Databricks, one of the most prominent private technology firms in the world, is raising billions of dollars in fresh funding while opting to delay its long-anticipated public offering, sources familiar with the matter told CNBC. The San Francisco-based company is reportedly securing at least $5 billion in its latest funding round, with the potential to raise as much as $8 billion as discussions progress. This new round would push Databricks’ valuation to $55 billion, making it one of the most valuable private tech companies globally.
The funding round, according to insiders, is partly designed to allow employees to sell shares, easing internal pressure for a liquidity event such as an IPO. By providing a mechanism for employees to cash out, Databricks reduces the urgency of going public, though a debut on the stock market could still occur in the latter half of next year.
Founded in 2013, Databricks specializes in software that helps organizations manage, analyze, and derive insights from massive amounts of data. Its platform also enables companies to build their own generative AI tools, leveraging machine learning to unlock the potential of data across industries. Databricks’ clients include major names such as AT&T and Walgreens, which use its technology to glean actionable insights from complex datasets.
This latest funding round could mark one of the largest equity raises in a year dominated by artificial intelligence investments. According to CB Insights, one-third of venture capital funding in 2024 has gone to AI-focused startups. The record for the largest funding round this year was set by OpenAI, which raised $6.6 billion in October at a staggering $157 billion valuation. Databricks, in comparison, last raised $500 million in funding at a $43 billion valuation, and its backers include notable names such as Nvidia, Andreessen Horowitz, Fidelity, Insight Partners, Tiger Global, and Capital One.
The company has been riding the wave of AI enthusiasm, bolstered by its acquisition of MosaicML earlier this year. MosaicML, which specializes in large language models capable of producing human-like text, was purchased for $1.3 billion, further solidifying Databricks’ position in the competitive AI landscape. The company has told investors that it expects its annualized revenue to reach $2.4 billion by mid-2024, underscoring its rapid growth and market dominance.
Databricks’ decision to remain private comes at a time when software stocks are facing significant headwinds due to rising interest rates. For example, Snowflake, a key competitor in the data storage and analytics space, has seen its shares drop by 13% in 2024. Meanwhile, other high-profile software companies, such as Stripe, have been forced to cut their valuations to remain competitive. In contrast, Databricks has continued to grow its valuation and expand its workforce, defying broader market trends.
At the recent Cerebral Valley AI Conference on November 20, Databricks CEO Ali Ghodsi explained the company’s long-term vision. He emphasized that the focus is on the company’s success over the next decade or two, rather than rushing to go public. “If we were to consider going public, the earliest timeline would likely be the middle of next year,” Ghodsi said. “So, it’s something that could happen, but we are optimizing for long-term success.”
While the company has not ruled out an IPO entirely, the current market environment for technology stocks has made the decision to stay private more appealing. Many tech firms have struggled to maintain strong valuations following their public debuts, prompting Databricks to take a more cautious approach. By securing significant funding through private markets, the company can continue to grow without the pressure of quarterly earnings targets or market volatility.
Databricks has also benefited from the ongoing AI investment frenzy, which has driven substantial interest in companies developing tools and platforms that harness the power of artificial intelligence. The company’s ability to tap into this momentum has set it apart from peers, positioning it as a leader in the rapidly evolving AI market.
Despite the excitement surrounding Databricks’ growth and its role in the AI boom, the company remains tight-lipped about its future plans. A spokesperson for Databricks declined to comment on the latest funding round or the timing of a potential IPO. However, industry analysts believe the company is well-positioned to capitalize on its strengths and continue expanding its influence in the data and AI sectors.
As the broader technology market grapples with challenges such as rising interest rates and slowing IPO activity, Databricks’ ability to attract significant investor interest underscores its unique value proposition. With billions in new funding and a growing portfolio of AI-driven capabilities, the company is poised to remain a key player in shaping the future of data analytics and artificial intelligence.
