When is a startup not a startup? When it’s a public firm with 1,300 workers and $2.5 billion in capital. If that did not conjure a lot as a smile, that’s as a result of it’s not a joke — it’s very a lot the truth for Nebius, a fledgling AI infrastructure enterprise that has emerged from the ashes of Yandex; a multi-billion greenback juggernaut as soon as touted because the “Google of Russia.”

“It’s like a startup as a result of we’re ‘beginning up,’ however it’s an unusually massive one,” Arkady Volozh, Yandex co-founder and former CEO, instructed TechCrunch in an interview this week. “However what we’re attempting to construct will truly require much more sources, extra folks, and rather more capital.”

Volozh was compelled out of Yandex in 2022 after the European Union positioned him on a sanctions record within the wake of Russia’s Ukraine invasion. The EU eliminated Volozh from the record in March this yr, paving the best way for his return to the fold as CEO of Yandex’s subsequent incarnation — one whose workforce and knowledge facilities are fully outdoors Russia.

The Yandex implosion

The entity often called Yandex was all the time somewhat convoluted. When discussing “Yandex,” most individuals imply Yandex LLC, the Russian firm based in 1997 that constructed all the things from search, e-commerce and promoting merchandise, to maps, transportation, and extra. Nonetheless, whereas Yandex’s core viewers was in Russia and a smattering of neighboring markets, its father or mother was a Dutch holding group referred to as Yandex N.V. which went public on the Nasdaq in 2011, adopted by a secondary itemizing three years later on the Moscow Alternate.

Yandex N.V. was doing comparatively properly as a public firm, hitting a peak market cap of $31 billion on the tail-end of 2021. However that every one modified with the Russia-Ukraine battle, with the Nasdaq placing a halt on buying and selling because of sanctions. Whereas the Nasdaq initially mentioned that it will delist Yandex fully — alongside a number of different Russian-affiliated corporations — Yandex appealed, and Nasdaq agreed to take care of the corporate’s itemizing, however maintain the pause on buying and selling because the Dutch entity went by the arduous technique of severing all Russian ties.

That course of entered its remaining levels in February, with Yandex N.V. revealing its exit technique. The whole thing of its Russian belongings — which additionally occurred to be the lion’s share of its enterprise — could be offered at a $5.4 billion valuation to a Russian consortium, with $2.5 billion paid in money and the rest paid in its personal shares.

The transaction was one thing of a firesale, constituting half of Yandex’s market capitalization at the moment. The rationale? A Russian government-imposed rule that calls for a compulsory low cost of at the very least 50% for any divestments involving father or mother corporations integrated in nations thought to be “unfriendly” by Russia. The Netherlands, being a signed up member of an EU bloc that imposed sanctions on Russia, would definitely fall into that class.

Nonetheless, the transaction closed this week, and Yandex N.V. has swiftly moved to distance itself from any remnants of its previous — the obvious one being its identify. Topic to shareholder approval, Yandex N.V. is adopting the identify of certainly one of its few remaining belongings, an AI cloud platform referred to as Nebius AI which it birthed final yr.

AI compute demand

Nebius is vying for a market that features all the main “massive tech” cloud hyperscalers, however its principal competitors is arguably the swathe of devoted “GPU-as-a-service” startups which have emerged off the again of demand for AI compute. These embrace the likes of U.S.-based CoreWeave, a $19 billion enterprise that pivoted from cryptocurrency mining, and which is at present increasing its personal infrastructure into Europe. There’s additionally at the very least one home various within the type of Flex AI, a French startup which just lately exited stealth with $30 million in seed funding to hire GPU compute out to AI corporations.

Nonetheless, Nebius finds itself in one thing of a singular place. Technically talking it’s not a startup, however it’s having to start out afresh with the few belongings it has left, which is admittedly the results of pure likelihood — it’s simply what occurred to exist outdoors of Russian territory when the battle began two years in the past. This contains an autonomous automobile firm referred to as Avride, primarily based in Texas; a generative AI and LLM firm referred to as Toloka AI; edtech platform TripleTen; and, most notably by way of this new path, a Finnish knowledge heart and AI cloud platform referred to as Nebius AI.

Accordingly, the corporate is now positioning itself as a full-stack AI infrastructure firm with plans for a large-scale community of GPUs (graphics processing models) en path to turning into a number one participant in Europe. That is enabled by its knowledge heart in Finland and an present partnership with Nvidia which fits again a while.

“We launched Nebius lower than a yr in the past, and we now have hundreds of GPUs,” Volozh mentioned. “Now we have an ideal cloud associate in Nvidia, they’ve identified us for ages as a result of we had been certainly one of its largest purchasers in Europe — so actually, it’s simply the identical folks speaking to the identical folks. They know us, and so they know what we are able to do. Happily, one of many knowledge facilities of Yandex was constructed outdoors of Russia, and that is what we inherited at the moment are now quickly growing its capability.”

Volozh says that Nebius is trying to triple the capability at its present owned facility in Finland, with plans to get it to virtually 100 megawatts. Nonetheless, it’s additionally trying to begin constructing out extra knowledge facilities throughout Europe within the coming years.

“We produce the complete stack — knowledge facilities, motherboards, servers, racks, connectivity — all the things is our personal,” Volozh mentioned. “We at the moment are negotiating for a number of greenfields [data center built from scratch] in a number of nations, which we are going to signal very quickly. However this may take time. And earlier than that point, we will probably be renting at co-location services.”

Public vs personal

Volozh confirmed that the corporate intends to regain its full unfettered public standing now that it’s untethered from its Russian belongings, and is actively working with each the Securities and Alternate Fee (SEC) and Nasdaq to realize that.

