The Rise of NVIDIA A Landmark Angel Investment in History

Author Liu Bo, Investment Sector PEdaily
This is a vivid brushstroke in the history of global venture capital.
Not long ago, Huang Renxun mentioned in a speech at his alma mater, Stanford University, about the first financing in his life – 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 facing the risk of collapse shortly after its establishment.
Thus, the NVIDIA Empire that would dominate the industry in the future was born.
Calculating it, the angel round from that year has now created a myth with a market value of $2.8 trillion, undoubtedly the best interpretation of venture capital aiding the rise of technology giants. Historical experience has shown that the level of venture capital activity directly affects the prosperity of technology innovation companies, and this is something worth pondering on today.
No business plan
Angel round raised $2 million
This investment 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, just before the PC revolution, with Windows 95 not yet launched and the Pentium processor still unreleased, it was evident 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 play games, she directly asked him, “Why don’t you find a job in an electronics factory?”
In short, Huang Renxun’s entrepreneurial journey was fraught with challenges. He didn’t even know how to write a business plan at that time. So, he went to a bookstore and found a book titled “How to Write a Business Plan,” which had a total of 450 pages. After flipping through a few pages, he gave up, saying, “By the time I finish reading it, the company will probably have closed down, and the money will be gone.”
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 remembers: armed with presentation materials, he tirelessly attended multiple investor meetings to help the NVIDIA CEO and management team promote their story. And his office was nothing more than a tiny mobile room.
Huang Renxun recalled in his speech that at that time, he had only about six months’ worth of living expenses in the bank, and the whole family had to rely on that meager savings. So, he decided not to write a business plan and instead went directly to see former CEO Wilfred Corrigan.
When Wilfred Corrigan heard Huang Renxun’s introduction, he bluntly admitted that he did not understand what he was talking about and called it one of the worst startup 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, when Huang Renxun finished his presentation, Don Valentine said, “Startups should not invest in other startups or collaborate with them.” His point was that for NVIDIA to succeed, another startup also needed to succeed, which was Electronic Arts, a video game development company. The CTO of that company was only 14 years old at the time, and his mother had to drive him to work.
In this way, Don Valentine and Sutter Hill each invested $1 million, allowing NVIDIA to raise $2 million in angel funding with a post-investment valuation of $6 million. It is worth noting that before this, Don Valentine had only invested a few hundred thousand dollars in Apple.
This investment remains indelible to this day. Huang Renxun still remembers Don Valentine’s words 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 daring capital
Today, this angel investment has been recorded in history.
In 1999, NVIDIA went public on the NASDAQ with a market capitalization of $230 million. Based on this calculation, the valuation of NVIDIA’s angel round has increased by 38 times. Even if they partially exited after the IPO, it was still a good choice. But believing in Don Valentine’s investment philosophy, they are sure to persist in achieving even higher returns.
The rest of the story does not need to be reiterated. NVIDIA has risen to become a chip giant and, with the emergence of OpenAI, has become a deserving ruler in AI chips. Alongside this, NVIDIA’s stock price has skyrocketed – in the past five years, NVIDIA’s stock price has grown by 28 times, and its latest market value has reached a staggering $2.8 trillion.
Perhaps only those who have experienced it can truly empathize. Huang Renxun has emphasized the importance of financing more than once before. In his view, a startup is a company on the brink of collapse. “When I founded NVIDIA, after each round of financing, I immediately started the next round of financing, then the third round. Survival is vital, cash is king. As a CEO, you either make money, save money, or raise money.”
At the same time, NVIDIA has quietly built a vast investment portfolio. According to S&P Global data, by 2023, NVIDIA had become the fourth-largest venture capital enterprise after Microsoft, SoftBank, and Google, with investments covering 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 early investment in the distant future, which is NVIDIA’s path to success.
To Mi Lei, the founding partner of China Creation Star, NVIDIA’s success once again highlights the long-term nature of “hard technology” and the importance of “knowledge value.” To maintain a leading position, there must be a continuous focus on technological innovation and a steady stream of R&D investment.
