Chain Reaction raises $70M, emerges from stealth to launch chips designed to compute encrypted data

As the networking industry explores homomorphic encryption, blockchains and other cryptographic techniques to take data protection and complex computing to the next level, one big roadblock to many of these working effectively and at scale has been the compute power required to run them. Today, one of the startups that believes it can address that issue is emerging from stealth armed with a hefty amount of funding to take on the industry.

Chain Reaction, an Israeli startup that is designing semiconductors and related architecture to use in blockchain and privacy hardware running cryptographic processes, has closed a round of $70 million, a Series C that brings the total raised by the company, while still in stealth mode, to $115 million. The company is not talking valuation, but we understand that it's approaching $500 million.

The round is being led by Morgan Creek Digital, with Hanaco Ventures, Jerusalem Venture Partners, KCK Capital, Exor, Atreides Management and Blue Run Ventures also participating.

The funds will be used for expanding the team -- there are currently 100 people with the startup, including alums from Nvidia, Mellanox, Israeli intel and TSMC -- and to get its first products out to market this quarter (Q1 2023). Those products will include, the company said, Application Specific Integrated Circuits (ASICs) and related systems, as well as solutions for cloud data infrastructure designs to run privacy enhancing technologies (as some of the cryptographic security approaches are sometimes described) -- the idea being that Chain Reaction's tech will reduce electricity consumption and speed up compute because their design is optimized for cryptographic calculations and thus is more efficient.

Chain Reaction currently works with TSMC as its sole foundry partner, with no plans at the moment to take on that work itself.

If a semiconductor company aimed at some of the most cutting-edge -- and some would argue not quite yet battle tested -- computing technologies sounds like a moonshot, the pedigree behind this particular startup de-risks that proposition. Its co-founders are CEO Alon Webman and CTO Oren Yokev, respectively the co-founder of Mellanox (which Nvidia acquired for nearly $7 billion after a bidding war with Intel) and a decades-long head of first cyber and then all tech for the Israeli Prime Minister.

Chain Reaction has been building in stealth mode for around six years, and Webman (perhaps one of the most perfect surnames ever for a tech entrepreneur) tells me that the original impetus for the company was for privacy applications -- and specifically to build processors to help handle the compute around privacy-related encryption technologies.

Homomorphic encryption -- an approach to data protection and privacy that involves encrypting of data end to end and throughout the process of how it gets used -- was seeing some breakthroughs in the academic sphere, although the pesky practicalities of how to actually apply it, and the compute power required to do so, were already presenting major roadblocks.