Inside Nvidia’s plan to give $100K to the next hot emerging startup (interview)

Nvidia will hold its sixth annual Emerging Companies Summit at its GPU Technology Conference in San Jose, Calif., in late March. And while the world’s biggest maker of standalone graphics chips often invests in companies working on cool graphics, this marks the first time that it will give away $100,000 in an on-stage bake-off among startups competing to be the best emerging company.

Jeff Herbst, vice president of business development, will lead the summit and be a judge in its Early Stage Challenge contest, where 12 companies will gather on stage to compete for the prize. Nvidia has had some successes with its investments lately — the biggest was Zynga’s $527 million purchase of NaturalMotion, a mobile game developer that Nvidia invested in early on.

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Beyond the first-prize check of $100,000, more than $500,000 in total prizes will be given out.

We caught up with Herbst for an interview at the company’s headquarters in Santa Clara. He also told us what tech sectors are ripe for investment and the trends he is paying attention to among startups. Here’s an edited transcript of our interview.

VentureBeat: What’s new that you’re doing at the conference? How is this contest going to be different?

Jeff Herbst: This is our sixth year doing the Emerging Companies Summit here in San Jose. The new and exciting thing this year is what we’re calling our Early Stage Challenge.

What we realized is, (graphics processing unit) GPU computing and people building their businesses on top of a GPU is now, in my view, well beyond the tipping point. We’ve been at this for a long time. There’s now a lot of people who are actually trying to make money off of GPUs. Just look at what’s going on with Bitcoin mining. People have figured out that there’s a speed and money advantage to using these kinds of processors.

We’re going to go a little bit earlier-stage this year. We’re going to keep doing what we’ve done in the past, which is showcasing some of the mid-stage private companies who’ve raised decent amounts of funding from VCs or elsewhere, but we also decided we’d make a contest for companies that have raised less than $1 million of total capital. We put out an open invitation for those companies to apply, and we selected 12 of them to be part of the Early Stage Challenge contest.

We’ve asked Scott Budman, from NBC11, to moderate this. We have a panel of other experts, including Bill Reichert from Garage Ventures. Jens Horstmann from Crestlight. Pat Moorhead, from Moor Insights & Strategy. I’ll be up on the panel as well.

What we’re going to do is bring all 12 companies up in a two-hour window – about eight minutes per company – for part presentation and part Q&A from the panel. After we’re done, we’re going to vote on who we think is the company with the best prospects for commercial success, and award a $100,000 check on the spot.

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The interesting thing about this is that the panel will get to vote, but the audience will get to put their input in as well. There’ll be a weighting factor between the panel of judges and the audience. The other key thing about this is, I’m not looking for research projects. The criteria are, it’s the best prospect for commercial success. If you want to see research projects, there are other parts of the GTC you can go to. We want to provide funding to the company that we think has the best chance of succeeding in the future. This is no strings attached cash. It’s not an investment. It’s just a cash infusion.

VB: And that differs in that some of the past ones were investments, right?

Herbst: We’ve never actually made investments as prizes for the Emerging Companies Summit. We do have what we call the One to Watch awards, which we’ll be giving out again this year, to five companies. Those awards are mainly a combination of in-kind services and prizes. It doesn’t encompass cash.

We also do invest in some of these companies on our own, but that’s not something we do as part of the conference. That’s what we call our GPU Ventures program.

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VB: What do they share in common?

Herbst: All of the companies share in common the fact that they’re using GPUs in some way to build their business. It might be a game engine, or a big data or analytics engine. They might be doing computer vision. They might be doing cloud services of some kind.

That’s why I think what we do is pretty exciting. We’re not just throwing a big net out and saying, “Come join us.” We have a very specific theme that’s not only interesting, but often very cool, because what these companies do is very visual in many respects.

VB: In recent years, GPU computing was more of a focus than just pure visualization, right? Do you still have that emphasis, or do you consider some of this to be accomplished now?

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Herbst: I’d say we’re seeing more and more companies doing GPU computing, but we continue to show a mix of companies at the conference. We have everything from big data, cloud, gaming, analytics, computer vision—I’d say those are some of the main categories. They span from mobile to desktop to cloud and combinations of them all.

I would say that if we’re seeing anything, we’re seeing – as a percentage of the mix – more companies doing GPU computing than we did five years ago. This is what I said at the beginning. We’re well beyond the tipping point, where people are using GPUs for all these kinds of applications.

VB: What are some of the successes that you’ve already seen in this visualization area?

Herbst: We just had two recent ones I can tell you about. Both were companies that were alumni of the Emerging Companies Summit, and also companies that Nvidia was fortunate enough to invest in. The first one was NaturalMotion, which was just sold to Zynga for somewhere in the neighborhood of $500 million. That was the best exit we’ve ever had from our GPU Ventures program. They presented a couple of times with the Emerging Companies Summit.

