Featured Article

From Yandex’s ashes comes Nebius, a ‘startup’ with plans to be a European AI compute leader

Arkady Volozh says his ‘new’ company is much like a startup, albeit an ‘unusually big one’

Comment

Yandex co-founder Arkady Volozh
Image Credits: Nebius // Arkady Volozh

When is a startup not a startup? When it’s a public company with 1,300 employees and $2.5 billion in capital. If that failed to conjure so much as a smile, that’s because it’s not a joke — it’s very much the reality for Nebius, a fledgling AI infrastructure business that has emerged from the ashes of Yandex; a multi-billion dollar juggernaut once touted as the “Google of Russia.”

“It’s like a startup because we are ‘starting up,’ but it’s an unusually big one,” Arkady Volozh, Yandex co-founder and former CEO, told TechCrunch in an interview this week. “But what we’re trying to build will actually require even more resources, more people, and much more capital.”

Volozh was forced out of Yandex in 2022 after the European Union placed him on a sanctions list in the wake of Russia’s Ukraine invasion. The EU removed Volozh from the list in March this year, paving the way for his return to the fold as CEO of Yandex’s next incarnation — one whose team and data centers are entirely outside Russia.

The Yandex implosion

The entity known as Yandex was always a little convoluted. When discussing “Yandex,” most people mean Yandex LLC, the Russian company founded in 1997 that built everything from search, e-commerce and advertising products, to maps, transportation, and more. However, while Yandex’s core audience was in Russia and a smattering of neighboring markets, its parent was a Dutch holding organization called Yandex N.V. which went public on the Nasdaq in 2011, followed by a secondary listing three years later on the Moscow Exchange.

A Yandex self-driving taxi in action
A Yandex self-driving taxi in action
Image Credits:

Yandex N.V. was doing relatively well as a public company, hitting a peak market cap of $31 billion at the tail-end of 2021. But that all changed with the Russia-Ukraine conflict, with the Nasdaq putting a halt on trading due to sanctions. While the Nasdaq initially said that it would delist Yandex entirely — alongside several other Russian-affiliated companies — Yandex appealed, and Nasdaq agreed to maintain the company’s listing, but keep the pause on trading as the Dutch entity went through the arduous process of severing all Russian ties.

That process entered its final stages in February, with Yandex N.V. revealing its exit strategy. The entirety of its Russian assets — which also happened to be the lion’s share of its business — would be sold at a $5.4 billion valuation to a Russian consortium, with $2.5 billion paid in cash and the remainder paid in its own shares.

The transaction was something of a firesale, constituting half of Yandex’s market capitalization at that time. The reason? A Russian government-imposed rule that demands a mandatory discount of at least 50% for any divestments involving parent companies incorporated in countries regarded as “unfriendly” by Russia. The Netherlands, being a signed up member of an EU bloc that imposed sanctions on Russia, would certainly fall into that category.

Nonetheless, the transaction closed this week, and Yandex N.V. has swiftly moved to distance itself from any remnants of its past — the most obvious one being its name. Subject to shareholder approval, Yandex N.V. is adopting the name of one of its few remaining assets, an AI cloud platform called Nebius AI which it birthed last year.

AI compute demand

Nebius is vying for a market that includes all the major “big tech” cloud hyperscalers, but its main competition is arguably the swathe of dedicated “GPU-as-a-service” startups that have emerged off the back of demand for AI compute. These include the likes of U.S.-based CoreWeave, a $19 billion business that pivoted from cryptocurrency mining, and which is currently expanding its own infrastructure into Europe. There is also at least one domestic alternative in the form of Flex AI, a French startup which recently exited stealth with $30 million in seed funding to rent GPU compute out to AI companies.

However, Nebius finds itself in something of a unique position. Technically speaking it’s not a startup, but it’s having to start afresh with the few assets it has left, which is really the result of pure chance — it’s just what happened to exist outside of Russian territory when the conflict started two years ago. This includes an autonomous vehicle company called Avride, based in Texas; a generative AI and LLM company called Toloka AI; edtech platform TripleTen; and, most notably in terms of this new direction, a Finnish data center and AI cloud platform called Nebius AI.

Accordingly, the company is now positioning itself as a full-stack AI infrastructure company with plans for a large-scale network of GPUs (graphics processing units) en route to becoming a leading player in Europe. This is enabled by its data center in Finland and an existing partnership with Nvidia which goes back some time.

