The Rise of NVIDIA The Most Legendary Angel Investment in History

Author Liu Bo, PEdaily Investment Circle
This is a vivid stroke in the history of global venture capital.
Not long ago, Huang Renxun mentioned his first financing in life in a speech at his alma mater Stanford University – in 1993, two angel investors jointly invested $2 million, valuing the company at $6 million. It was this investment that turned the tide for Nvidia, which was on the brink of collapse just after its establishment.
From then on, the Nvidia Empire, which has dominated the scene, was born.
When you calculate it, this angel round from that year has created a myth worth $2.8 trillion in market value to date, undoubtedly the best interpretation of venture capital’s role in the rise of tech giants. Historical experience has shown that the level of venture capital activity directly affects the prosperity of technology innovation companies, and this is more worth pondering at this moment.
No business plan
$2 million raised in the angel round
This investment story dates back to 1993.
At that time, Huang Renxun was working as an engineer at a chip company when two friends, Chris and Curtis, approached him, expressing their desire to leave their jobs and start a business, hoping Huang Renxun would join them. At that time, with the PC revolution about to break out, Windows 95 not yet released, and the Pentium processor still in development, it was clear that microprocessors would be crucial, and thus Nvidia was born.
There is an interesting anecdote here – when Huang Renxun told his mother that he was starting a 3D graphics chip company for consumers to use for gaming, she directly asked, “Why don’t you just get a job at an electronics factory?”
In short, Huang Renxun’s entrepreneurial journey was full of twists and turns; he didn’t even know how to write a business plan at the time. So, he went to a bookstore and found a book titled “How to Write a Business Plan,” which was a whopping 450 pages long. After flipping through a few pages, he gave up, saying, “By the time I finish reading it, the company would probably have closed down, and the money would have run out.”
How difficult was it for Nvidia to raise funds at that time?
Sid Siddeek, who was in charge of Nvidia’s venture capital department, still vividly recalls: armed with presentation materials, he rushed to various investor conferences, helping Nvidia’s CEO and management team tell their story. His office was just a tiny mobile room.
Huang Renxun recalled in his speech that at that time, he only had about six months’ worth of living expenses in the bank, and the whole family had to live off that small savings. So, instead of writing a business plan, he went straight to his former CEO, Wilfred Corrigan.
When Wilfred Corrigan heard Huang Renxun’s pitch, he bluntly admitted that he completely didn’t understand what he was talking about, calling it one of the worst entrepreneurial pitches he had ever heard. Nevertheless, Wilfred Corrigan picked up the phone and called Sequoia Capital founder Don Valentine, saying, “I want to send a young man to you, hoping you can invest in him. He was one of our best employees.”
However, after Huang Renxun completed his presentation, Don Valentine said, “A startup company should not invest in another startup or work with one.” His point was that for Nvidia to succeed, another startup also needed to succeed, namely Electronic Arts, a video game development company. The CTO of that company was only 14 years old at the time, and his mom had to drive him to work.
In this way, Don Valentine and Sathe Capital each invested $1 million, allowing Nvidia to raise $2 million in angel funding, valuing the company at $6 million post-investment. It’s worth noting that before this, Don Valentine had only invested a few hundred thousand dollars in Apple.
This investment has been indelible to this day; Huang Renxun still remembers what Don Valentine said at the meeting, “If you lose my money, I’ll kill you.” Fortunately, Huang Renxun and Nvidia did not disappoint his expectations.
A mirror
The capital that dares to take risks
Today, this angel investment has been enshrined in history.
In 1999, Nvidia went public on the Nasdaq with an IPO valuation of $230 million. By this calculation, compared to the angel round valuation, Nvidia’s value has increased by 38 times, even if they partially exited after going public, it was still a good choice. But given Don Valentine’s investment philosophy, he was sure to persevere to achieve even higher returns.
The rest of the story doesn’t need further elaboration; Nvidia has risen to become a chip giant, and with the emergence of OpenAI, it has become a deserved ruler in AI chips. Along with this, Nvidia’s stock price has skyrocketed – in the past five years, Nvidia’s stock price has grown 28 times, reaching a staggering market value of $2.8 trillion.
Perhaps only those who have experienced it can truly understand. Huang Renxun has emphasized the importance of financing on more than one occasion; in his view, a startup is essentially a company on the verge of collapse. “When I founded Nvidia, after each round of financing, I immediately started the next round, then the third round, survival is crucial, cash is king. As a CEO, you either make money, save money, or raise money.”
At the same time, Nvidia has quietly built up a vast investment portfolio. According to S&P Global data, Nvidia has become the fourth-largest venture capital firm after Microsoft, SoftBank, and Google, with investments in healthcare and biotechnology, AI infrastructure, generative AI and RPA technology, autonomous driving, robotics, 3D printing, and other fields.