As an investor, Mi Lei has deep feelings about this. He believes that for venture capital firms, focusing too much on short-term financial returns will make it impossible to invest in great companies. “The essence of venture capital is to drive technological progress and industry change through supporting disruptive innovative technologies, creating greater value, and ultimately reaping ‘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, today, venture capital, as a foreign concept, is becoming more localized than ever before. Some VCs are no longer about capturing risks but have turned into rigid profit guarantees, requiring short cycles, no risk, and guarantees.
For a time, buybacks, bets, and dividends are heard frequently in China’s primary market. For example, buyback agreements between founders and investment institutions have become common, but since last year, the situation has changed – buybacks are even listed as a mandatory condition for investment decisions. If the controlling shareholder is unwilling to sign a buyback, the investment will not proceed.
“The charm of venture capital lies in finding those uncertain but potentially disruptive innovations.” A venture capital partner who wishes to remain anonymous lamented that we need to be wary of certain practices that may prevent us from discovering other great innovations.
Capital patience
The road to China’s technological rise
What role should venture capital play in the rise of technology? This is undoubtedly a question that every venture capital person should ponder.
It is well known that technological innovation is not achieved overnight. To achieve original and disruptive results, one must go through a difficult process of technological foundation and breakthroughs, as well as the commercial application of results. The return period is long and fraught with uncertainties. In the market tide, many tech startups face obstacles due to large initial capital investments and difficulties in converting results, leading to poor financial performance for a long time, or even “collapsing before dawn.” The more so, the more we need to strengthen the capital of patience.
What is patient capital? As the name suggests, it is about guiding capital to be a “friend of time,” unaffected 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 candidly stated that the typical fund life of Chinese venture funds is 3+2 years, with a maximum of 7 years. However, it generally takes 6-10 years for a company to meet the listing requirements, making it impossible for some RMB funds to hold onto excellent companies for the long term.
“Some investors are used to making quick money, adapting to the fast-paced investment rhythm, convincing them to invest for more than ten years is indeed challenging. Also, Chinese investors are not very keen on entrusting their funds to professional institutions to manage; they often prefer to invest themselves.” Yang Bin, the President of Shanghai Science and Technology Innovation Fund, once expressed his feelings on this matter.
Chang Junsheng, Executive Director, Investment Committee Director, and General Manager of Jinshi Investment, pointed out the underlying disagreement – overseas major investors seek long-term asset allocation, even hoping to extend the investment period. “But now, whether it is individuals or institutions in China, the assessment cycle is relatively short. If I cannot exit within my term, then this project will definitely not be pursued. So, fundamentally solving this problem can only be hoped for more long-term funds to enter the equity investment market.”
At the same time, he also emphasized the need to provide LPs with reasonable expectations guidance. “From the perspective of China’s overall economic development progress, our fund returns, including the expected returns of our LPs, may need to be appropriately lowered, or the term extended appropriately. Everyone should uphold the concept of long-term investment and grow together with time.”
In response, Mi Lei gave several suggestions. He believes that strengthening patient capital first requires freeing up thoughts, updating concepts, realizing that only a long period can bring higher returns. From governments to enterprises to all LPs, they should recognize the long-term value of patient capital and its potential for significant future returns to support VC/PE in making longer-term investments, leading to fund periods of over ten years. Policies should also provide some preferential treatment to patient capital. For genuine patient capital that supports technological innovation, tax incentives should be provided.
Entrepreneurship is difficult, and the innovative leap from “0 to 1” is the most exciting. But before this moment arrives, one must endure a long and arduous journey, often filled with hardships and solitude, requiring the companionship of venture capital. Just as Don Valentine said in “The History of Venture Capital”:
“Venture capital is not about viewing the world from a God’s perspective; it is also about entrepreneurship, about starting a business together with entrepreneurs.”