Databricks Adds $1.6 Billion for $38 Billion Valuation

Databricks has raised $1.6 billion in Series H funding, achieving a post-money valuation of $38 billion, further validating the company’s approach to multi-cloud data management and prompting questions about a potential IPO later this year.

The round, led by Morgan Stanley’s Counterpoint Global fund, follows Databricks’ $1 billion series G, raised in February 2021, which valued the company at $28 billion. To date, the company has raised a total of about $3.6 billion.

Databricks has told numerous media outlets that it’s achieved annual recurring revenue of $600 million and an annual growth rate of 75%. The company also plans to hire at least 700 more employees by the end of the year, bringing its total to 3,000 by 2022.

Databricks also added two new hires to its executive team: Andy Kofoid, a president at Salesforce (NYSE: CRM), which is also a Databricks investor, will join this month as president of global field operations. Databricks also has hired Fermín Serna, formerly CISO at Citrix (Nasdaq: CTXS), to serve as chief security officer.

All this, and Databricks’ soaring numbers, indicate the company is reaching a point at which investors will look to a public debut. But CEO and co-founder Ali Ghodsi is deflecting any questions on that, though he has told Forbes and other outlets that an IPO is on the horizon. Meanwhile, we're left to ponder the phenomenal success of this eight-year-old firm and explore the reasons for its meteoric rise.

What’s Behind Databricks’ Success

Databricks points to its “data lake” approach as key to its success. The platform combines the ability to gather structured and unstructured data in a single repository to which artificial intelligence (AI) can be applied to fuel analytics.

But there’s a bit more to the story than that. Databricks has distinguished itself by addressing several themes that resonate with customers in today's market, including the following:

Open source. Data scientists love open source. In a survey conducted by MIT Technology Review Insights and sponsored by Databricks, half of 351 respondents reported they were looking for alternatives to their current data management wares. And of those, 50% want the flexibility of open source tools. Databricks constructed its platform from several open-source technologies, including Apache Spark, Delta Lake, and MLFlow, among others, and it continues to promote those technologies as compatible with its commercial solutions. This gives Databricks a leg up with customers such as Dollar Shave Club, which uses Databricks with Apache Spark for complex analytics.

Security. Attention to security is a priority for most enterprises, and Databricks has made it essential. The addition of a new chief security officer underscores many other efforts Databricks has made to reassure customers. The company has a range of security approaches it recommends and supports, and it boasts a fleet of important security certifications. This attention to a burning issue only works to Databricks’ advantage.

Multi-cloud. Despite costs and other issues, cloud services remain at the heart of digital transformation, which has accelerated over the past 18 months. Databricks has made a point of integrating with all major public cloud providers – AWS, Microsoft Azure, and Google Cloud Platform – and all three have invested in the company through their venture arms. This signals that they, along with companies such as Salesforce, believe Databricks adds value to their solutions. An effective ecosystem that’s willing to invest in go-to-market strategies with Databricks is an asset that's surely boosted its enterprise profile.

A Top Spot for Now

Of course, Databricks isn’t the only vendor pushing the data lakehouse/analytics approach. Snowflake may be its chief rival, but there are many others, including many of the ecosystem partners Databricks supports, such as the public cloud providers, especially AWS. Data lake suppliers also claim to have solutions to enterprise data management, including IBM (NYSE: IBM), HPE (NYSE: HPE), Oracle (NYSE: ORCL), and many others.

For now, Databricks is enjoying the limelight. And while no company’s success is ever guaranteed, the momentum behind data management and analytics ensures it will hold a place there for a while. Whether the company goes for even more money or looks to IPO, it will be exciting to follow its market trajectory.