20VC: The Future of Datacentres: What You Need to Know | Why Everyone Gets GPU Depreciation and AI's Energy Costs Wrong | Who Really Makes Money From AI & Why Most Moats Don't Exist with Chase Lochmiller

The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

Chase Lochmiller, CEO of Crusoe Energy, joins the show following a $3.9 billion Series F at a $30.9 billion valuation to discuss the critical infrastructure powering AI. He dismantles common misconceptions

Key takeaways

• Crusoe raised $3.9 billion in a Series F round at a $30.9B valuation, backed by NVIDIA, Founders Fund, Gavin Baker's Atreides Management, Mubadala Capital, and Valor Equity Partners.
• Lochmiller argues data centers lower local energy prices by catalyzing new generation capacity and amortizing transmission infrastructure across communities.

Main topics

• AI data center infrastructure scaling
• Energy constraints and local grid economics

Notable quotes

"The infrastructure to support AI wasn't going to be centralized. It was going to be distributed where energy was low cost and abundant."

Conclusion

Listeners gain a grounded, data-driven perspective on AI infrastructure scaling challenges and

Transcript preview

Speaker 2 (0:00) So absent having a purpose, I was like, man, I guess I should get rich. That's maybe the next best thing to having a monastic calling that you're devoted to. The infrastructure to support AI wasn't going to be centralized. It was going to be distributed where energy was low cost and abundant. Energy prices actually come down. It's actually the opposite of the narrative that's being told. People are very emotional about data centers. There's really like three products that we ultimately... sell to customers where we're making money. We can sell data centers, we can sell GPUs, and we can sell tokens. Well, you know, the GPU is actually the most valuable thing in the entire data center. Most moats are illusion. that most months don't exist. Speaker 3 (0:39) This is 20VC with me, Harry Stebbings. Now, my job is to bring you the most relevant interviews in technology. Right now, we are in a race for data centers, for compute capacity, for energy, and there is not a more pertinent guest that could join me in the hot seat today than Chase Lochmiller from Crusoe Energy. They provide several different layers of this very important business, which is they provide the data centers, they can provide the compute, and then they provide the inference, three of the most valuable pillars of this value chain. He sits down today to join me following their $3.9 billion Series F, which was raised at a $30.9 billion valuation. Get the notebooks out. This one went very granular into the build-out that's required over the next few years to supply the incessant demand for AI. But before we dive into the show today, founders and investors sleep on 8sleep. It is the intelligent sleep system trusted by Mr. Mark Zuckerberg, Dr. Andrew Huberman, Charles Leclerc, and the Aston Martin F1 team. The pod is a smart mattress cover that fits on any bed. 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What do you learn from mountaineering that you think makes you better as an entrepreneur? Speaker 2 (5:00) It's a great question. We've actually ingrained mountaineering into the culture of Crusoe. And we have a core set of company values. One of our core values is actually to... think like a mountaineer. And so what does that mean? You know, mountaineering is a practice where things are subject to change and you need to be prepared for change. With it, it really embeds this sense of like cultural resilience that I think is really, really important for a business like ours that is doing stuff both in the digital world as well as the physical world. But to further the analogy here, For mountaineering, you know, you come up with a plan to basically set out from your camp, go some at the peak, come back safely and, you know, take your photo and your glory is, you know, written in the history books. But you have to be prepared for things to go wrong, right? You have to be prepared for the weather to change. You have to be prepared for gear to fail. You have to be prepared for your partner to get sick or an avalanche to occur. And the idea is really having, here's a plan A, and then I have a plan B, a plan C, a plan D. I have plans all the way down. in case different things go wrong. You know, additionally, like you have to have a sense of willingness to endure difficult challenges and difficult times. You know, this notion of enduring the expedition. The expedition can be long and hard and arduous. And, you know, you have to really dig deep at those moments of pain to work through those challenges. That's a different aspect of thinking like a mountaineer. And then, you know, another big aspect is thinking with a safety culture, having this notion of safety as a huge priority, which is important when... You're doing things at the scale