“We launched Nebius less than a year ago, and we now have thousands of GPUs,” Volozh said. “We have a great cloud partner in Nvidia, they’ve known us for ages because we were one of its largest clients in Europe — so really, it’s just the same people talking to the same people. They know us, and they know what we can do. Fortunately, one of the data centers of Yandex was built outside of Russia, and this is what we inherited are now now rapidly increasing its capacity.”

Volozh says that Nebius is looking to triple the capacity at its current owned facility in Finland, with plans to get it to almost 100 megawatts. However, it’s also looking to start building out additional data centers across Europe in the coming years.

“We produce the full stack — data centers, motherboards, servers, racks, connectivity — everything is our own,” Volozh said. “We are now negotiating for several greenfields [data center built from scratch] in several countries, which we will sign very soon. But this will take time. And before that time, we will be renting at co-location facilities.”

Arkady Volozh
Arkady Volozh
Image Credits: Nebius

Public vs private

Volozh confirmed that the company intends to regain its full unfettered public status now that it’s untethered from its Russian assets, and is actively working with both the Securities and Exchange Commission (SEC) and Nasdaq to achieve that.

But wouldn’t it be easier to go private and scale the good old-fashioned startup way — away from the pressures of the public glare?

“I would say the opposite,” Volozh said. “Building infrastructure is the most capital intensive thing. Who’s building it? It’s the big tech guys who have billions of dollars revenues, and they have their own ecosystems where whatever you launch gives you an extra couple percent of profits. They’re investing like hell, and for a reason. Everybody wants to be there first.”

So the Microsofts and Googles of the worlds are all-in, as are those in the “second tier” market such as CoreWeave, Lambda, and numerous others that are capitalizing on their relationships with GPU kingpin Nvidia. But the capital required not only to build this, but develop a full system of interconnected GPUs that can communicate and share data and workloads dynamically, is significant — which is why we’re seeing these younger players raise multiple massive rounds of funding in close proximity, spanning debt and equity.

Nebius, for its part, is starting with a couple of billion dollars in capital, a figure that may deplete fairly quickly if a buy-back proposal to procure dormant shares is taken up by its existing shareholders. However, Volozh reckons that it will be far easier — and cheaper — to raise capital as a public company. Moreover, Nebius is positioned strongly as it’s operating in one of the hottest spaces in technology right now.

“It’s [AI infrastructure] probably the unsexiest ‘thing’ within a very sexy market,” Volozh said. “AI is very interesting — it’s very real, and it’s not hype like the internet wasn’t hype 20 to 30 years ago. With infrastructure, we are in a very sweet spot. We’re starting off with a couple of billion [dollars], and we will build enough capacity to scale initially.”

Moreover, as a public company, Nebius could serve as an alternative option for those looking for skin in the game without having to bet on the usual players.

“I don’t know of any other public company in AI infrastructure outside of ‘big tech’ — if you’re an investor, and you want exposure to this area, we’re very promising,” Volozh said. “Of course, you could buy Microsoft or Google stock, or you can buy this stock. So that is why it’s good to be public.”

Talent pool

While Nebius is not alone in its endeavors, it has something other younger players in the space don’t have — and that’s experience building out compute infrastructure at scale. Of the company’s 1,300 employees, around 1,000 of them are engineers, mostly transitioning over from the old Yandex business, according to Volozh.

“Technologically, this is what this whole team has been doing for the past 15 to 20 years,” he said. “They have built pretty large infrastructure globally, with hundreds of megawatts of data centers. Now, we need to build it again, and these things are easier when you’re doing it a second time.”

When Yandex N.V. was a corporate holding company, Amsterdam was little more than an address. Today, the Dutch capital is the company’s biggest hub with some 500 people, with the remainder of its headcount split across various other locations including Israel, the U.S. (Austin, Texas) and Belgrade. While Amsterdam will remain home, its other bases will be fluid and evolve in line with the demands of the business.

This geographical spread has largely been down to chance, a combination of where its subsidiaries were originally based and, more recently, which countries have been willing to accept workers fleeing the conflict.

“It has been quite a journey. When the war broke out in February, ’22, a lot of people started leaving the country [Russia],” Volozh said. “There’s a lot of families, but to move a family is a brave move just to drop everything and just move. But they realized that they don’t want to support it [the war]. They don’t want it to happen in their name. When they all started leaving, we started helping them.”

