UK chip designer raises millions from Agnelli fund

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A UK chip designer whose light-powered technology promises to unlock one of the biggest challenges in data security has attracted millions in funding from investors that include Italy’s wealthy Agnelli family.

Leeds-based Optalysys this month raised a £21mn Series A round jointly led by Lingotto, the investment company owned by the Agnelli family’s holding company Exor. The funds will help create jobs, with the company drawing in former Arm and Imagination engineers, as it moves closer to production.

The 10-year-old company is developing technology in the field of silicon photonics, optical chips that use light instead of electricity to perform calculations. This “groundbreaking” technology is particularly suited to new kinds of encryption that its creators say will allow more private and secure data sharing between companies and countries.

Optical chips are seeing an uptick in investment as the semiconductor industry grapples with slower advances and rising costs with each new generation of traditional silicon processors.

As the cadence of innovation underpinned by Moore’s Law, which for decades held that the number of transistors packed on to a chip would roughly double every two years, begins to break down, semiconductor designers and manufacturers are having to go to greater lengths to meet ever-growing demand for computing power.

By radically accelerating processing speeds without a commensurate increase in energy consumption, Optalysys co-founder and chief executive Nick New claims the technology can power a new level of encryption that is able to withstand hacking attempts even from quantum computers.

“Our vision is to become the Nvidia for [this kind of encryption] and secure processing,” said New, referring to the success of the California-based company’s accelerator chips in powering a wide range of new artificial intelligence applications.

Researchers have been warning that, in the coming years, large-scale quantum computers will be able to overpower the cryptography algorithms that applications from online payments to private messaging apps have relied upon for decades, igniting a race to develop “post-quantum encryption”.

The Agnelli family, the Italian industrial dynasty that controls Ferrari and Juventus, launched the $3bn Lingotto fund in May. It recently brought in former UK chancellor George Osborne as its non-executive chair and James Anderson, the former Baillie Gifford fund manager, as a managing partner.

Lingotto is investing alongside Imec.xpand, the investment arm of the Belgium-based semiconductor R&D organisation Imec, and Northern Gritstone, a fund formed by the Universities of Leeds, Manchester and Sheffield to support academic spinouts in the north of England.

Optalysys’ accelerator chips will power a new kind of encryption technology that allows data to be processed without having to unlock it first. It is working with partners including Google and IBM on “fully homomorphic encryption”, which promises to allow encrypted data to be processed in the cloud and across “untrusted” networks. This will enable data sharing between organisations while preserving privacy for customers in sensitive sectors such as healthcare and financial services.

The concept of fully homomorphic encryption is not new but the computing power required has made it prohibitively expensive to run on traditional datacentre infrastructure.

An earlier incarnation of Optalysys moved from Cambridge, where New completed a PhD in optical computing, to Leeds more than a decade ago to “lean on the photonics and optical expertise” in the area, said New, who along with co-founder Robert Todd grew up in Yorkshire.

“We wanted to show the world that we can do this in Yorkshire as well as Silicon Valley,” New added.

Optalysys is targeting scaled-up production of its “chiplet” processors in around three years. Its latest equity investment values the company at £20mn, excluding the latest capital raised.

“This groundbreaking technology exists really nowhere else,” said Ashish Kaushik, partner at Lingotto. While other companies are attempting to develop accelerators for FHE using traditional electronics, Optalysys is the only one approaching the problem using optical chips, he said, bringing breakthrough reductions in energy consumption and processing time.

For a semiconductor company at this stage, “a round of this size in Europe is quite exceptional”, said Tom Vanhoutte, partner at imec.xpand. “There are not that many companies [in Europe] of this size and ambition.”

Optalysys has been expanding its team with recruits from UK chip companies including Arm, Imagination and Graphcore. It plans to increase its headcount from 18 today, including contractors, to more than 50 in the next 12 months. It has recently hired a former senior executive at Arm and Imagination to lead the architecture team tasked with designing its processors.

“A lot of chip companies are struggling a bit at the moment with the reversal in the trends of the market over the past 18 months,” said New, pointing to the abrupt reversal from a chip shortage to a supply glut as sales of consumer electronics slowed following the pandemic. “There is a good pool of people coming available [to hire].”