Databricks this morning confirmed previous reports that it was raising new capital with a higher valuation. The data and artificial intelligence-focused company has secured a $ 1.6 billion round with a $ 38 billion valuation, he said. Bloomberg first reported Last week, Databricks was looking for new capital at that price.
The H Series was led by Counterpoint Global, a Morgan Stanley fund. Other new investors included Baillie Gifford, UC Investments and ClearBridge. A check from previous investors also gave the round a cash kick.
The new funding brings Databricks’ total private funding raised to $ 3.5 billion. Notably, its latest increase comes just seven months after the late startup raised $ 1 billion at a $ 28 billion valuation. Your new valuation represents value creation on paper that exceeds $ 1 billion per month.
The company, which makes commercial and open source products to process structured and unstructured data in one place, sees its market as a new category of technology. Databricks calls the technology a “data lake,” a combination of a data lake and a data warehouse.
CEO and Co-Founder of Databricks Ali ghodsi He believes that his new capital will help his company to ensure its leadership in the market.
For context, since the 1980s, large companies have stored massive amounts of structured data in data warehouses. More recently, companies such as Snowflake and Databricks have provided a similar solution for UNITED NATIONSstructured data called a data lake.
In Ghodsi’s view, combining structured and unstructured data in one place with the ability for clients to run data science other Business intelligence work without moving the underlying data is a critical shift in the broader data market.
“[Data lakehouses are] a new category, and we think there will be many providers in this data category. So it’s a land grab. We want to rush to build it and complete the image, “he said in an interview with TechCrunch.
Ghodsi also noted that it faces well-capitalized competitors and that it wants the funds to compete hard with them.
“And you know, it’s not like we’re up against some small startups that are getting seed money to build this. It’s all kinds of [large, established] sellers, ”he said. That includes Snowflake, Amazon, Google and others who want to secure a piece of the new market category that Databricks sees emerging.
The company’s performance indicates that it is on to something.
Databricks has reached the annual recurring revenue (ARR) milestone of $ 600 million, it revealed as part of its financing announcement. It closed 2020 with $ 425 million ARR, to better illustrate how quickly it is growing to scale.
According to the company, its new ARR figure represents 75% growth, measured year over year.
That’s fast for a company of its size; According to the Bessemer Cloud Index, public software companies in the first quartile are growing at around 44% year-over-year. Those companies are worth about 22 times your future income.
At its new valuation, Databricks is worth 63 times its current ARR. So Databricks isn’t cheap, but at its current rate it should be able to grow to a size that makes its most recent private valuation easily sustainable when it goes public, as long as it doesn’t set a new, higher bar for its future. yield increasing again before going public.
Ghodsi declined to time-share around a potential IPO, and it is unclear whether the company will pursue a traditional IPO or continue to raise private funds to be able to list directly when it decides to float. Regardless, Databricks is now valuable enough that it can only go out to one of the few mega-cap tech giants or go public.
Why hasn’t the company gone public? Ghodsi enjoys a rare position in the startup market: he has access to unlimited capital. Databricks had to open another $ 100 million in its latest round, which was originally scheduled to close at just $ 1.5 billion. You are not lacking in investor interest, allowing your CEO to bring in the type of shareholder you want for your company’s post-IPO life, while enjoying limited dilution.
This also allows you to aggressively contract, possibly buy a few smaller companies to fill the gaps in the Databricks product roadmap and grow out of the glow of Wall Street expectations from a position of capital advantage. It is the initial equivalent of eating the cake and eating it too.
But staying private for longer is not without risk. If the largest market for software companies were to depreciate quickly, Databricks could prove too expensive to go public in its final private valuation. However, given the long bull market we’ve seen in recent years for software stocks and the confidence Ghodsi has in its potential market, that doesn’t seem likely.
There’s still a lot about Databricks’ financial position that we don’t know yet, for example, its gross margin profile. TechCrunch is also incredibly curious about what all of its fundraising and subsequent spending has done to Databricks’ short-term operating cash flow results, as well as how long its gross margin-adjusted CAC recovery has evolved since inception. of COVID-19. If we ever get an S-1, we could find out.
For now, attractive private markets are giving Ghodsi and the crew room to operate a public company effectively without the hassle of being truly public. Do you want the same for your company? Easy: it only reaches $ 600 million ARR while growing 75% year over year.