Databricks, one of the world’s most valuable private technology companies, is raising billions of dollars in new funding as it chooses to delay its long-awaited 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 technology 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, although the stock market debut could still occur in the second 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 allows companies to create their own generative AI tools, leveraging machine learning to unlock the potential of data across industries. Databricks’ customers include big names like AT&T and Walgreens, who use its technology to glean actionable insights from complex data sets.
This latest funding round could mark one of the largest capital raises in a year dominated by AI investments. According to CB Insights, one-third of venture capital funding in 2024 went 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, by comparison, last raised $500 million in funding at a $43 billion valuation, and its backers include big names like 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 told investors it expects its annualized revenues to reach $2.4 billion by mid-2024, underscoring its rapid growth and dominant market position.
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 industry, saw its shares plummet 13% in 2024. Meanwhile, other high-profile software companies, such as Stripe, were forced to reduce their ratings to remain competitive. . In contrast, Databricks has continued to increase 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 stressed that the focus is on the company’s success over the next ten to twenty years, rather than rushing to go public. “If we were to consider going public, the earliest deadline would probably be the middle of next year,” Ghodsi said. “So it’s something that could happen, but we’re optimizing for long-term success.”
While the company hasn’t completely ruled out an IPO, the current market environment for tech stocks has made the decision to stay private more appealing. Many tech companies have struggled to maintain high valuations after their public debut, prompting Databricks to take a more cautious approach. By securing significant financing 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 sparked significant interest in companies developing tools and platforms that harness the power of AI. The company’s ability to capitalize on this momentum has set it apart from its competitors, positioning it as a leader in the rapidly evolving artificial intelligence market.
Despite the excitement surrounding Databricks’ growth and its role in the artificial intelligence 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 to expand its influence in the data and artificial intelligence sectors.
As the broader tech market grapples with challenges such as rising interest rates and slowing IPO activity, Databricks’ ability to attract significant investor interest underlines its unique value proposition. With billions in new funding and a growing portfolio of AI-powered capabilities, the company is poised to remain a key player in shaping the future of data analytics and AI.
