AI start-up Databricks raises $13.5b from investors including GIC

BENGALURU/TORONTO – Databricks has secured a US$62 billion valuation after raising a whopping US$10 billion (S$13.5 billion) in one of the largest venture capital funding rounds in history, underscoring the unprecedented appetite for fast-growing private companies that have seen accelerated growth due to artificial intelligence (AI).

The oversubscribed round, led by Mr Joshua Kushner’s Thrive Capital, drew commitments from elite investors including Andreessen Horowitz, DST Global, GIC, Insight Partners and WCM Investment Management, confirming an earlier Reuters report last week.

Existing backer Ontario Teachers’ Pension Plan and new investors Iconiq Growth, MGX, Sands Capital and Wellington Management also participated.

Databricks expects to achieve positive free cash flow for the first time in the quarter ending Jan 31, 2025, and to cross the US$3 billion revenue run rate in January. It also expects to generate US$3.8 billion in revenue in the following fiscal year, sources previously told Reuters.

The funding will be mostly used to let some employees cash out their stock, which comprises a significant chunk of the compensation at start-ups and faces expiration after several years.

The company plans to use the remaining funds to hire top AI talent, invest in new AI products, and potential mergers and acquisitions opportunities for start-ups, according to Mr Ali Ghodsi, co-founder and chief executive of Databricks.

He attributed the 11-year-old company’s milestone of achieving positive cash flow to its efforts to slow headcount expansion amid fast revenue growth, as well as offshoring some jobs for lower costs.

The funding frees the company from the rush for a liquidity event, which means its highly anticipated initial public offering could take longer.

“The company, I believe, will be a public company for the majority of its lifetime. And it’s not if, it’s a when. The absolute theoretically earliest we could do it would be next year, but we have some flexibility now. The thing that is top of mind for management and me is providing liquidity opportunities for the employees,” said Mr Ghodsi.

The round surpasses the US$6.6 billion raised by OpenAI in October, reflecting a massive appetite for companies simplifying AI integration and driving soaring valuations for start-ups like Microsoft-backed OpenAI and Mr Elon Musk’s xAI.

The San Francisco-based Databricks enables its 10,000 customers, including payments firm Block, telecoms giant Comcast, electric vehicle maker Rivian and energy company Shell, to analyse data.

The company, with 7,000 employees, competes with Snowflake, which has a market capitalisation of about US$57 billion.

“Databricks is one of the iconic private tech companies that we think are poised to become the next platforms. And in technology, the platforms have shown that as they get bigger, they get better, and there are more advantages to scale,” said Thrive Capital partner Vince Hankes.

Insight Partners, which wrote one of the firm’s biggest cheques in 2024 of about US$1 billion as a returning investor, said generative AI adoption is a major catalyst in Databricks’ next stage of growth.

“The world is now needing to be able to process more unstructured data than we’ve ever had to prior. The exponential demand for enterprise-grade data management, analytics and AI systems underpins the seminal role Databricks plays in empowering organisations to unlock the full potential of their data,” said Insight Partners managing director George Mathew. REUTERS