Databricks, a data analytics software company based in San Francisco, has raised over $500 million in funding at a valuation of $43 billion, bucking the trend of a pullback in tech stocks. Despite the decline in cloud software stocks and the subsequent drop in valuations, Databricks has managed to maintain its share price and attract new capital.
The latest funding round saw shares sold at $73.50 each, remaining consistent with pricing from the previous year. The $5 billion increase in valuation is attributed to the issuance of new shares to the company’s employees, as well as investors. Databricks has been able to avoid a reduction in its valuation, unlike other high-valued tech startups that are turning to IPOs for their next funding rounds.
In recent months, the tech market has been affected by high interest rates and economic concerns, particularly impacting companies that are burning cash. However, Databricks has capitalized on the growing momentum in the field of artificial intelligence (AI). In July, the company acquired MosaicML, a startup specializing in efficiently running large language models for generating natural-sounding text.
Notably, chipmaker Nvidia has become a new investor in Databricks. Nvidia has been investing in several AI infrastructure startups, including Hugging Face, Cohere, and CoreWeave. The strategic partnership between Nvidia and Databricks is seen as a complementary move, as both companies are delving deeper into AI. Databricks relies heavily on Nvidia’s graphics processing units, especially since the acquisition of Mosaic.
Another noteworthy investor in Databricks is Capital One’s venture arm, marking its first-time participation. Capital One is the largest customer of Snowflake, another cloud software company, while also being a customer of Databricks. Capital One utilizes Databricks’ technology, particularly for fraud detection.
The funding round was led by existing investor T. Rowe Price and included participation from Andreessen Horowitz, Baillie Gifford, Fidelity, Morgan Stanley’s Counterpoint Global, and Tiger Global, among others.
CEO Ali Ghodsi stated that an IPO is still part of Databricks’ roadmap and that the recent funding does not alter the company’s plans. However, no specific timeline for an IPO was provided.
Databricks will be closely watching the market in the coming weeks to gauge demand for new tech opportunities. Arm, a chip designer, is returning to the public market after being taken private in 2016, while companies like Instacart and Klaviyo have also filed their prospectuses. The last notable venture-backed tech IPO in the U.S. occurred at the end of 2021.
Despite the challenging economic climate and reduced purchasing by major customers, Databricks has remained in growth mode and has not announced any layoffs. The company has implemented cost-cutting measures primarily through software subscriptions, reducing expenses and optimizing technology usage.
In the quarter ending in July, Databricks reported a $1.5 billion annual revenue run rate, with sales growing 50% year over year. Snowflake, a comparable company, recorded a 36% growth in the latest quarter, generating $674 million in revenue.
Overall, Databricks’ ability to secure substantial funding and maintain its valuation in a volatile tech stock market underscores the continued interest in AI and data analytics. The company’s partnerships with Nvidia and Capital One add further credibility to its position in the industry. As Databricks keeps an eye on the IPO market, its growth trajectory and strategic moves will be key factors to watch in the months ahead.
Keywords: Databricks, funding, valuation, tech stocks, IPO, cloud software, artificial intelligence, Nvidia, chipmaker, Capital One, T. Rowe Price, growth, revenue.