Databricks, a start-up whose software helps companies quickly process large sets of data and get it ready for analysis, said Monday it has raised $1 billion in fresh cash, including from a few prominent corporate investors. Amazon Web Services, Alphabet’s CapitalG venture arm and Salesforce Ventures all joined in, according to a statement. Microsoft, which invested in Databricks earlier, is also participating in the new round, the statement said.
The transaction, which values Databricks at $28 billion, shows the top three U.S. cloud providers recognize that the company represents an opportunity similar to Snowflake, another firm with cloud software that helps companies manage data. Databricks rose to prominence because it helped companies implement a version of Apache Spark, an alternative to the Hadoop technology for storing lots of different kinds of data in massive quantities. It can help clean up data for exploration in data visualization software such as Salesforce-owned Tableau. The Databricks software gives companies a simple way to run this sort of software, without having to worry about configuring and updating it. Databricks is also increasingly helping organizations deploy artificial intelligence models.
“We’re 100 percent cloud-native,” Databricks CEO Ali Ghodsi told CNBC in a 2019 interview. That same principle applies to Snowflake, which Salesforce had also invested in and has demonstrated strong revenue growth following its initial public offering last year. Amazon, the largest cloud provider, did not put money into Snowflake before it went public. Now it’s investing in Databricks at a later stage than it has historically done. Founded in 2013, Databricks is a big data software company. It specializes in helping other companies analyze massive amounts of data. And the industry knows just how valuable this company’s technology is/
Amazon, Alphabet, Microsoft, and Salesforce each invested in Databricks’ $1 billion Series G round. That alone tells us that something big is going on at this private company. What’s more, we saw late stage money from investors like T. Rowe Price, BlackRock, and the Canada Pension Plan Investment Board. That means the company is tracking for an IPO. This will likely be its last VC round as a private company. Databricks has now raised $1.9 billion in venture capital since its founding. And this latest round values the company at $28 billion.
Looking at the financials, Databricks grew its revenue 75% last year to $450 million. At a $28 billion valuation, this implies an inflated EV/sales ratio of over 62. That’s certainly not a bargain. Yet Amazon, Google, Microsoft, and Salesforce were each willing to invest at these levels.