Two DPU companies plan to merge, valuation plummets by 80%

Latest update time：2024-06-19

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Two DPU startups, Kalray and Pliops, have been planning a merger for months, with Pliops recently announcing an integration with data orchestrator Hammerspace.

Pliops is an Israeli data processing unit (DPU) startup that, like Nebulon, must differentiate itself from the general-purpose storage and network acceleration DPUs popularized by Nvidia (BlueField), Intel (IPU), Pensando, and Fungible. The Pliops XDP (Extreme Data Processor) uses key:value storage technology to offload and accelerate low-level storage stack processing from the host x86 server for applications such as RocksDB and RAID.

France-based Kalray is another DPU developer of massively parallel processing array (MPPA) accelerator technology. The company was founded in 2008 as a fabless semiconductor business spun out of the French Atomic Energy Commission (CEA), and has developed MPPA chips and cards from them, such as its K200-LP storage accelerator card. The company works with Arm on CPUs.

“This merger with Pliops represents a significant strategic opportunity,” Kalray CEO Eric Baissus said in a prepared statement. “By combining our strengths, we aim to become a global leader in storage and AI GPU data acceleration solutions.”

Pliops Chairman Eyal Waldman added: “By combining the high-quality assets of Pliops and Kalray, we are poised to deliver additional business opportunities for both companies.”

“The proposed merger of our two companies has tremendous potential,” said Ido Bukspan, CEO of Pliops. “Combining our technical expertise, teams and products will make this new entity a global leader and will significantly accelerate our time to market with new storage paradigms for AI data acceleration solutions.”

Kalray went public on Euronext Paris in 2018, raising €47.7 million ($51 million). By mid-2023, the company achieved breakeven EBITDA, won that year’s FMS award for its DPU technology, and attended Dell Technologies World Expo as a Dell Technologies ETC (Extended Technology Complete) partner, meaning it can combine its products with Dell’s servers, storage, and networking gear.

This is similar to Pliops' work with HPE. It has worked with HPE to validate its XDP with HPE ProLiant servers. Pliops will be present and sponsoring the HPE Discover event this week, where it will preview an upcoming product that will address optimization issues in large language model (LLM) inference. Pliops has also partnered with scale-out software provider Hammerspace and will launch a new product that integrates its XDP PCIe gen 5 cards with Hammerspace's global data environment.

AI has become a common factor in technology development at Kalray and Pliops. Kalray announced the launch of the Ngenea AI data acceleration platform in May. Google, Lenovo, and Pliops collaborated in April to develop AlloyDB Omni, an integrated product designed to accelerate traditional databases and generative AI applications.

Faced with competition from Nvidia and Intel, DPU startups often find it difficult to gain attention and succeed. In 2022, Pensando was acquired by AMD for $1.9 billion, the most successful DPU startup exit to date.

Microsoft reportedly acquired Fungible in 2020 for $190 million, less than the $300 million in funding Fungible raised. Earlier this year, Nebulon appeared to have been acquired by Nvidia, a messy deal that neither company confirmed and many Nebulon employees were bound by nondisclosure agreements, though other employees listed Nvidia moves or acquisitions on their LinkedIn profiles. For example, Director of People and Resources Laleh Rongere left in March 2024. Her LinkedIn profile read "Director of People and Resources at Nebulon (acquired by Nvidia)."

Now, Pliops and Kalray are in talks with the aim of joining forces. The former was founded in 2017 by then-CEO Uri Beitlar, CTO Moshe Twitto, and Chairman Aryeh Mergi, and since its inception, the company has so far raised more than $200 million from major investors such as Koch Disruptive Technologies, State of Mind Ventures Momentum, Intel Capital, Viola Ventures, SoftBank Ventures Asia, Expon Capital, NVIDIA, AMD, Western Digital, SK Hynix, and Alicorn. In August 2022, the company raised a $100 million Series D round of financing, with a valuation of approximately $650 million to $700 million at the time. Former Nvidia senior vice president of chip design Ido Bukspan became CEO of Pliops in June last year, and Beitler became chief strategy and business development officer. Mellanox founder Eyal Waldman joined the board of directors at the end of 2020 and became chairman earlier this year.

According to the merger plan, the merged company will have about 120 Pliops employees, of which 65% will be held by Kalray shareholders and 35% will be held by Pliops shareholders. Kalray will issue new shares to Pliops shareholders. According to Israeli media Calcalist, the 35% stake may rise to 40% if certain business milestones are achieved. Kalray is capitalized at 140 million euros ($150 million) and the value of the new entity will be 240 million euros ($257.3 million). This means that Pliops is valued at between 84 million euros and 96 million euros ($90 million to $103 million), which is lower than the $215 million it raised and far lower than the $650 million to $700 million valuation in the last round of venture capital in August 2022, which means that their valuation is more than 80% lower than it was two years ago.

The expanded Kalray business, driven by Pliops technology and business relationships, is expected to launch a storage access acceleration product for GenAI applications that combines Kalray and Pliops IP. Kalray can also inherit the Pliops-Hammerspace partnership.

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