CoreWeave’s 7-year journey to IPO wound through crypto before AI

If not for Nvidia, there would be no CoreWeave IPO. The artificial intelligence infrastructure startup might still be plucking away in the crypto market.

In 2020, CoreWeave established a business renting Nvidia’s graphics processing units in the cloud. Now the company is generating $2 billion in annual revenue and just raised $1.5 billion in the biggest U.S. venture-backed tech IPO since 2021.

But if not for Nvidia, once again, this week’s IPO could have gone off the rails. After CoreWeave said it was going to sell shares at $47 to $55 a piece, investor demand failed to materialize due to a difficult public market environment and questions surrounding the sustainability of the company’s business model.

Nvidia, a major supplier and customer, stepped in to buy shares at $40 in a scaled-back offering. That’s where the IPO priced on Thursday night and where the stock closed after its Nasdaq debut on Friday.

“I feel like this company has been built on a long list of events where the chips are down and the people at the top being tough as nails, but gets it through,” Brian Venturo, CoreWeave’s co-founder and chief strategy officer, told told CNBC in an interview on Friday. The IPO “was just another one of those experiences.”

Not that Venturo and his co-founders, CEO Michael Intrator and development chief Brannin McBee, are hurting. The three are worth a combined $5.3 billion on paper. And their company, along with its 250,000 Nvidia GPUs across 32 data centers, now has the attention of public investors as it challenges Amazon, Google, IBM, Microsoft and Oracle.

Intrator says the company is focused on being best in class.

“We are built for speed,” he said. “That is all we do, right? And when you build something to do one thing, you end up with a Lamborghini, not a minivan.”

Intrator, 56, has an unconventional background for a technology CEO. He received a bachelor’s degree in political science from the State University of New York at Binghamton and a master of public administration degree from Columbia University.

After graduate school, Intrator spent about 16 years at carbon credit buyer Natsource, where he worked on sales of emission credits tied to air pollution. Venturo worked there as an energy trader.

“They were the Michael Jordan and Scottie Pippen of the carbon markets at the time,” said Alex Baldassano, who was a portfolio manager at Natsource. The Chicago Bulls teammates won six NBA championships in the 1990s.

Intrator and Venturo went up against Goldman Sachs and won. Their firm was involved in the first over-the-counter trade in a cap-and-trade program called the Regional Greenhouse Gas Initiative, Baldassano said. They were pioneers in carbon trading years before the wider market began targeting net-zero emissions, he said.

In 2013, the pair helped start a small natural gas hedge fund, Hudson Ridge Asset Management.

Then came crypto. In 2017, as bitcoin and other cryptocurrencies were rising in price, Intrator and Venturo joined with McBee to establish Atlantic Crypto Corp., which focused on ethereum mining with Nvidia GPUs. They chose ethereum because it didn’t require specialized hardware, Venturo said on a podcast in 2020.

Their ethereum effort first consisted of one GPU on a pool table in a Wall Street office. Soon the pool table was covered with GPUs. The trio later turned Venturo’s grandfather’s garage in New Jersey into a data center.

“One GPU turned into hundreds, then tens of thousands via strategic acquisitions of distressed hardware during the ‘crypto-winter’ of 2018/2019, and our portfolio of facilities grew to seven,” Intrator wrote in a 2021 blog post. Intrator worked with employees to set up GPU servers, former engineer John Lynch recalled.

In 2019, the company changed its name to CoreWeave and pursued additional computing jobs that could be handled with GPUs beyond crypto. That included rendering videos and training AI models.

CoreWeave was suddenly competing with some of the world’s largest technology companies, including Amazon, which has offered GPUs through the cloud for a decade.

“We quickly started getting inundated with introductions to businesses dependent upon GPU acceleration with a common pain point: legacy cloud providers make it extremely difficult to scale because they offer a limited variety of compute options at monopolistic prices,” Intrator wrote on the blog. CoreWeave claimed on its website that it charged 80% less than traditional cloud providers.

