On October 21st, a new ticker was made available to Nasdaq traders. NBIS is part of Nebius, a startup in the AI cloud infrastructure space.
The path to IPO for most startups has been devoid of much of the usual fanfare, so it's no wonder casual observers wonder where this company came from. There was no roadshow either. The horn doesn't sound either. There will be no confetti ceremony. Nothing is voyeuristic. That's because Nebius is an unusual company. Although we are a publicly traded company, we are a startup in almost every sense of the word.
Nebius has actually been publicly traded for 13 years, going public as Yandex NV in May 2011. Yandex NV is the Dutch holding company of Russian internet giant Yandex (often referred to as the “Google of Russia”). At the end of 2021, Yandex NV's valuation peaked at $31 billion, but everything changed following Russia's invasion of Ukraine in early 2022. Nasdaq suspended trading in Yandex NV shares in February of the same year due to sanctions against Russia-related companies, and a year later Nasdaq announced that it would completely delist Yandex. However, Yandex successfully appealed on the grounds that it is undergoing restructuring, and the process will take another 16 months to fully complete.
Part of that included offloading all of its Russian assets, which had most of its substantial business value there. What remained under Yandex NV's ownership was a random combination of infrastructure and business units that happened to be located outside of Russia. The sale was completed in July, and Yandex NV changed its name to Nebius AI. Nebius AI is an AI cloud platform with its own Finnish data center.
The new venture was to be spearheaded by Russian Yandex co-founder and former CEO Arkady Volosh (pictured above), who was responsible for Russia's attack on Ukraine. His public condemnation led to his removal from the European sanctions list in March.
At its core, Nebius' business is providing GPUs (Graphical Processing Units) to enterprises that need “computing,” i.e., processing power and resources to perform computational tasks such as running algorithms or running machine learning models. sold as a service. Last month, the company debuted a comprehensive cloud computing platform designed for the “complete machine learning lifecycle” spanning data processing, training, fine-tuning, and inference.
Nasdaq last month gave the green light for Nevius to resume trading after the restructuring was completed and Mr. Vorosh was free to run the show from his new headquarters in the Netherlands. However, this situation was unprecedented. A listed company suspended from trading, then reopened some three years later with a new name and a completely different business?
In many ways, the good old startup approach of delisting and growing with private capital would have made sense. But as Volozh explained to TechCrunch earlier this year, building infrastructure is capital-intensive, and most people with access to capital in this sector, currently one of the hottest areas in the tech industry. The easiest and cheapest way is through the open market. But we were never quite sure how the public market would react to this strange new entity. No one really knew what was going to happen.
A month later, Nevius is enjoying a somewhat lukewarm return to public life. The market capitalization has fallen significantly from $18 billion before trading was suspended in February 2022, as expected, and has since fluctuated between $3.5 billion and $4.75 billion, and there are signs that it is starting to stabilize. Can be seen.
“We couldn't predict what was going to happen. It could be $5 a share, it could be $50 a share. Nothing like this has ever happened before. , no one knows how to deal with it,” Volozh told TechCrunch in an interview in London this month. . “It's still volatile, but it's stabilizing. The good thing is it's stabilizing above asset prices. That means the market believes we can build a business here. ”We'll see how big the business becomes. ”
Nebius competes with all the usual hyperscaler cloud giants, but its more direct competitors are arguably other alternative cloud startups such as CoreWeave, which has raised significant funding this year. As CoreWeave expands from the US to Europe, Nebius is moving in a different direction, expanding its presence into the US with a new GPU cluster scheduled to go live in Kansas City (on the Missouri side) this week We are announcing plans to. The company has also opened “customer hubs” in San Francisco and Dallas, and plans to open a third hub in New York by the end of the year.