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The other one I can mention is Geomerics. They were doing a lighting engine. They were just bought by ARM in December, I believe. We were also an investor in that company. That was another good exit for us.

VB: What’s the most imaginative place where GPU computing is sprouting now? What would you consider that to be?

Herbst: I’m particularly excited about companies using GPU computing for enterprise applications. Big data is on my mind right now. We’ve got a couple of companies presenting this year that will knock your socks off. One of them is called Sqream. They’re going to be interesting for the audience. The other area is machine learning and robotics. This is another theme that we’re starting to see interesting companies explore.

VB: Cloud gaming has progressed. How would you describe the state of it right now? There was some early excitement around companies like OnLive. They ran into a wall, but they kept on going. Nvidia has also made some big investments in cloud technology.

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Herbst: We’re investing heavily in the technology that allows cloud gaming to proceed. I’d say we’re in the rational phase of that business. You have a few companies that look to be building nice businesses based on that, and the initial overhype is gone. Now people are rolling up their sleeves and figuring out how to build businesses that make economic sense based on the technology. We’re seeing good traction.

We have G-cluster coming to present at the CEO On Stage portion of the event this year. Last year we had Playcast and Ubitus. We’ve spent a lot of time with these companies. We want them to be very successful. I think they will be. They’re on their way.

VB: Some of the challenge, the technological challenge there, is how to deliver gaming over the cloud efficiently, right? Without consuming too many resources in any one part of the system, like bandwidth.

Herbst: The technology’s now proven, I think. It’s a question of getting the business model to work. You do need to be as efficient as possible with your use of the hardware, because having a 1:1 relationship between the GPU and the user doesn’t work from an economic standpoint. But it’s clear to us that the technology works. There is enough bandwidth. We’ve seen successful deployments already.

The other piece of building a cloud gaming service is that you have to have the content. There are a few companies that have spent the time and the resources and the money to go out and get all the content together. It’s more of a question of the business model right now, as opposed to the technology, which is already there.

VB: What do you think of regional differences, and the opportunities for startups in different regions? Asia is starting to stand out in a lot of ways. If you look at M&A in the game business, nine out of 10 deals have Asian buyers.

Herbst: It probably makes sense in the game business. What we see in terms of startups that are using GPUs to build their business is that it’s a worldwide phenomenon. We see a lot of people in Israel doing things in high-performance computing and computer vision. We tend to see a lot of companies in Europe that do things around visualization. We see companies all over doing GPU-based businesses in finance and big data.

One of the interesting things about my job, and why I tend to travel so much internationally, is that this is a worldwide phenomenon. The majority of my business trips are outside of the U.S. A lot is going on here in Silicon Valley, but a lot’s going on in London, Tel Aviv, other parts of Europe. Like you say, gaming is happening a lot in Asia, but we tend not to see as many hardcore technology startups using our GPUs in those areas. I would love to see more. In fact, Asia, and China in particular, is an area that I want to target even more. That’s on my list of priorities for this year. If people can be helpful to us, we’re very open to that.

VB: There’s this tool chain in the middle of things, making games or making movies more efficiently. There seem to be lots of opportunities there.

Herbst: We’ve seen a lot of those businesses over the years – game engines, tools. NaturalMotion started off as a tools company before they became a content company. They were building tools for animation. Epic Games started out as a game engine and then moved toward first-party content as well. These are decent businesses, but I think middleware has traditionally been a tough place to build a big company. The most successful examples are some of the ones I mentioned, who’ve also done something else to exploit their middleware.

VB: As far as how much better this gets, with new generations of hardware, you have more room for power efficiency?

Herbst: Like I said, I travel around the world and talk to people about GPU computing, the use of GPUs in games and so forth. I continually get asked for more computing horsepower. When? How much? I don’t think we’re even close to saturation right now, especially with these new applications like computer vision and big data and analytics. We’re just scratching the surface. These are things that can consume an unlimited amount of compute horsepower.

It turns out that for these parallel-type tasks, a GPU is much more efficient than a CPU. Especially when you get into cloud applications and data centers. Heat and power are huge factors as well. Any improvement in efficiency improves the heat and power situation.

Again, Bitcoin mining is a good example. There’s a reason why people went crazy buying GPUs for Bitcoin mining. It’s a hard problem, and the problem gets harder every day. The algorithm that they have to solve gets more difficult. Having a programmable engine like a GPU that can do that very efficiently ends up allowing people to make money.

VB: Do you have any concern that the U.S. is behind in anything? I’ve voiced the feeling that mobile bandwidth is a ligature in the U.S., compared to other countries.

