Breaking down Databricks $500 Million Funding Raise
Series I is kind of late-stage no?
Hey Everyone,
I’m sort of always watching news about Snowflake and Databricks, since they will obviously evolve into important companies and especially for data workers and tech engineers of various kinds.
Data analytics and AI software maker Databricks has raised a Series I round worth more than $500 million, earning a valuation of $43 billion. Series I, when are you going public already guys! Snowflake has a $53 Billion valuation on the public market.
The Sequence finally wrote something that interested me, they recently wrote about how Nvidia is one of the surprise backers of Generative A.I. and it’s true:
Hugging Face: NVIDIA was part of the recent $200 million round that pushed Hugging Face's valuation to $4 billion.
AI21 Labs: NVIDIA invested in the recent $155 million Series C that valued the OpenAI competitor at $1.4 billion.
Imbue: NVIDIA joined the $200 million Series B that valued the AI reasoning platform at $1 billion.
Cohere: NVIDIA was part of the $270 million round that valued Cohere at $2.1 billion.
Adept AI: NVIDIA participated in the $350 million round that valued Adept at $1 billion.
Nvidia is basically backing some of the most actionable startups in the future of A.I., agents, open-source and data analytics. That they are backing Databricks is really telling.
You will remember, Databricks last raised $1.6 billion in August of 2021 at a post-money valuation of $38 billion. All of these valuation slashing really is going to wreck havoc with the IPO market that has seemingly restarted after what amount to a 1.5 year break. I shudder to think of where ARM will end up price range wise.
Databricks now thinks they are worth $43 Billion
This funding values the company at $43 billion and establishes the price per share at $73.50. The series is led by funds and accounts advised by T. Rowe Price Associates, Inc., which is joined by other existing investors, including Andreessen Horowitz, Baillie Gifford, ClearBridge Investments, funds and accounts managed by Counterpoint Global (Morgan Stanley), Fidelity Management & Research Company, Franklin Templeton, GIC, Octahedron Capital and Tiger Global along with new investors Capital One Ventures, Ghisallo Capital Management, Ontario Teachers’ Pension Plan and NVIDIA.
Revenue at Databricks rose 50% in the quarter that ended in July.
TechCrunch summarized it well here:
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.
I believe Databricks will go public in 2024 or 2025 when things have settled down in the IPO market and there’s more cash on the sidelines. There’s still significant macroeconomic uncertainty. But Databricks cannot afford to wait much longer (holding out almost as bad as Stripe).
Databricks likely to go IPO in early 2024
According to a report by The Information in late 2022, the company told its investors that it planned to launch an IPO by the summer of 2023.
Databricks CEO said of the round: “really about the strategic nature of the partnerships and investors that we brought in into this round.”
Databricks and Snowflake have room to make important acquisitions in the Generative A.I. space should they choose to do so in the coming months and years. Snowflake acquired Neeva, likely more for the talent than the product.
Databricks have a lot of momentum though listen: As of 2023, 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.
Some of us forget Databricks was only founded in 2013, they are incredibly mature and profitable for a startup that is just ten years old. Snowflake isn’t anywhere near profitable and it’s still overvalued on the public markets.
Databricks has found a mean point in its internal validation though. With an effective revenue multiple 29x, the company appears a little expensive for the current market. But flashy startups like Snowflake and Databricks don’t come around that often, I mean look at Nvidia, it’s easily over-priced at this point even if you think it’s an A.I. chip monopoly which it won’t be forever by the way.
Defining Snowflake or Databricks is also tricky because they will have to evolve with the times. Founded in 2013 by the original creators of Apache Spark, an open-source unified analytics engine for large-scale data processing, Databricks is known for its “lakehouse” platform in the cloud — a combination of data warehouses and data lakes that unifies data, analytics and AI on a single platform so that customers can govern, manage and derive insights from enterprise data and build their own generative AI solutions faster.
I think we will always be comparing Databricks with Snowflake. Snowflake was founded just a year earlier, in 2012. In this case the duopoly that they are is likely good for innovation, at least now as they are smaller. As Databricks and Snowflake compete to own the end-to-end enterprise AI workflow, their continued moves and countermoves will spur innovation that enables more businesses to leverage generative AI—a win for the entire enterprise ecosystem.
Datawarehouse Architecture
“The commitment from long-term focused strategic and financial partners reflects Databricks’ continued momentum, the rapid customer adoption of the Databricks Lakehouse, and the success customers are seeing from moving to a unified data and AI platform,” said Ali Ghodsi, Co-Founder and CEO of Databricks. “Databricks and NVIDIA are building transformative AI technology, and we’re excited about the business value and innovation we can bring to our customers.”
In the latest round, shares were sold at $73.50 a piece, roughly equal to where they were priced in 2021.
The $5 billion increase in valuation is the result of new shares that CEO Ali Ghodsi said have gone to the 3,500 employees the company has hired in the past two years, as well as to investors. Headcount now sits at around 6,000.
Nvidia has been investing in bigger companies recently including Hugging Face, Cohere and CoreWeave are a few of the companies that Nvidia has backed at multibillion-dollar valuations.
Hugging Face
Databricks
Cohere
CoreWeave
Adept AI
Imbue (Formerly Generally Intelligent)
AI21 Labs
That’s quite the list Nvidia is accumulating. A bit like how Microsoft is backing OpenAI and Inflection. Nvidia is just a bit smarter in how it allocates its funding around ecosystems than Microsoft’s AI-assistant gamble that’s more about connections than who will actually end up winning.
I don’t myself see ChatGPT or Pi as being the end-game of A.I. or AGI chatbots by the way. We are on the first batter of the first inning. Meanwhile Google got Anthropic’s back.
Databricks is technically growing faster than Snowflake. And what if Nvidia could one day acquire them? What will Snowflake and Databricks become?
Databricks vs. Snowflake
via Macrometa.
