June 18, 2024
Databricks raises $500M more, boosting valuation to $43B despite late-stage gloom

Data analytics and AI software maker Databricks has raised a Series I round worth more than $500 million, earning a valuation of $43 billion.

This round sticks out, particularly as many late-stage startups are seeing their valuations being slashed amid a wider funding slowdown. Databricks last raised $1.6 billion in August of 2021 at a post-money valuation of $38 billion, and seeing the company add $5 billion to its price tag is proof that wider trends do not affect everyone equally, if they do at all. 

The list of investors that participated in this Series I makes it look like both a pre-IPO funding round and a strategic investment. Capital from T. Rowe Price, Morgan Stanley, Fidelity and Franklin Templeton fills up the “pre-IPO” portion, as these investors often put money in companies that are expected to go public sooner than later. On the strategic side, we have Capital One Ventures and Nvidia.

The Nvidia-Databricks connection is not hard to suss out — Databricks is leaning into its AI capabilities, built on its history of selling data and machine learning software. Nvidia is also riding high on AI-powered demand for its chips and software. There’s so much demand for Nvidia chips that some countries are working to secure supply for their own economies, for example.

Other more traditional private-market investors also took part in the Series I, including Andreessen Horowitz and Tiger Global.

How did Databricks manage an up-round in this market, where more conservative revenue multiples abound? The company said that in the second quarter ended July 31, its revenue run rate surpassed the $1.5 billion mark. Databricks also said that it has more than 10,000 customers globally, of which more than 300 are currently generating revenue at a pace of $1 million or more per year for its software and services.

Parsing partial data that Databricks disclosed a couple months ago, it appears that the company’s revenue growth is slowing. However, Databricks also said today that its fiscal second quarter included the “strongest quarterly incremental revenue growth” in its history. 

Fair enough. And that’s enough for investors to wager that when Databricks does go public, it will be able surpass that $43 billion price tag. 

However, that implies, slightly annoyingly to those excited to read its eventual S-1 filing, that Databricks is not racing toward a public offering. With an effective revenue multiple 29x, the company appears a little expensive for the current market. That implies the company is planning to grow a bit more before it tries to defend its latest valuation on the public market. Hence, a later IPO.

The new capital is more of a refresh than a recharge for Databricks, which we did not think was running particularly low on cash anyway. Perhaps this round also gives it more room to make other strategic moves. There’s a massive race to win a chunk of what most folks in tech expect to be a humongous AI market. A fresh half-billion in capital certainly won’t hurt Databricks’ ambitions.

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