Herbst: I personally don’t feel that way. I can see how you might have that perception, given the amount of mobile gaming that goes on in places like Korea. But Korea and Asia have always been leaders in gaming, even on the desktop. You probably know this, but a good portion of Nvidia’s hardware sales end up in places like China and Asia. It’s a huge market for us. As is the U.S. and EMEA.

VB: So you see that kind of catching-up as something that’s always happened? Other countries may lead, but they don’t necessarily take over.

Herbst: If you look at how the mobile revolution started, Europe was ahead 15 years ago. Now I would say that the U.S. is one of the places you’d consider to be on the leading edge of mobile network rollouts.

VB: All these gaming platforms are multiplying still. The micro-consoles are out there trying to get traction, in the home and in general. Do you have any observations about that?

Herbst: It’s early days for those platforms. We’re big believers in the Android gaming ecosystem. Folks like Ouya—I can tell you, we have an investment in them. They’re leading the charge there. There are others as well. We’re supportive of all of these companies. The more companies that adopt the Android gaming ecosystem, the more opportunities there will be for Nvidia in the future.

VB: What themes do you see at the larger show?

Herbst: Clearly automotive is becoming a theme, and not only for the graphics aspect of the entertainment media displays, but also for the computer vision aspect of automotive. Taking the road data and the pictures and figuring out whether you’re going to hit anything, whether there’s a pedestrian, whether you should go out of your lane, that’s a big theme.

Big data, another big theme. Computer vision I’ve mentioned. Machine learning is big for us this year. And then all the visualization things that we’ve seen in the past, just getting better and better. Mobile and cloud of course.

What I tend to do is span across all of those different verticals, as you might call them. I’m looking for people doing early stage commercial-ready things in the areas that are interesting to not only Nvidia, but also the rest of the people who are attending GTC. That’s what the Emerging Companies Summit is. It’s been successful in the past, and I’m looking forward to a good one this time.

VB: Do you see anything interesting related to Tegra K1 deployments coming into the startup picture?

Herbst: It’s a little early to talk about that. We just recently announced it. The startup activity on a new product like that tends to take a bit longer to develop. Maybe next year we’d talk about that.

VB: If you look back, there are always skeptics about whatever things you guys do. What do you remember most as far as what people have been skeptical about?

Herbst: I don’t think people believed we would get this much traction in GPU computing and our Tesla business. We’ve surprised a lot of people. Not ourselves, by the way. We always knew where the potential was. We’re we’ll past the tipping point now. You’re going to see this go into a hyper-growth mode. We’ve reached more than critical mass.

CUDA (Nvidia’s programming language) has been taught in schools and universities for a long time. People have good development tools for CUDA. Everyone I talk to around the world, they ask me about CUDA and GPU computing. I see great startups doing things I never imagined people would do, like database acceleration.

The company I mentioned earlier Sqrean, is extremely interesting to me. They’re in the middle of Israel. I met these guys and they just knocked my socks off with what they were doing. I had no idea this was even going on.

There may have been skeptics in the past, but now, people know this is for real. I believe we have a big head of steam. We’re ahead of everyone else in the space.

VB: AMD’s talked a lot about the 64-bit ARM in servers and data centers. Intel has very skeptically said that they’re still waiting for this to happen, that the micro-servers are about one percent of the market. There seems to be some skepticism on that front, like there was about things like CUDA. Do you see these as inexorable forces, ARM in servers?

Herbst: I’m not sure. The jury’s still out. It’s not an area that we’re focused on, but I am watching it pretty carefully. The ARM server camp has a long way to go to get any meaningful penetration. They’re dealing with a very established, strong competitor. From what I’ve learned recently, some of the companies doing this are starting to pull back. That may not be public information, but I know for a fact that ARM and their investors pulled the plug on Calxeda, which was building one of these products.

Going back to the conference, we’ll have some great stuff in the exhibit hall. In total, we have around 40 companies attending ECS in one way or another. There will be some surprises. I’m looking forward to learning about some of the companies that I don’t know that well. A lot of these companies in the Early Stage Challenge are very new to us. They’re very young. We haven’t spent time with them.

VB: How wide a net goes out there? If you have 40 appearing, how many applied?

Herbst: Quite a few applied for the Early Stage Challenge. The companies that we bring in for the CEO On Stage in the exhibition hall, we specifically invite them ourselves, but the Early Stage Challenge, we selected 12 out of some tens of companies that applied. It wasn’t hundreds. As people know about this more and more, we expect to get more applications.

We’ll see how this goes. I like surprises myself. I’m excited about how it’s going to play out. I can’t tell you what’s going to happen.