Israel, where Volozh himself has officially been based for the best part of a decade, was the first country to start accepting his workers.

“Because it’s a visa-free country for Russia, it was easier for them to come as tourists — and then they started getting work permits pretty quickly,” Volozh said. “Later in 2022, across Europe and specifically the Netherlands recognized what was going on and actually invited us — they issued hundreds of work permits. So that’s why people started moving to Amsterdam, and I think it’s a big win for the Netherlands. It’s a big AI company, and we have well-paid, high-level engineers — everybody will be contributing a lot of taxes here.”

It’s difficult to overstate the sheer scale of the effort involved in getting to where Nebius is today. It’s a shadow of its former self, for sure, but much like the companies that pivoted from crypto to cash-in on the AI gold rush, Nebius is repurposing the resources it has to meet a demand that is showing little sign of waning.

“It was a lot of work to move all these people, while also separating the company in parallel,” Volozh said. “It has been a lot like a startup, in that we had to build the company from scratch, though we needed to be sure that all the technology is totally separate — for example, ensure that the same Finnish data center doesn’t transmit anything back across the border [to Russia]. Now the deal is done, the money is in the bank, the company is separated. And the people are here.”

Volozh, for his part, is technically based in Tel Aviv though he adds that in reality he “lives on a plane,” splitting his time between the various hubs his work takes him to. But he remains upbeat about his new venture’s prospects.

“I’ve never been so excited about the future,” he said. “Yandex was not my first company, but even at Yandex we started all these business units almost every year — Yandex grew to be much more than a search company, and it really was just like launching [new] companies. So… here’s yet another company to launch.”

More TechCrunch

Featured Article

From Yandex’s ashes comes Nebius, a ‘startup’ with plans to be a European AI compute leader

Subject to shareholder approval, Yandex N.V. is adopting the name of one of its few remaining assets, an AI cloud platform called Nebius AI which it birthed last year.

From Yandex’s ashes comes Nebius, a ‘startup’ with plans to be a European AI compute leader
Image Credits: Nebius // Arkady Volozh

Employees at Bethesda Game Studios — the Microsoft-owned game developer that produces the Elder Scrolls and Fallout franchises — are joining the Communication Workers of America. Quality assurance testers at…

Bethesda Game Studios employees form a ‘wall-to-wall’ union

This week saw one of the most widespread IT disruptions in recent years linked to a faulty software update from popular cybersecurity firm CrowdStrike. Businesses across the world reported IT…

CrowdStrike’s update fail causes global outages and travel chaos

Alphabet, the parent company of Google, is in advanced talks to acquire cybersecurity startup Wiz for $23 billion, the Wall Street Journal reported on Sunday. TechCrunch’s sources heard similar and…

Unpacking how Alphabet’s rumored Wiz acquisition could affect VC

Around 8.5 million devices — less than 1 percent Windows machines globally — were affected by the recent CrowdStrike outage, according to a Microsoft blog post by David Weston, the…

Microsoft says 8.5M Windows devices were affected by CrowdStrike outage

Featured Article

Some Black startup founders feel betrayed by Ben Horowitz’s support for Trump

Trump is an advocate for a number of policies that could be harmful to people of color.

Some Black startup founders feel betrayed by Ben Horowitz’s support for Trump

Featured Article

Strava’s next chapter: New CEO talks AI, inclusivity, and why ‘dark mode’ took so long

TechCrunch sat down with Strava’s new CEO in London for a wide-ranging interview, delving into what the company is prioritizing, and what we can expect in the future as the company embarks on its “next chapter.”

Strava’s next chapter: New CEO talks AI, inclusivity, and why ‘dark mode’ took so long

Featured Article

Lavish parties and moral dilemmas: 4 days with Silicon Valley’s MAGA elite at the RNC

All week at the RNC, I saw an event defined by Silicon Valley. But I also saw the tech elite experience flashes of discordance.

Lavish parties and moral dilemmas: 4 days with Silicon Valley’s MAGA elite at the RNC

Featured Article

Tracking the EV battery factory construction boom across North America

A wave of automakers and battery makers — foreign and domestic — have pledged to produce North American–made batteries before 2030.

Tracking the EV battery factory construction boom across North America

Featured Article

Faulty CrowdStrike update causes major global IT outage, taking out banks, airlines and businesses globally

Security giant CrowdStrike said the outage was not caused by a cyberattack, as businesses anticipate widespread disruption.