As Huang Renxun has emphasized on many occasions, the rapid development of the technology industry requires investing in the distant future early on, which is the path Nvidia must take.
In the eyes of Mi Lei, founding partner of Zhongke Chuangxing, Nvidia’s success once again highlights the long-term nature of “hard technology” and the importance of “knowledge value.” To maintain a leading position, one must focus on long-term technological innovation and continuous R&D investment.
As an investor, Mi Lei has deep feelings on this matter. He believes that for venture capital firms, excessive pursuit of short-term financial returns will not lead to the discovery of great companies. “The essence of venture capital is to support disruptive innovative technologies to create greater value, drive technological progress and industry transformation, and ultimately harvest ‘knowledge value,’ ‘social value,’ and ‘economic value.'”
To some extent, this is also the best mirror for domestic venture capital.
In the 1990s, venture capital began to take root in China and has been around for thirty years. However, currently, venture capital, as a foreign import, is becoming more localized than ever before. Some VCs no longer focus on capturing risks but have turned into rigid profit guarantees, seeking short cycles, no risk, and guarantees.
For a time, buybacks, guarantees, and dividends are prevalent in the domestic primary market. For example, buyback agreements between founders and investment institutions have become commonplace, but since last year, the situation has changed – buybacks have even become a mandatory condition for investment committee approval. If the controlling shareholder is unwilling to sign a buyback, the investment will not proceed.
“The charm of venture capital lies in finding innovative ideas that are uncertain but may have great disruptive potential.” A venture capital partner who prefers to remain anonymous lamented that some current practices may prevent us from discovering other great innovations.
Patient capital
The road to China’s technological rise
What role should venture capital play in the rise of technology? This is undoubtedly worth pondering for every venture capitalist.
It is well known that technological innovation is not an overnight process. To achieve original, disruptive results, it often requires a challenging process of technological foundation and breakthroughs, the commercialization of outcomes, and a long and uncertain return cycle. In the midst of market trends, many tech startups struggle due to large upfront investments and obstacles in converting outcomes, leading to a long period of poor financial performance and the possibility of “falling before dawn.” The more challenging it is, the more patient capital is needed.
What is patient capital? As the name suggests, it is guiding capital to be a “friend of time,” not affected by short-term market fluctuations, accompanying hard tech, scientists, and entrepreneurs in the long run. However, faced with the current reality, some investment institutions seem to no longer value imagination and long-termism.
A prominent local venture capital figure in Shenzhen bluntly stated that the typical lifespan of a domestic venture capital fund is 3+2 years, with a maximum of 7 years. However, it usually takes 6-10 years for a company to meet the requirements for listing, which means that some RMB funds cannot hold excellent companies for long periods.
“Some investors are used to making quick money, adapting to short-term investment rhythms, convincing them to invest for more than ten years is indeed difficult; moreover, Chinese investors are not very fond of entrusting funds to professional institutions for management, often preferring to invest themselves.” Yang Bin, President of Shanghai Science and Technology Innovation Fund, once lamented about this.
Chang Junsheng, Executive Director, Chairman of the Investment Committee, and General Manager of Jinshi Investment, pointed out the underlying disagreements – overseas major contributors seek long-term asset allocations, even hoping to extend the investment period. “But currently, whether individual or institutional investors in China, the assessment cycle is relatively short. If I cannot exit within my term, then this project will definitely not be pursued. Therefore, fundamentally solving this problem can only be hoped for by more long-term capital entering the equity investment market.”
At the same time, he also emphasized the need to provide LPs with reasonable expectation guidance. “From the perspective of China’s entire economic development progress, our fund returns, including the expected returns of our LPs, should appropriately decline, or the term should be appropriately extended. Everyone should uphold the concept of long-term investment, growing together with time.”
In this regard, Mi Lei offered several suggestions. He believes that strengthening patient capital first requires liberating thinking, updating concepts, realizing that only a long cycle can bring higher returns. From government to enterprises to all LPs, they should recognize the long-term value of patient capital and the huge future returns it can generate, to support VCs/PEs in making longer-term investments, which will lead to funds with periods of over 10 years. Policies should also provide certain incentives for patient capital. For true patient capital that supports technological innovation, some tax incentives should be given.
Entrepreneurship is difficult, the innovation of “going from 0 to 1” is the most exciting, but before this moment arrives, one must go through a difficult, lonely, and long road, requiring the company of venture capital all the way. Just as Don Valentine said in “The History of Venture Capital”:
“Venture capital is not about looking at the world from a god’s perspective; it is also entrepreneurship, a journey taken together with entrepreneurs.”