Groq, the AI hardware and software startup, faced a near-death experience that required an unconventional solution from CEO Jonathan Ross. The semiconductor company, founded in 2016 by former Google engineers, struggled for seven years to find a viable product before confronting a severe cash crunch that threatened its survival.
In a revealing episode of The Twenty Minute VC podcast, Ross disclosed how he asked employees to accept reduced cash compensation in exchange for equity—a move he creatively branded as “Groq Bonds” inspired by World War II war bonds. The historical parallel was intentional: just as governments asked citizens to finance military efforts during economic hardship, Ross asked his team to invest in the company’s future through salary reductions.
The decision was particularly intense given that many employees had left established careers and had families depending on their income. Ross acknowledged the weight of responsibility, noting concerns that the entire workforce might abandon ship. However, the gamble paid off—80% of employees participated in the equity compensation program, demonstrating remarkable faith in the company’s vision.
This sacrifice proved pivotal in keeping Groq operational until it could secure substantial funding. The company’s fortunes dramatically reversed with a $300 million funding round in 2021, co-led by prominent investors Tiger Global Management and D1 Capital. The momentum continued with Groq raising $640 million in August 2024 at a $2.8 billion valuation, led by heavyweight investors including BlackRock, Cisco Investments, and Samsung Catalyst Fund.
Most recently, Groq secured a massive $1.5 billion deal with Saudi Arabia to expand delivery of its advanced AI chips to the Middle Eastern market, cementing its position in the competitive AI hardware sector.
While equity compensation is common in tech startups, Ross stands out as one of few CEOs publicly discussing emergency cash-to-equity conversions. His transparency about vulnerability resonated with employees: “If you lean towards that vulnerability, people are often going to go with you,” Ross explained.
The company now joins elite startups like OpenAI, Stripe, and SpaceX in offering tender offers—allowing employees to sell shares at fixed prices during limited timeframes, providing liquidity even while remaining private. This mechanism has become increasingly important for retaining talent at high-growth private companies where traditional IPO exits remain uncertain.
Key Quotes
We’re going to run out of money. We need you to trade salary for equity.
CEO Jonathan Ross’s direct appeal to employees during Groq’s cash crisis, demonstrating the stark choice facing the startup before its eventual turnaround and multi-billion dollar valuation.
We literally took pictures of the war bonds and we put Groq Bonds on it instead.
Ross describing the creative branding of the equity compensation program, drawing parallels to World War II financing to frame employee sacrifice as patriotic investment in a shared mission.
If you lean towards that vulnerability, people are often going to go with you.
Ross reflecting on his leadership philosophy during crisis, explaining why 80% of employees chose to participate in reduced cash compensation—a testament to transparent leadership in startup environments.
Our Take
Groq’s story reveals an underreported reality in AI: hardware startups face fundamentally different challenges than software companies. While AI software can iterate rapidly with minimal capital, chip development requires years of R&D and manufacturing partnerships before generating revenue. Ross’s willingness to discuss near-failure contrasts sharply with the triumphalism dominating AI discourse.
The 80% employee participation rate is extraordinary and suggests Groq cultivated genuine belief in its mission—not just financial opportunism. This cultural foundation likely contributed to subsequent success in attracting top-tier investors and major contracts. The Saudi Arabia deal particularly signals geopolitical competition for AI infrastructure, with nations recognizing that chip sovereignty matters as much as model development. Groq’s trajectory from near-bankruptcy to billion-dollar valuations exemplifies the high-risk, high-reward nature of AI infrastructure investments.
Why This Matters
Groq’s survival story illuminates critical dynamics in the AI hardware sector, where capital-intensive chip development requires sustained funding before achieving product-market fit. The seven-year journey to viability underscores the patience and resources required to compete in AI infrastructure—a reality often overshadowed by software-focused AI success stories.
Ross’s transparency about near-failure and unconventional compensation strategies provides rare insight into startup survival tactics during funding gaps. As AI companies face increasing pressure to demonstrate sustainable business models beyond hype, Groq’s experience offers lessons in employee alignment and crisis management.
The company’s subsequent success—culminating in a $2.8 billion valuation and major Saudi investment—validates both the technology and the team’s commitment. This matters for the broader AI ecosystem as competition intensifies for alternatives to dominant players like Nvidia. Groq’s specialized AI chips represent the diversification of AI infrastructure necessary for industry resilience.
Furthermore, the story highlights how equity compensation and tender offers have become essential tools for private AI companies to retain talent while avoiding premature public offerings, reshaping traditional startup exit strategies.
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