But while the cloud infrastructure business is the company's backbone (accounting for two-thirds of its revenue, according to its first earnings report last month), there are three additional businesses under the Nebius Group umbrella. This includes a Texas-based self-driving car company called Avride. A generative AI and LLM company called Toloka, based in Switzerland. and TripleTen, an edtech platform based in Wyoming.
driving time
Avride comes from the international division of Yandex's self-driving division, which was spun out of a joint venture with Uber in 2020. Alphabet Inc.'s Waymo is currently leading the way in the burgeoning robotaxi space, recently securing a $45 billion valuation, but Yandex was an early company. Driving cars on public roads was in the plans before the war, as Russian pioneer Volosh noted that the company nearly beat Waymo in launching the first fully self-driving car.
“They are [Yandex] “A few months before Waymo launched in San Francisco, we planned to operate our first taxi on public roads in a real city (Moscow) without anyone behind the wheel,” Volosh said. “Journalists were invited to a big event in March 2022, but the launch never happened. People had to pack up everything and leave within a few weeks.”
The team working on Yandex's self-driving car project transitioned to a new brand, Avride, launched last year, eventually relocating to Austin via Tel Aviv.
“These are the same 250 people,” Volosh added.
Last month, Avride announced an important multi-year partnership with Uber that will bring Avride's sidewalk food delivery robots to Uber Eats from Austin, which will later bring Avride's self-driving cars to Uber. (Uber has similar deals with other companies, including Google's sibling company Waymo).
Image credit: Avride
While Yandex had enough money to fund its self-driving car project, Nebius does not. The company has banked billions of dollars from the Russian sale and is focused on building its cloud infrastructure business. This is why Volozh says Avride will need to find additional partners in the long term.
“They have a good budget for this year and next year,” Volosh said. “We are funding them, but building a fleet is very capital-intensive, so they need to use this time to find new partners. There needs to be real investment.”
Obvious partners could include automakers, but could be any company prepared to invest billions of dollars and relinquish control of Avride if necessary. Yes, Volozh added.
Toloka, on the other hand, is a platform specialized in data labeling and quality control for large-scale language models (LLMs) and related AI systems. This is very similar to Scale AI, which was recently valued at over $13 billion. While Toloka has clear synergies with Nebius' core infrastructure business, the customers are not the same. Nebius primarily works with generative AI startups looking for compute, while Toloka works with large companies like Amazon and Hugging Face who want to improve their LLMs.
Both Toloka and Avride could eventually follow a similar path to ClickHouse, the developer of the open-source database management system of the same name, which was spun out of Yandex in 2021. ClickHouse's commercial entities include Index Ventures, Benchmark Capital, Courtue and Nevius, with minority interests.
“ClickHouse became so popular that we were approached by investment funds to build a business around open source projects. We are now profitable and growing,” Volosh said. .
TripleTen, on the other hand, is a bit of an outlier among the Nebius group of companies in that it's mostly a direct-to-consumer product that offers online coding bootcamps for people looking to move into the tech field. One of the ideas Nebius is working on is positioning itself as a provider of “full stack services” to AI companies, from data center and GPU infrastructure to education. And this highlights the situation Nebius finds himself in. Nebius tries to draw lines between the various entities left behind and make it all make sense.
For now, TripleTen is breaking even, and Volozh admits that the infrastructure business will not be a significant revenue driver, but it has the potential to bring in meaningful revenue and remains part of the Nebius Group. Will continue.
“Nebius is a billion-dollar business,” Volozh says. “TripleTen — it's a great model, but it's probably a tens of millions or hundreds of millions of dollars business. It's not a billion dollar business.”
parallel computing
As for its core Nebius AI cloud business, the company already has a wholly-owned data center facility in Finland, with plans to triple its capacity to 75 megawatts. In parallel, the company is building additional sites in its colocation facilities. This is a move aimed at not only increasing processing power but also reducing wait times by moving processing closer to the customer. In addition to the Kansas location announced this week, Nebius had already announced a new GPU cluster in Paris that will come online this month.
Nebius plans to build more of its own data centers in both Europe and the US in the future, but given the time it will take, it will be quicker to bridge the gap with colocation facilities, so it is pursuing a hybrid approach.
“It would be more efficient to build it ourselves, but it will take a year and a half or two years to build it. It's a long process and we can't wait,” Volozh says. “That’s why we have these joint locations in Paris and Kansas City.”