Huang was betting on what he calls a zero-billion-dollar market – one that would get big fast when customers saw the value Nvidia’s product provided. His bet paid off. — Bloomberg
For every startup working on its first product, the alternative to success is often running out of money and shutting down. Just ask Jensen Huang, founder of Nvidia.
Thirty years ago, the chipmaker was on the brink of running out of cash just three years after its launch.
Nvidia was founded in 1993 and that year raised venture capital from Sequoia, a premier Silicon Valley VC firm, before the company had even developed a product. Wilfred Corrigan, then-CEO at chip company LSI Logic, where Huang worked before he joined Nvidia, strongly urged Sequoia to invest in Nvidia, according to Crucible Moments. Despite Huang’s weak business plan, Corrigan’s recommendation was decisive.
But by 1996, Nvidia was a month away from running out of cash, having bet its dwindling reserves on an unconventional 3D-graphic chip for video game maker Sega.
When Huang realised the chip – and Nvidia – would fail without some help, he told Shoichiro Irimajiri, the Sega executive Nvidia was working with, that Nvidia would not be able to deliver the contracted chip – and asked Irimajiri to invest US$5mil to keep the company going, noted Crucible Moments.
Amazingly, Sega made the investment. To make sure there would be enough capital left to build the chip, Nvidia took a novel approach to design, reducing the design timeline to about seven months, instead of the traditional one-to-two-year runway. How? Nvidia developed the software, and acquired a simulator that would test and fix the software before finalising the design. Measure twice, cut once, right?
Huang was betting on what he calls a zero-billion-dollar market – one that would get big fast when customers saw the value Nvidia’s product provided. His bet paid off. Nvidia’s Riva 128 design was so much better than existing graphics chips that it faced no direct competitors, and Nvidia sold a million units within four months, paving the way to the company’s 1999 IPO, reported Crucible Moments.
Betting on such solutions is a two-edged sword. What’s good about such wagers is that if you succeed, you become the leader of a new, fast-growing market with few, if any, competitors. The negative? If you fail to deliver a product that customers are scrambling to buy, you will be out of business.
And don’t let success go to your head or make you complacent. Eventually those competitors will catch up, and the zero-billion-dollar market for your product will be saturated. In 2012, Huang bet the company on AI chips, hiring and partnering with AI experts and extending to AI the software it had built to help developers adapt the company’s GPUs for applications other than video games.
It just goes to show that great leaders think differently. In their darkest hours, their determination never wavers. And when they win big, they don’t rest on their laurels. Complacency is simply not an option. – Inc./Tribune News Service
