Source: Naveen Rao’s new AI hardware startup targets a $5 billion valuation with backing from the A16Z

Naveen Rao, formerly head of artificial intelligence at Databricks, is in talks to raise $1 billion at a $5 billion valuation of a new startup building a new type of computer, according to four people familiar with the discussion.

Andreessen Horowitz has agreed to lead the investment, and Lightspeed and Lux ​​Capital are also taking part in the transaction, two sources said, but none of these VC companies responded to requests for comment. Databricks is also said to be investing in Rao’s new company, Bloomberg reported last month.

Rao has already raised hundreds of millions and plans to start building a startup without waiting for the full $1 billion round to close, our source said. He plans to raise the rest of the capital in installments. This is a fundraising approach commonly referred to as the “transsing” round.

Rao declined to comment, but publicly acknowledged the new startup in X last week, confirming its name and described the product he wanted as “rethinking the fundamentals of computers to build new substrates that are as efficient as biology. Building scale efficiency for the brain without biological luggage.”

Databricks acquired Rao’s previous startup, MosaicML, for $1.3 billion in 2023. According to Pitchbook, MosaicML raised $33.7 million from investors including Lux Capital, DCVC, Playground Global and Samsung, which was founded in 2020 with an emphasis on training and deployment of large-scale AI models. Prior to MOSAICML, Rao co-founded Machine Learning Platform Nervana Systems. This is reportedly acquired by Intel Corp. in 2016 for over $400 million.

According to a LinkedIn profile and a previous report by Bloomberg, Rao, who spent time with Databricks’ AI vice president (now worth $400 billion for $100 billion and generating $40 billion ARR), left the company last month focusing on his new startup.

Our sources say that Rao’s vision will essentially compete with Nvidia by designing new AI machines that include both custom silicon chips and server infrastructure.