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After Shelving IPO, Semiconductor Startup Astera Labs Climbs To $3.2 Billion Valuation In New Fidelity-Led Funding Round


For the past few months, tech companies have been drastically slashing valuations. Semiconductor startup Astera Labs is bucking that trend with $150 million in new venture funding at a valuation of $3.2 billion. The latest investment, led by mutual-fund giant Fidelity, more than triples Astera’s previous valuation of $950 million.

Santa Clara, California-based Astera had hoped to go public before year end, so the decision to stay private and raise more private capital represents an acknowledgement of just how much the market for tech companies has changed. “The market was starting to slow down, and we had two options, either still go out and have our IPO or raise a round,” Astera cofounder and chief business officer Sanjay Gajendra tells Forbes. “This funding round and the significant revenue we’re bringing in allows us to control our timing.”

Astera focuses on removing bottlenecks in data centers to keep up with advances in artificial intelligence and machine learning. With data centers growing fast and customers that include Google
GOOG
, Microsoft
MSFT
and AWS, Astera’s revenue reached an estimated $35 million last year, and it’s expected to approach $100 million this year. That represents a slight slowdown from previous forecasts over the summer.

“Valuations are clearly down and if you had any chips exposed to PCs or cryptocurrencies, life is probably not so great,” says Stefan Dyckerhoff, managing director at Sutter Hill Ventures, which first invested in Astera in 2019 and added to its investment with this round. “However, the secular growth in the cloud I think will continue.” Sutter Hill, cofounded by early Silicon Valley venture capitalists Bill Draper and Paul Wythes, was an early investor in Pure Storage, now a $9 billion (market cap) publicly traded firm, and Snowflake
SNOW
, worth $49 billion on Nasdaq. “In every downturn, a few great companies are born,” Dyckerhoff says.

For Astera, which had hoped to go public this year, the new private funding represents a change of plans.

As we detailed over the summer when Astera was included in the Forbes Next Billion-Dollar Startups list, Gajendra and cofounders Jitendra Mohan (Astera’s CEO) and Casey Morrison (its chief product officer) met at Texas Instruments
TXN
where they hatched the idea for the business. In 2017, the trio, all first-time entrepreneurs, quit their jobs to start Astera. A so-called fabless chipmaker, Astera designs its chips on the cloud, speeding up the process, then has them fabricated by semiconductor giant TSMC.

“The entrepreneurs of Silicon Valley, the TV show, look very different,” Dyckerhoff says. “These are hard-core operators.”

Astera’s latest product, called Leo, builds off a new technological standard known as CXL, or Compute Express Link, that allows more flexibility for the large-scale deployment of AI and machine learning in the cloud. AMD launched a new version of its Epyc data-center processor known as Genoa in mid-November, and Intel’s
INTC
delayed new Sapphire Rapids Xeon chip is expected to be available in 2023. The Leo connectivity platform works with both of them.

Gajendra estimates that half the company’s total addressable market of $8 billion is due to CXL. “It’s a new standard and new standards don’t happen that often,” he says. “Unless things get really crazy, we should continue to see significant growth in revenue.”

While market conditions scuttled plans for an IPO this year, Gajendra hopes for better timing in 2023 as the market and economy stabilize. In the meantime, the company announced two new board members to help position it for that future: Alexis Black Bjorlin, VP of infrastructure at Meta, and Michael Hurlson, CEO of publicly traded Synaptics
SYNA
.

Gajendra declined to say how much of Astera he and his cofounders still own. Before the current funding, investors owned 58%, according to venture-capital database PitchBook.

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