SF Compute aims to make GPU rights usable as collateral

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 16:11

   You said building a physically settled forwards market for compute. Yeah, so we have an enormously, like, complicated challenge ahead of us, but functionally what we're trying to do is make the debt cheaper. Whenever we've tried to explain San Francisco Compute, it's like this elephant, and we, like, show you one view of the elephant. One way of explaining San Francisco Compute is, like, we sell GPUs, man, don't worry about it.

2. 16:30

   and another way of explaining SF Compute is we're like this forwards market but the sort of longer explanation of what we do is we operate GPU clusters, we don't own the assets and then we run a market on top of the GPU clusters that we operate and this allows us to create this piece of paper that says I own the rights to these GPUs between this time and that time and you can lend against that or that's the goal for us. We're going to make that possible to lend against And we think that is a better form of collateral that's more viable than the hardware itself.

3. 17:02

   And if you can do that, then you can bring down the requirements for credit quality that the customer has assigned, which basically means that if you use that as the collateral for the loan, then the customer's experience is they don't have to pay a big prepayment. The prices go down for them, and they get to succeed at all. Why don't lenders already do that? Because this type of collateral doesn't exist.

4. 17:25

   We're making that collateral. To do that, it took us three and a half years just to build the operating capacity of a GPU cloud. We had to do that while we didn't own the hardware. So we basically had to slow grow for three years. We had to look like the dumbest cloud in the world. Because the moment you buy the hardware, then you're exposed to the same risk. And so we had to not buy the hardware while still building the operating capacity of a GPU cloud.

5. 17:49

   Then we had to build this forwards market, which you can't even build until you build the hardware. Or until you can build the operating capacity of the cloud. You have to get liquidity on that, and then you can do lending. It was like a multi-stage process that is almost impossible to explain to anybody who is not deep in the industry. Meanwhile, it's like the worst possible path for a company to do, and so just nobody has done it.

6. 18:08

   How do you price forwards on GPUs, especially very long-dated forwards, when GPUs depreciate? You just have a customer who prices it. We don't price it. The customer does. The customer says, I would like to buy this between this time and this time, and I'm willing to pay up to this. Really? Well, who's the counterparty then? So we operate the clusters, and we're like a property manager for the person who owns the cluster.

7. 18:36

   And so there's sort of like a mixed structure there. The term counterparty here is probably not exactly what I think you mean. You're asking who the customer is, or you're asking who the vendor is? Who the vendor is. The vendor is like a fund. So the people who are building GPU clusters today that are working with us are people who otherwise wouldn't have built a GPU cluster. They're not a cloud. Like, they're sometimes kind of a cloud and will help new clouds get started.

8. 19:03

   But a lot of people are like, I've got a data center, and I could sell the data center to a cloud, or I could become the cloud. But then they don't have the ability to operate a GPU cluster. And so we step in and we partner with them. And we say, look, we'll do the GPU cluster part. You do the data center part. But you're going to own the assets. and so you'll make more money because you own the assets.

9. 19:23

   We're going to give up the right to do that because we want to do this debt thing over here, which is why I say like SF Compute is kind of like a very stupid GPU cloud. We're sort of like doing the economically dumb thing so that we get the ability to do the smart thing, which ultimately saves startups. Totally. Well, I think that's a good place to wrap. Evan, thank you so much for coming on MTS. Thank you.

10. 19:46

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