Betaworks Scores With Hugging Face Deal
John Borthwick’s venture firm wrote the first check Hugging Face ever received, and now owns a stake that could be worth $650 million. Other early investors also did handsomely.
- Nvidia is acquiring Hugging Face for close to $13 billion, including about $11.9 billion for stockholders.
- Venture firm Betaworks holds a roughly 5.5% stake in Hugging Face, which is worth about $650 million at the acquisition price.
- Betaworks initially invested a $150,000 check in Hugging Face during a 2016 accelerator program.
John Borthwick and his team at venture firm Betaworks picked Hugging Face as one of eight startups to join its 2016 accelerator among 450 applicants.
New York-based Betaworks wrote a $150,000 check to the company, which was developing a chatbot for teens at the time. Another $50,000 was syndicated to angel investors.
A decade later, Hugging Face, which pivoted to becoming a platform for open-weight AI models, announced it is being acquired by Nvidia for close to $13 billion, about $11.9 billion for stockholders and $1 billion in equity retention for employees.
John Borthwick, founder and CEO of Betaworks, standing with crossed arms at the NYSE podium with a gavel in the foreground in January of this year.
John Borthwick, founder and chief executive of Betaworks. Photo: NYSE
Betaworks invested in Hugging Face out of its $48 million first venture fund, and still owns a roughly 5.5% stake in the company, according to a person familiar with the situation. That translates to roughly $650 million at the acquisition price.
Two other early investors also hit a home run: A.Capital Ventures and SV Angel, firms run by brothers Ronny and Topher Conway, respectively. A.Capital said it could bag $1.5 billion on the sale of Hugging Face, while SV Angel estimates it could receive $312 million.
But part of Hugging Face’s early gestation occurred at Betaworks. Founded in 2008, Betaworks was originally a venture studio, where it incubated social-media startups, including TweetDeck and Giphy. In 2016, it raised its first venture fund and started its first accelerator program called “BotCamp,” focused on young startups creating chatbots using early natural-language-processing capabilities. At the time, many startups were building vertical chatbots, such as a weather bot or a finance bot.
Hugging Face’s founders, however, were going their own way. “They were insistent on doing a generalized experience,” said Borthwick, who is chief executive at Betaworks. “I was struck by that.”
The startup’s founders soon moved from Paris to join Betaworks in New York.
“Ten years ago to the day, I flew to NYC to work with Clem Delangue 🤗 at Betaworks,” Julien Chaumond, Hugging Face co-founder and chief technology officer, wrote in a post on LinkedIn last month, referring to his fellow co-founder and the startup’s chief executive. “We spent three weeks working together, almost day and night, from the Meatpacking District, in the NY 2016 summer heat,” he continued in the post, which included a picture of his British Airways boarding pass to the U.S.
They ended up working for a few months after the accelerator was over in Betaworks’ space.
That is where Terrence Rohan recalls meeting the founders. Now a managing director at Otherwise Fund, Rohan invested in Hugging Face’s seed round out of a small angel fund on behalf of Index Ventures, he said.
“Betaworks was a super important part of the early story,” Rohan said. “It’s an extraordinary return for them,” he added.
Borthwick, a champion of the New York tech scene, said that the deal “is a huge win for New York.”
At A.Capital, Ronny Conway, its founder and general partner, said in a letter to limited partners that his firm and SV Angel combined are Hugging Face’s largest outside shareholder.
A.Capital expects to receive $1.5 billion in proceeds, according to the letter, which comes to a 220 multiple on invested capital. The firm added that those figures are preliminary. A.Capital first invested in Hugging Face in 2018 out of its Fund II.
SV Angel estimated its proceeds would be $250 million for its SV Angel VI fund, generating a multiple on invested capital of 275 times. The firm first backed Hugging Face in 2016, with a $200,000 check. Additionally, SV Angel would get about $62 million via two of its other funds, per preliminary calculations, Topher Conway, a managing partner at the firm, wrote to the firm’s LPs.
Figures on A.Capital’s and SV Angel’s returns were first reported by Axios.
Other investors in Hugging Face include Lux Capital, Addition, Sequoia Capital, Salesforce Ventures, Coatue and Sound Ventures. Hugging Face raised close to $400 million over the years, and its latest private valuation was $4.5 billion, according to research firm PitchBook.