MW Databricks' $10 billion haul shows how it may delay an IPO - along with OpenAI and SpaceX

By Steve Gelsi

With ample money available in private markets, Databricks, a specialist in data and artificial intelligence, is valued at $62 billion

San Francisco-based software company Databricks Inc. said Tuesday it has raised $8.6 billion out of a $10 billion targeted fundraising in private markets as the latest example of why some major companies don't need to go public to win capital.

While investors continue to eye potential initial public offerings from the likes of high-profile names such as SpaceX or OpenAI, the reality is that they can continue to grow as private companies without the extra filing requirements and scrutiny of a publicly listed company.

This is the path that Databricks is also on at the moment. It values itself at $62 billion after the latest funding round led by Thrive Capital, with support from some of Silicon Valley's biggest names including Insight Partners, DST Global, Andreessen Horowitz and WCM Investment Management.

Institutional investors taking part in the funding include Ontario Teachers' Pension Plan, Wellington Management, Iconiq Growth, Sands Capital and MGX.

Given the amount of money it's raising, Databricks has a compelling story to tell.

It's managed to post 60% year-over-year revenue growth as its artificial intelligence software benefits from increased tech spending across the board by U.S. companies.

The company's main product, Databricks Data Intelligence Platform, helps companies "democratize" their access to data to make it easier to tap information for machine learning, analytics and other AI applications.

"Customers use the Data Intelligence Platform to find and treat diseases and cancer earlier, identify new ways to combat climate change, detect financial fraud, develop pharmaceuticals faster, reduce time to mental health intervention, decrease local financial inequality and much more," the company said.

Its third-quarter revenue increased by 60%. The company is projecting $3 billion in annual revenue and its first three-month period of positive cash flow in the fourth quarter. It did not provide an estimate of when it would generate net income.

These private market investors will want to see a return on their money at some point in the future.

That'll be achieved by either a sale to a larger company such as Nvidia Corp. $(NVDA)$, Microsoft Corp. $(MSFT)$ or Oracle Corp. $(ORCL)$ - or through an initial public offering of stock.

But aside from these and a few other blockbuster tech names, few businesses are big enough to buy a company with a valuation of $62 billion.

That would mean that Databricks may be floating an IPO after all, but not any time soon.

To be sure, plenty of bigger private companies may go public after the successful debut of ServiceTitan Inc.'s (TTAN) IPO at $71 a share last week. At last check, the stock is up another 4.5% on Tuesday to $110 a share.

Also read: ServiceTitan's IPO growth story wins over Wall Street with huge market opportunity in building trades

-Steve Gelsi

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December 17, 2024 10:45 ET (15:45 GMT)

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