Databricks, one of the world’s most valuable private tech companies, is in the process of raising significant capital, according to sources who spoke to CNBC on the condition of anonymity. The San Francisco-based data analytics and AI firm is raising at least $5 billion in its latest funding round, with the possibility of reaching $8 billion as discussions continue. This funding round would value Databricks at $55 billion, positioning it among the largest equity raises of the year.
The funding round is designed in part to provide liquidity to Databricks employees by allowing them to sell shares. One source indicated that this reduces internal pressure for a liquidity event such as an IPO. Another source suggested that the fundraising effort makes the company’s highly anticipated public debut less urgent, though an IPO could still take place in the latter half of 2024.
During a recent appearance at the Cerebral Valley AI Conference, CEO Ali Ghodsi reportedly stated, “If we were going to go, the earliest would be, let’s say, mid-next year, or something like that. So, you know, [an IPO] could happen next year.” He emphasized that his focus is on Databricks’ long-term success rather than rushing to go public.
Founded in 2013, Databricks specializes in software that helps enterprises organize and analyze data, using machine learning to support clients like AT&T and Walgreens. The company has been riding the wave of momentum in artificial intelligence, evidenced by its $1.3 billion acquisition of MosaicML earlier this year. MosaicML specializes in large language models capable of generating natural-sounding text, further bolstering Databricks’ capabilities in the AI space.
The firm’s annualized revenue is projected to reach $2.4 billion by mid-2024, according to information shared with investors earlier this year.
Databricks is backed by a range of prominent investors, including Nvidia, Capital One, Andreessen Horowitz, Baillie Gifford, Fidelity, Insight Partners, and Tiger Global. The company last raised $500 million at a $43 billion valuation, underscoring its significant growth.
This funding round could become the largest in a strong year for artificial intelligence investments. AI-focused startups have received one-third of venture capital dollars in 2024, according to CB Insights. OpenAI currently holds the largest funding round of the year, having raised $6.6 billion in October at a valuation of $157 billion.
Databricks’ decision to remain private contrasts with the struggles faced by software companies in the public market, where higher interest rates have weighed on valuations. For example, rival Snowflake has seen its stock decline by 13% this year. Unlike other IPO-ready companies like Stripe, which have experienced valuation cuts, Databricks has increased its valuation while continuing to expand its workforce.
The Information was the first to report Databricks’ latest funding round. A Databricks spokesperson declined to comment.