we're doing from a construction standpoint, thinking with the safety mindset of safety first, second, and third. There's this saying in mountaineering that getting up to the top is optional, getting down is mandatory. We try to practice that safety culture here at Crusoe and really try to avoid any sort of physical injuries or challenges with digital attacks on the platform as well. I have so much respect Speaker 3 (6:52) for mountaineers. It's one of those ones where it... I almost can't get my head around the complexity and the mental fortitude it takes to get through the change of plans, the weather, the partner that's sick, the endurance, as you said. I met an entrepreneur yesterday that climbed Everest and he showed me pictures of the dead bodies along the way. I mean, to see that is just so Speaker 2 (7:12) harrowing. Yeah, it's tragic just kind of, you know, seeing when people take unnecessary risk because, you know, actually spending a lot of time and within high altitude mountaineering culture and communities, you do see oftentimes people taking unnecessary, very careless risks. It's actually quite shocking. Oftentimes tragedy is avoidable. It is preventable. And, you know, I think having that mindset of thinking like a mountaineer and planning ahead is what enables mountaineers to do it for a long period of time. Speaker 3 (7:42) Can I ask, you said about resistance to change. What change did you find the hardest Speaker 2 (7:47) in your life? I think maybe one of the most difficult moments of change for me was in my life, I always had sort of the next thing planned before I left the previous thing. So what I mean by that is when I left high school, right, I knew exactly where I was going to college before, you know, the end of high school. When I left college, I knew exactly where I was going to work and what I was going to do. And when I left my first job, I knew I was going to work and going to grad school. And I had a job lined up even after that. When I left to go climb Mount Everest in 2018, I did not have a plan after that. I had a reasonable amount of financial success in my life to that point, but I didn't have the thing planned. And actually having that void. that sort of emptiness really was both challenging and empowering for me because it felt like I could do anything. It was sort of like a blank slate. I had thoughts of like, maybe I'm just going to invest my own money and just kind of like enjoy the rest of my life and not do much. But I could also start a company. And if I were going to start a company, what are the most challenging things that I could think about tackling that are interesting and that I would be excited about pursuing on a daily basis? That was kind of like the emergence of Crusoe sort of came through that chapter of difficulty and challenge of just nothingness, right? Just having an empty slate. Speaker 3 (9:09) My job is to find signals that will determine a potentially great entrepreneur. And one thing that I find now is actually often richer entrepreneurs. are better entrepreneurs because they're not worried about downside protection and they just see what is possible. How do you think starting Crusoe with a little bit of money and success already changed how you think about building it? Speaker 2 (9:29) Oh, I think it absolutely changed the way I think about building it. There's a bunch of like psychological aspects to it. I mean, you could look at like Maslow's hierarchy of needs, you know, just like it is empowering to know that like if I take risk and this all goes to zero. I'm still going to be fine. I'm going to be able to cover my rent and feed my family and cover these base needs that I may have in my life. When I was in university, I mean, I was convinced I was going to become a theoretical physicist and likely a professor. And I was spending time doing research in basic science, right? So I was doing research in physics, both at MIT and then at Los Angeles National Lab. So early on in that journey, I was pretty committed to living this monastic life of not really earning a bunch of money, but just having this life of discovery where I get to go discover the mysteries of the universe. And that would be my life's work and pursuit. At some point, I realized it's a very slow moving industry, this industry of discovery. It may be changing today because of AI, but at least at that point in my life, it was a very slow moving industry. And I felt like I wanted to do something very fast paced. And I felt like I had sort of lost my life's purpose. I was like, okay, I don't feel like I have a purpose anymore. So absent having a purpose, I was like, man, I guess I should get rich. Like that's maybe the next best thing to like having a monastic calling that you're devoted to. I was looking around for different ways to make money. And this headhunter found me and recruited me into this field of quantitative finance. And it was like, hey, you're really good at