Waikato supercomputing startup Nyriad raises $US8.5m

Nyriad remains unknown to most New Zealanders. Outside NBR, it’s had no serious coverage.

Yet the Waikato supercomputing company is one of this country's most promising start-ups – and it just got more promising with the news it has successfully closed a $US8.5 million Series A round, bringing its total raised to date to $US11 million.

The post-money valuation is $US52 million (all parties are schtum on the pre-money valuation, but Companies Office records show Nyriad had a total of 12 million shares before a flurry of new investors were registered on February 7. Post-February 7, various parcels of newly-issued stock took the total shares to 20.9 million).

The new capital will be used to hire new engineers, in small-town Cambridge, and to bankroll the release of Nyriad’s first product, due at the end of March: Nsulate. The product is a graphics accelerated storage controller. Or, to put it in slightly plainer English, Nyriad develops software that repurposes graphics cards (a technology originally focused on gaming) to store massive amounts of data quickly, and with resilience (that is, not losing a bunch of it). There have been other solutions for capturing the firehose of data produced by supercomputers but Nyriad says its solution is the first that’s relatively low-cost.

Five venture capital funds participated in the round: Data Collective VC of Palo Alto (0.5%), Prelude Ventures of San Francisco (0.5%), East Ventures and Idaten Ventures of Japan (0.5%), and the NZ Venture Investment Fund or NZVIF (1%). Two New Zealand angel investor groups: Icehouse's Ice Angels (9% — its parent's largest ever investment in a single round) and Tauranga-based Enterprise Angels (2%) participated. So did several family investment vehicles to complete the round and some existing investors (mostly founders and managers) collected extra shares too.

Post-raise, the largest shareholders remain Nyriad co-founders Matthew Simmons (23%) and Alex St John (20%) and a nominee company for staff shares (20%). Smaller holders include NBR Rich Lister and Datacom founder John Holdsworth.

'Billion-dollar ambition'
Investment director Chris Jagger says the Crown-backed NZVIF was attracted to Nyriad because it had developed a unique product for a global market.

NZVIF has also been impressed by Nyriad’s co-founders, Matthew Simmons and Alex St John.

“They’ve got the ambition to create a billion-dollar company,” he says.

It also appealed that the co-founders are committed not just to keeping the centre of operations in New Zealand but specifically in the small Waikato town, Cambridge, where Nyriad was founded in 2014.

The startup has just under 100 staff today, and Mr Simmons says he wants to boost that to 180 within a year. While many tech firms tout an ICT skills shortage, the Nyriad chief executive says his company can “breed what we need” in terms of talent – a reference to its intern partnerships with Waikato University, and its ability to recruit from around Australasia and Japan thanks to close relationships with more than two dozen universities including Victoria University, AUT, the University of Western Australia, ANU in Canberra and Melbourne University.

Mr Jagger says that “While no investment is without risk, Nyriad's technology is proven by pilots.”

He also hails the experience of former Microsoft executive and US expatriate Mr St John – who, while at Microsoft, became the father of DirectX, a key computer graphics processing unit (GPU) technology that changed the world of gaming. (Given Mr Jagger’s enthusiasm, you might wonder why NZVIF’s investment is limited to 1%. The investment director says NZVIF’s SCIF – Seed Capital Investment Fund – is limited to $1.5 million a company, across all rounds).

ABOVE: Nyriad's software turns an off-the-shelf graphical processing unit (GPU) into a storage controller capable of dealing with a firehose of data. The startup won't make any hardware itself, instead will licensing its software to various multinationals, who will incorporate it into their own storage kit.

Born from star stuff
Mr Jagger is right that Nyriad’s technology has already been proven in the field.

Nyriad was born out of consultation work for ICRAR (backed by the Australian government and the University of Western Australia) on the multi-billion-dollar Square Kilometre Array (SKA), which is a huge array of satellite dishes that, once built, will be the world’s largest astronomy project. (Nyriad's SKA participation was funded, in part, by a $350,000 grant from the Ministry of Business.

The Taxpayers' Union has today issued a statement critical of the government for backing the multi-country project, which it sees as a "bad use of money." New Zealand's contribution has so far been $2.3 million. It could reach $25 million by 2025. The SKA will be used for deep-space astronomy, plus – via radio waves being bounced off the atmosphere – research into earthquakes and climate change).

Closer to home, Spark-owned Revera has been piloting a new blockchain service, powered in part by Nyriad's Nsulate, designed to make information stored in the cloud tamper-proof. Once launched, the technology, billed as a world first, will form part of Revera's Homeland Cloud service for government data.

Nsulate was demonstrated at the SC 17 conference in Denver, Colorado, last December. Those initials stand for “Super Computing” and the low-profile Nyriad is aiming to revolutionise the way huge volumes of data are stored as the GPU technology originally developed for gaming graphics is repurposed for broader power.

Using both hardware and software, Nyriad developed new data compression technology that will allow the 5.2 terabytes of data per second created by the SKA to be stored, processed and analysed. Today, there is just no solution capable of capturing such a torrent of data – at least at a commercially viable price.

And it is a torrent. To put 5.2 terabytes of data per second in layman’s terms, it equates to roughly 15% of the total traffic on the internet at any given moment.

Why a small town in the Waikato?
Mr Simmons expects Nsulate to bring in $US4-5 million by the end of this financial year as the first orders roll in.

And as well as that billion-dollar revenue target, he has big plans for local staff. “180 is just the beginning,” he says.

The Nyriad boss sees himself and Mr St John employing 500 while staying in Cambridge.

At the moment he and Mr St John are hiring eight to 12 staff a week.

And he says the company will continue to recruit primarily from New Zealand — simply because it has to train most of its staff more or less from scratch. The parallel programming used by Nyriad to develop Nsulate just isn't taught by any tertiary provider, Mr Simmons says.

But why Cambridge over Auckland or, say, Silicon Welly?

"We don't want to just create a company then flick it on for a few hundred million dollars. We want to create something massive," Mr  Simmons says.

"And for that, we need lots of land."

Besides, Mr Simmons' first startup, Arvus Digital (founded in 2003 and still running), is located in Cambridge. He describes Arvus as a niche manufacturer of digital audio converters for the post-production and gaming industries. Clients include Sony, DTS, Samsung, Microsoft, Dolby, Disney, CBS, AT&T and Park Road Post. 

Licensing software, not building hardware
He says the computer storage market is worth around $US50 billion a year, meaning his company's "game-changing" technology has the ability to fuel some very fast growth at Nyriad.

The startup will be able to scale fast, too, he says, due to the fact it's a software company that won't make any hardware. Instead, it will license its software to OEMs (original equipment manufacturers) and systems integrators which will in turn build hardware that carries their own badging.

The chief executive won't name any of the licensees but he says they are global multinationals that even everyday Kiwis will recognise as household names.

A little further down the track, his own company might fit that description.

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