Fractile raises $720m at $7bn valuation as Britain’s state AI fund backs its chip bet

The London and Bristol chipmaker, which has yet to ship a product, has seen its value rise roughly sevenfold since May on the strength of a memory-heavy design for running large AI models.

Fractile, a British startup building chips for artificial intelligence, has been valued at $7 billion in its latest fundraising round, which included backing from the British government, according to a person involved in the deal. The company raised $720 million in a Series C round led by Thrive Capital, Founders Fund, Lightspeed and Redpoint, it told Reuters.

The government’s own figure is more guarded. A press release from the Cabinet Office and the business department said the round values the company at over £5 billion, and that the UK’s Sovereign AI Venture Fund and the British Business Bank had joined a round worth over £500 million. Like most venture capital funds, Sovereign AI does not comment on specific investment figures, citing commercial sensitivity; its typical equity investments are worth around £1-10 million.

The scale of the round is notable for a company whose hardware is not yet on the market. Fractile plans to launch its first commercial chip next year. In a LinkedIn post, chief executive Walter Goodwin wrote that the funding would allow the company to “ship [its] first chips and systems next year,” while acknowledging that “there is still a lot of work ahead.”

The valuation has climbed quickly. Fractile completed a $220 million round in May at a post-money valuation of around $1 billion, led by Accel, Founders Fund and Factorial Funds. By August, Bloomberg reported that the company was raising at a pre-money valuation of $6.5 billion, after what it described as an initial agreement with Anthropic. Fractile has an initial deal to sell about $250 million of chips to Anthropic and expects to deploy in data centres in 2027, according to that reporting; Dealroom noted that the agreement was reported by Bloomberg but has not been independently confirmed. Companies House filings show the round was assembled in stages: about £577.4 million of new Series C shares were allotted between September 9 and October 23, most of it as Series C-3 stock at £1,452.35 a share.

The investor list extends well beyond the four leads. Other new investors include Dragoneer, DST Global, Elad Gil, BlackRock, CapitalG, Shopify, Balderton and SV Angel, alongside the Sovereign AI fund and the British Business Bank, while returning backers include Accel, Conviction, Factorial and Felicis.

Fractile’s pitch rests on the memory problem in AI inference, the work of running trained models to produce answers. In an interview this autumn, Goodwin said the company spent its first two years on an SRAM-based chip, similar to Groq or Cerebras, which offers extreme bandwidth but low capacity. By late 2023 it concluded that growing model sizes and context lengths made that approach unscalable, and pivoted to working with memory vendors to extract high bandwidth from cheap DRAM. One element of its approach is stacked DRAM. Redpoint, one of the lead investors, said the processors interleave memory and compute, so large models can generate output dramatically faster across very long contexts.

The company’s performance claims are ambitious and unproven in commercial use. Fractile reportedly expects its chips to offer up to 100 times better performance than current silicon and a 90% reduction in energy use, by removing the need for models to move data to off-chip HBM memory. Goodwin has argued that speed matters most for autonomous agents: the goal is to run multi-trillion-parameter models at many thousands of tokens per second, making long-running agents far faster. Fractile plans to sell its processors as part of rack-scale systems that include custom software. It employs about 150 people across chip design, implementation and advanced packaging, keeping the whole silicon stack in-house rather than relying on an outside design house.

For the government, the deal serves an industrial argument. The press release presented the investment as a way of reducing dependence on fragile overseas supply chains and ensuring the UK has a greater stake in the hardware that will underpin its future economy. Kanishka Narayan, the AI minister, said Britain needs to build more of the technology that powers it. Business Secretary Jonathan Reynolds pointed to plans to expand the company’s presence in Bristol, following Fractile’s February announcement of a £100 million three-year expansion of its London and Bristol operations, including a new hardware-engineering site in Bristol.

The investment comes a fortnight after the Budget, where the Chancellor confirmed a further £140 million for Sovereign AI, including an additional £60 million to support the fund’s investments. The fund was set up earlier this year with £500m of public money to back home-grown AI companies, and Fractile joins two other British start-ups it has backed, Olix and Ineffable Intelligence.

The commercial test is still ahead. The market for AI hardware is dominated by Nvidia and a handful of Asian semiconductor manufacturers, and Fractile’s chips have not shipped in volume. Whether its first systems reach data centres on the 2027 timetable it has set out will determine how much of today’s valuation holds.