Nvidia and Capital One have invested in acclaimed cloud data analytics startup Databricks, which is seen as a frontrunner in terms of a potential IPO.Databricks' revenue grew by 50% over the period from April to July.The company has been able to maintain its valuation in spite of the decline in tech stocks since its 2021 funding round.
Amidst tech startups turning to the once dormant IPO market for funding, Databricks, a data analytics software company, announced Thursday that it secured more than $500 million at a $43 billion valuation. Since the company's last funding round at a $38 billion valuation in 2021, competing cloud software stocks have diminished in value. Nonetheless, Databricks has sustained its share price, and the latest round saw shares sold at roughly the same amount as in 2021 - $73.50 - resulting in a $5 billion increase in valuation. This increase is accredited to both the 3,500 employees that Databricks has recruited during the last two years and investors. With a workforce of about 6,000, Databricks is encouraged by a current surge in AI and has taken over MosiacML, a software startup for running large language models, for $1.3 billion. Notable investor Nvidia has been extensively investing in artificial intelligence infrastructure startups, and is the latest investor in Databricks.
Ghodsi remarked that conversations with Nvidia CEO Jensen Huang had been ongoing for a stretch of time, with a strategic alliance becoming more critical as both companies delved deeper into AI. Databricks invests heavily in Nvidia's GPUs, mostly through multiple public clouds, and has been intensifying since the acquisition of Mosaic. He added that discussions regarding a partnership between Nvidia and Mosaic were held prior to the purchase. "Partnering more closely made sense," Ghodsi stated. "Basically, we're involved in related markets."Of note as well is the inclusion of Capital One's venture arm as an investor for the first time. For Snowflake, the banking entity is its largest customer, with Mike Scarpelli, Snowflake's financial head, revealing during an investor meeting in August 2022 that Capital One had disbursed almost $50 million annually to Snowflake, and in November he reported that it's its top customer and that "it has taken them 5.3 years to get where we are now". Similarly, Capital One is a Databricks customer, utilizing the technology for fraud detection among other applications, as documented in a 2021 blog post.Taking the lead in Databricks' newest round was pre-existing investor T. Rowe Price, with Andreessen Horowitz, Baillie Gifford, Fidelity, Morgan Stanley's Counterpoint Global and Tiger Global joining in as well.Ghodsi mentioned that when talks began with potential investors for a potential round of financing a couple of months ago, his "initial suggestion was no more than $100 million," which ended up being raised fivefold as multiple investors wanted to be part of it.As for a potential IPO, Ghodsi mentioned that it is still within the plan, and that the funding does not impact the company's objectives. He, however, did not specify a timeline for this.Databricks will have the chance to measure demand for fresh tech prospects in the coming weeks. Chip designer Arm is set to return to the public market this Thursday after getting taken private in 2016, while grocery delivery company Instacart and software vendor Klaviyo have filed their respective prospectuses last month. The last noteworthy venture-backed tech IPO in the U.S. occurred late 2021.As growth rates slow, a great number of enterprise software makers have been attempting to constrain spending due to the shaky economy causing major customers to reduce their purchases. Databricks has kept up with growth and has not made any layoffs. According to Ghodsi, the majority of the cost cutting he has executed was in regard to the company's utilization of technology, particularly software subscriptions. He stated: "We spent $30 million on 300 pieces of SaaS software, and I said, 'Let's halve that.'"In the quarter that ended in July, Databricks informed that it had reached a $1.5 billion annual revenue rate, with sales rising 50% year on year. Snowflake, which had their shares listed on the New York Stock Exchange in 2020, announced a 36% growth in the latest quarter to $674 million in revenue.
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