Andrew Bly was CEO of visual effects studio Molecule VFX at the time. The New York company paid CoreWeave to run computing clusters and workstations after initially using Amazon Web Services. The result was faster rendering, he said, but some employees were having issues on the West Coast, where CoreWeave didn’t have data centers.

“The leadership at CoreWeave was like, ‘Give us less than a month,'” Bly said, assuming that timeframe was impossible. But CoreWeave set up infrastructure in Nevada in under one month that made the cloud-based software easy for the West Coast employees to use, he said.

CoreWeave was still generating revenue from ethereum mining, but only when the GPUs weren’t being used for other purposes, Venturo said on the podcast. The idea was to achieve 100% utilization of the GPUs, in order to make the most of the infrastructure. The unit eventually shut down in September 2022.

Two months later, an earthquake shook the computing world when OpenAI launched ChatGPT.

Consumers were enamored with the chatbot. It grew to 100 million users in under three months, putting a strain on Microsoft, whose Azure cloud was responsible for providing computing resources to OpenAI. That’s when Microsoft agreed to start renting GPUs through CoreWeave, ultimately signing a deal worth potentially billions of dollars.

It was a coup for a company that was, to that point, reliant on testimonials from small startups.

“That’s the moment where CoreWeave came into the collective consciousness,” said Michael Kellner, a communications executive who represented the startup at public relations agency Treble.

Around that same time, Nvidia became a customer and invested in CoreWeave. The two companies enjoy a symbiotic relationship, Intrator said.

“They depend upon us to be able to build and deliver the most performant configuration of their infrastructure in the world,” he said. “They depend upon us to build it faster than anyone else. They depend upon us to find the issues within the software, within the hardware, so that we can troubleshoot it, so that it can be deployed globally.”

But CoreWeave really depends on Nvidia. In the risk factors section of its prospectus, CoreWeave said “all of the GPUs used in our infrastructure today” are from Nvidia.

Intrator said he stays in touch with Nvidia CEO Jensen Huang.

“I’m not bashful about reaching out to him,” Intrator said. “He’s not bashful about reaching out to me. We’re working on different pieces of similar problems, and so there’s a free flow of information in order to optimize outcomes.”

One challenge for public market investors is in figuring out how they should value CoreWeave. It’s not a pure technology play with a popular gadget or application. Rather, it’s cobbling together another vendor’s technology, so that other companies can run their software on it.

It’s an expensive model that’s required substantial financing. In 2023, CoreWeave raised $2.3 billion in debt led by private equity firm Blackstone and hedge fund Magnetar, now the company’s biggest equity investor. It was an unconventional arrangement.

CoreWeave posted the underlying Nvidia GPUs as collateral. In its prospectus, CoreWeave says it pioneered new and “innovative” methods of financing. But t came at a high price, with an actual interest rate above 14%.

CoreWeave obtained over $7 billion in additional debt last year from Blackstone, Magnetar and others, borrowing at a rate of about 11%.

“As we have scaled, we have managed to drive lower cost of capital across our financings,” the company said in its prospectus.

For CoreWeave, it’s the cost of playing in a market that’s lifted Nvidia to a multitrillion-dollar market cap and, according to many experts, is still in its early days. Analysts at DA Davidson predict that CoreWeave accounts for 6% to 7% of Nvidia’s revenue, and the company earlier this month signed a five-year deal with OpenAI valued at nearly $12 billion.

“CoreWeave has helped us build really large-scale computing clusters that led to the creation of some of the models that we’re best known for, and helped us deliver these systems to customers at the scale that they need,” Sam Altman, OpenAI’s CEO, said in a recording that CoreWeave included in its IPO roadshow.

With the OpenAI deal, Microsoft will represent less than half of expected future committed contract revenue, CoreWeave said, down from 62% of total sales last year.

Baldassano, who now works in commodities trading, saw the headlines about CoreWeave’s debt and other concerns while on vacation in Boston this week.

Still, when asked if he plans to buy stock in the company, he didn’t hesitate.

“Of course I am,” he said.

WATCH: Magnetar Capital’s David Snyderman breaks down CoreWeave investment and IPO