Faulty CrowdStrike update causes major global IT outage, taking out banks, airlines and businesses globally

CISA confirmed the CrowdStrike outage was not caused by a cyberattack, but urged caution as malicious hackers exploit the situation.

US cyber agency CISA says malicious hackers are ‘taking advantage’ of CrowdStrike outage

The global outage is a perfect reminder how much of the world relies on technological infrastructure.

These startups are trying to prevent another CrowdStrike-like outage, according to VCs

The CrowdStrike outage that hit early Friday morning and knocked out computers running Microsoft Windows has grounded flights globally. Major U.S. airlines including United Airlines, American Airlines and Delta Air…

CrowdStrike outage: How your plane, train and automobile travel may be affected

Prior to the ban, Trump’s team used his channel to broadcast some of his campaigns. With the ban now lifted, his channel can resume doing so.

Twitch reinstates Trump’s account ahead of the 2024 presidential election

This week, Google is in discussions to pay $23 billion for cloud security startup Wiz, SoftBank acquires Graphcore, and more.

M&A activity heats up with Wiz, Graphcore, etc.

CrowdStrike competes with a number of vendors, including SentinelOne and Palo Alto Networks but also Microsoft, Trellix, Trend Micro and Sophos, in the endpoint security market.

CrowdStrike’s rivals stand to benefit from its update fail debacle

The IT outage may have an unexpected effect on the climate: clearer skies and maybe lower temperatures this evening

CrowdStrike chaos leads to grounded aircraft — and maybe an unusual weather effect

There’s a man in Florida right now who wants to propose to his girlfriend while they’re on a beach vacation. He couldn’t get the engagement ring before he flew down…

The CrowdStrike outage is a plot point in a rom-com 

Here’s everything you need to know so far about the global outages caused by CrowdStrike’s buggy software update.

What we know about CrowdStrike’s update fail that’s causing global outages and travel chaos

This serves as an example for how easy it is to spread inaccurate information online during a time of immense global confusion and panic.

From the Sphere to false cyberattack claims, misinformation runs rampant amid CrowdStrike outage

Today is the final chance to save up to $800 on TechCrunch Disrupt 2024 tickets. Disrupt Deal Days event will end tonight at 11:59 p.m. PT. Don’t miss out on…

Last chance today: Secure major savings for TechCrunch Disrupt 2024!

Indian fintech Paytm’s struggles won’t seem to end. The company on Friday reported that its revenue declined by 36% and its loss more than doubled in the first quarter as…

Paytm loss widens and revenue shrinks as it grapples with regulatory clampdown

J. Michael Cline, the co-founder of Fandango and multiple other startups over his multi-decade career, died after falling from a Manhattan hotel, New York’s Deputy Commissioner of Public Information tells…

Fandango founder dies in fall from Manhattan skyscraper

Venture capital giant a16z fixed a security vulnerability in one of the firm’s websites after being warned by a security researcher.

Researcher finds flaw in a16z website that exposed some company data

Apple on Thursday announced its upcoming lineup of immersive video content for the Vision Pro. The list includes behind-the-scenes footage of the 2024 NBA All-Star Weekend, an immersive performance by…

Apple Vision Pro debuts immersive content featuring NBA players, The Weeknd and more

Biden centering Musk in his campaign is a notable escalation, considering he spent most of his presidency seemingly pretending the billionaire didn’t exist.

Elon Musk is now a villain in Joe Biden’s presidential campaign

Waymo would need a ground transportation permit to operate at SFO, which has yet to be approved.

Waymo wants to bring robotaxis to SFO, emails show

When Tade Oyerinde first set out to fundraise for his startup, Campus, a fully accredited online community college, it was incredibly difficult. VCs have backed for-profit education companies in the…

Why it made sense for an online community college to raise venture capital

Canadian private equity firm PartnerOne paid $28.2 million for HeadSpin, a mobile app testing startup whose founder was sentenced for fraud earlier this year, according to documents viewed by TechCrunch.…

PE firm PartnerOne paid $28M for HeadSpin, a fraction of its $1.1B valuation set by ICONIQ and Dell Technologies Capital

Meta has suspended the use of its AI assistant after Brazil’s National Data Protection Authority (ANPD) banned the company from training its AI models on personal data from Brazilians. The…

Meta puts a halt to training its generative AI tools in Brazil