself in: It’s drawing traces between the totally different entities it has been left with, and attempting to make all of it make sense.
For now, TripleTen is breaking even, and Volozh acknowledges that it’s not going to be the massive income driver that its infrastructure enterprise is — nevertheless it has the potential to supply significant earnings and can stay a part of the Nebius Group.
“Nebius is a billion-dollar scale business,” Volozh mentioned. “TripleTen — it’s a nice model, but it’s maybe a tens or hundreds-of-millions of dollars business. It’s not a billion-dollar business.”
Parallel compute
As for the core Nebius AI cloud enterprise, the corporate already has its totally owned knowledge middle facility in Finland, with plans to triple its capability to 75 megawatts. In tandem, the corporate is constructing out further websites at co-location services, a transfer designed to not solely improve its capability, but additionally to cut back latency by bringing the processing nearer to its prospects. Along with the Kansas location introduced this week, Nebius had already unveiled a brand new GPU cluster in Paris that goes on-line this month.
Additional down the road, Nebius plans to construct extra of its personal knowledge facilities, each in Europe and the U.S., however given the time it takes, it’s faster to plug the hole with co-location services, which is why it’s forging forward with a hybrid method.
“It’s more efficient if we build it ourselves, but to build means a year and a half or two years — it’s a long process, and we can’t wait,” Volozh mentioned. “That’s why we have these co-locations in Paris and Kansas City.”
