Fungible DPUs Are Dead – Acquired By Major US Cloud – Acquisition Details
When the first mover’s advantage doesn’t help you succeed
Fungible was once one of the hottest semiconductor startups, having raised north of $370M since 2015. Fungible had many high-profile founders with amazing backgrounds, such as Pradeep Sindhu, who founded Juniper Networks. Fungible was the first merchant silicon company targeting cloud-level DPUs before Intel, Nvidia, Pensando (AMD), and Marvell. With a first-mover advantage, they should have been able to capitalize on the hot DPU market, but instead, they failed to get off the ground.
This report will discuss the death of Fungible, the cloud buyer that said no and the final buyer, the pricing of the deal, and how Fungible founders potentially came out much better than employees and most investors with an unannounced funding round with liquidation preferences.
The moral of the story for anyone joining a startup is to think deeply about the structure of equity and liquidation preferences. Many people at Fungible accepted being underpaid for years, only to end up with an abundance of near-worthless RSUs.
Before we discuss the drama, first, a quick overview of the technology because the technology isn’t dead, the cloud player will continue the ASIC work here.
The core need here is that networking and storage demands are growing faster than compute. Security is becoming much more complex. Commodity compute needs to be scaled out with networking that is fully programable. Programmability is necessary because unreliability and inflexibility of a network is a big issue for cloud hyperscalers.
While Fungible was targeting everything from x86 compute nodes to GPU and machine learning analytics nodes, those are all canned. One point to mention about Fungible is that they used MIPS, which made developing many applications for it painful and running any external code basically impossible. The target for the major cloud is now only the storage aspect.
Now onto the drama. This includes the bidder who said no, the cloud company who acquired Fungible, and an unannounced incestuous funding round that had preferred equity with 5x liquidation preferences, which was mostly the founder’s money.
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