solving math problems. If you come work in this industry, they just pay you a lot of money to solve math problems. And I said, this sounds great. Sign me up. But I think once that need was met of like, OK, I have enough money. OK, what what next? And and I think to your original question of like, you know, starting from this position of strength of, you know, being an entrepreneur and actually having had some financial success, it's empowering to take bigger swings, empowering to take bigger risks, which can ultimately lead to bigger outcomes. The final one before we actually get into what I plan to get into. Speaker 3 (11:32) Yeah. It's just picking up on you said kind of the endurance element of mountaineering. Endurance is great in some respects, but it can also lead you to continue doing something you maybe shouldn't. And sometimes there is a right time to change course rather than persevere. You went through a very big change in the business, seemingly so from the outside. A lot of your investors said you always had the foresight, actually, that it would lead to where we are today. But seemingly it's like a... Bitcoin phase one and then phase two is AI. Yeah. I don't want to kind of really actually get into that maybe weirdly, but I want to ask your advice, which is when asked, how do you advise someone when to endure, keep going, persist versus when to change tact and go down Speaker 2 (12:15) a different route? It's Speaker 3 (12:16) a Speaker 2 (12:16) great question. It's interesting. investors that you spoke to validated this claim. But from the outside, it does appear to be a pivot. Internally, when we started the company, the goal was always to build an AI platform. That was what I had sort of spent my career working on with AI machine learning algorithms. And I'd been a big user and early adopter of deep learning for certain tasks. And I felt like it was this meta science that ultimately was going to transform every every industry. And, you know, at that scale, compute becomes the bottleneck. Compute and data become the two bottlenecks. And, you know, what is the bottleneck for compute? Energy. So that was kind of the premise of starting the company. Now, we obviously weren't dedicating all of our resources towards building an AI platform day one. We were dedicating actually the majority of our resources towards monetizing waste energy with Bitcoin mining. That was kind of the philosophy of starting the company and finding and seeking out these low cost, abundant energy resources that we could monetize with compute. Bitcoin was the best monetization engine we had at the time, but we were building this AI platform from very, very early days. So when you think about at what point do I shift the resource allocation to this other thing that maybe I'm working on on the side, I think about the world in a very Bayesian. approach, right? I don't think the future is deterministic. I think it's very probabilistic. And I sort of have a view of what the future is going to look like. It's more certain if you go out just a little bit of time, if you go out, you know, a further amount of time, you know, it gets a little bit hazier, but I still have a view of sort of what things are going to unfold. And what was happening with this AI platform was it was sort of a project that Chase had devoted some time and resources and engineering towards internally, and we were committed to exploring this pathway. But we had launched the Crusoe Cloud Platform in early 2022 with our first set of paying customers. Before that, we were working with a lot of researchers at MIT and Stanford and different groups. trying to understand what's actually valuable for AI researchers, like from an infrastructure platform. So we finally launched in early 2022. But the moment that changed everything was obviously November 30th, 2022, the launch of ChatGPT. This was like the tweet heard around the world, the moment that just shifted everything in terms of like, okay, AI is here and there are really interesting use cases that are going to explode from sort of this moment. And that was kind of like a moment where my view of the world shifted quite a bit. How so? I just felt there was going to be far more demand for AI compute. infrastructure solutions. And we were very well positioned by actually having launched that platform at that point. What did you do then Speaker 3 (15:04) differently immediately as a result? Speaker 2 (15:06) After the chat GPT moment happened, we had sort of watched this evolution of the data center to support Bitcoin. And if you look at the history of Bitcoin mining, it's pretty fascinating, right? It started with like hobbyists on their laptops in this sort of decentralized way. And then people started to use GPUs. And then people started to lease data center capacity from, you know, more traditional co-location facilities that have like five nines of reliability. People started to develop ASICs. And then at