Databricks, a producer of software for data analytics and AI, has secured a Series I round for more than $500 million, giving it a $43 billion valuation.
This round stands out, especially in light of the fact that many late-stage businesses are seeing their values reduced due to a general downturn in investment. Databricks last raised $1.6 billion in August 2021 at a post-money valuation of $38 billion; seeing the business increase its asking price by $5 billion is evidence that larger trends do not, if at all, affect everyone equally.
The list of participants in this Series of investors It gives the impression that it is both a pre-IPO capital round and a tactical investment. The “pre-IPO” segment is funded by capital from T. Rowe Price, Morgan Stanley, Fidelity, and Franklin Templeton because these investors frequently engage in businesses that are anticipated to go public shortly. NVIDIA and Capital One Ventures are our key partners.
The relationship between NVIDIA and Databricks is obvious given that the latter is investing in its AI capabilities and has a track record of marketing data and machine learning tools. The demand for NVIDIA’s chips and software driven by AI is also strong. NVIDIA chips are in such high demand that some nations are attempting to obtain a supply of their own.
The Series I also included participation from other, more conventional private-market investors including Andreessen Horowitz and Tiger Global.
In this industry, which is dominated by more conservative sales multiples, how did Databricks manage an upturn? The business said that its revenue run rate exceeded $1.5 billion in the second quarter that concluded on July 31. Databricks also stated that it had more than 10,000 customers worldwide, more than 300 of whom are already producing revenue for its software and services at a rate of $1 million or more annually.
Analyzing some of the Databricks data that was released a few months ago, it seems that the company’s revenue growth is decreasing. However, Databricks also noted today that the “strongest quarterly incremental revenue growth” in its history was experienced during the company’s second fiscal quarter.
All right. And it is sufficient for investors to speculate that Databricks will be able to surpass that $43 billion price tag when it does go public.
However, that means that Databricks is not hurrying up to an IPO, which would annoy people eager to read its eventual S-1 filing. The company seems a tad costly for the current market with an effective revenue multiple of 29x. That suggests the business intends to expand a little bit more before attempting to defend its most recent valuation on the stock market. Thus, a later IPO.
For Databricks, which we did not believe was particularly low on cash anyway, the new financing serves more as a refreshment than a recharge. This battle may also provide it greater room to make additional tactical choices. There is a fierce competition to capture a piece of what tech industry insiders anticipate to be a sizable AI business. A fresh half-billion in capital certainly won’t hurt Databricks’ ambitions.