However wouldn’t or not it’s simpler to go personal and scale the nice old style startup means — away from the pressures of the general public glare?

“I might say the other,” Volozh mentioned. “Constructing infrastructure is probably the most capital intensive factor. Who’s constructing it? It’s the massive tech guys who’ve billions of {dollars} revenues, and so they have their very own ecosystems the place no matter you launch offers you an additional couple % of earnings. They’re investing like hell, and for a cause. Everyone desires to be there first.”

So the Microsofts and Googles of the worlds are all-in, as are these within the “second tier” market equivalent to CoreWeave, Lambda, and quite a few others which can be capitalizing on their relationships with GPU kingpin Nvidia. However the capital required not solely to construct this, however develop a full system of interconnected GPUs that may talk and share knowledge and workloads dynamically, is critical — which is why we’re seeing these youthful gamers elevate a number of large rounds of funding in shut proximity, spanning debt and fairness.

Nebius, for its half, is beginning with a few billion {dollars} in capital, a determine that will deplete pretty rapidly if a buy-back proposal to obtain dormant shares is taken up by its present shareholders. Nonetheless, Volozh reckons that will probably be far simpler — and cheaper — to boost capital as a public firm. Furthermore, Nebius is positioned strongly because it’s working in one of many hottest areas in know-how proper now.

“It’s [AI infrastructure] in all probability the unsexiest ‘factor’ inside a really attractive market,” Volozh mentioned. “AI could be very fascinating — it’s very actual, and it’s not hype just like the web wasn’t hype 20 to 30 years in the past. With infrastructure, we’re in a really candy spot. We’re beginning off with a few billion [dollars], and we are going to construct sufficient capability to scale initially.”

Furthermore, as a public firm, Nebius might serve in its place choice for these searching for pores and skin within the recreation with out having to guess on the same old gamers.

“I don’t know of another public firm in AI infrastructure outdoors of ‘massive tech’ — should you’re an investor, and also you need publicity to this space, we’re very promising,” Volozh mentioned. “In fact, you might purchase Microsoft or Google inventory, or you should purchase this inventory. So that’s the reason it’s good to be public.”

Expertise pool

Whereas Nebius shouldn’t be alone in its endeavors, it has one thing different youthful gamers within the house don’t have — and that’s expertise constructing out compute infrastructure at scale. Of the corporate’s 1,300 workers, round 1,000 of them are engineers, largely transitioning over from the outdated Yandex enterprise, in accordance with Volozh.

“Technologically, that is what this entire workforce has been doing for the previous 15 to twenty years,” he mentioned. “They’ve constructed fairly massive infrastructure globally, with a whole lot of megawatts of knowledge facilities. Now, we have to construct it once more, and this stuff are simpler once you’re doing it a second time.”

When Yandex N.V. was a company holding firm, Amsterdam was little greater than an deal with. At present, the Dutch capital is the corporate’s greatest hub with some 500 folks, with the rest of its headcount cut up throughout varied different areas together with Israel, the U.S. (Austin, Texas) and Belgrade. Whereas Amsterdam will stay house, its different bases will probably be fluid and evolve in step with the calls for of the enterprise.

This geographical unfold has largely been right down to likelihood, a mix of the place its subsidiaries had been initially primarily based and, extra just lately, which nations have been keen to simply accept staff fleeing the battle.

“It has been fairly a journey. When the battle broke out in February, ’22, lots of people began leaving the nation [Russia],” Volozh mentioned. “There’s loads of households, however to maneuver a household is a courageous transfer simply to drop all the things and simply transfer. However they realized that they don’t wish to assist it [the war]. They don’t need it to occur of their identify. After they all began leaving, we began serving to them.”

Israel, the place Volozh himself has formally been primarily based for the most effective a part of a decade, was the primary nation to start out accepting his staff.

“As a result of it’s a visa-free nation for Russia, it was simpler for them to return as vacationers — after which they began getting work permits fairly rapidly,” Volozh mentioned. “Later in 2022, throughout Europe and particularly the Netherlands acknowledged what was occurring and truly invited us — they issued a whole lot of labor permits. In order that’s why folks began shifting to Amsterdam, and I feel it’s an enormous win for the Netherlands. It’s an enormous AI firm, and we’ve well-paid, high-level engineers — everyone will probably be contributing loads of taxes right here.”

It’s troublesome to overstate the sheer scale of the hassle concerned in attending to the place Nebius is at present. It’s a shadow of its former self, for positive, however very similar to the businesses that pivoted from crypto to cash-in on the AI gold rush, Nebius is repurposing the sources it has to fulfill a requirement that’s displaying little signal of waning.

“It was loads of work to maneuver all these folks, whereas additionally separating the corporate in parallel,” Volozh mentioned. “It has been loads like a startup, in that we needed to construct the corporate from scratch, although we wanted to make sure that all of the know-how is completely separate — for instance, be sure that the identical Finnish knowledge heart doesn’t transmit something again throughout the border [to Russia]. Now the deal is finished, the cash is within the financial institution, the corporate is separated. And the individuals are right here.”

Volozh, for his half, is technically primarily based in Tel Aviv although he provides that in actuality he “lives on a aircraft,” splitting his time between the varied hubs his work takes him to. However he stays upbeat about his new enterprise’s prospects.

“I’ve by no means been so excited in regards to the future,” he mentioned. “Yandex was not my first firm, however even at Yandex we began all these enterprise models virtually yearly — Yandex grew to be rather more than a search firm, and it actually was similar to launching [new] corporations. So… right here’s yet one more firm to launch.”