What Does Databricks’ $1B Funding Round Mean for the Data Market?
The funding round
This series G funding round was led by Franklin Templeton. New investors that joined this funding round include the Canada Pension Plan Investment Board, Fidelity Management & Research and Whale Rock. In total, Databricks has 28 investors. These new investors join the likes of Microsoft, Coatue Management and Tiger Global Management.
More than 5,000 organizations around the world already use Databricks’ services. However, the interest in their expertise is clearly growing, given the success of its latest funding round. This was reiterated by Ali Ghodsi, the CEO and co-founder of Databricks. He sees the investment as evidence their vision is working and their unified data platform works for all data-driven use cases.
It isn’t just their recognition that data management is powerful. Their deployment of the lakehouse architecture that allows for the handling of unstructured and semi-structured data is what’s fuelling their growth. Lead investor Franklin Templeton has recognized this and is excited to help push Databricks forward, according to their CEO Jonathan Curtis.
How Databricks will use the $1 billion
“We are going to be investing heavily in the technology that will empower the Databricks Lakehouse platform,” said Keyana Corliss, Databricks’ head of global communications, when asked how Databricks will deploy the funds.
“We believe lakehouse platform will be the data architecture of the future, and we'll use this money for R&D as well as M&A to expand the adoption and power of our platform. We'll also use the funding to scale and accelerate global expansion.”
Ghodsi also added that they’ll be keeping an eye out for talent when seeking merger and acquisition (M&A) opportunities. Databricks is no stranger to acquisitions. It acquired Redash in 2020. They used the expertise from Redash to implement a rich visualization and dashboarding experience. He also said they will look to expand their engineering team.
Round’s significance in the data market
Databricks isn’t the only player in the data market. Other companies such as AWS, Snowflake, and IBM also offer similar solutions. However, what sets Databricks apart is that it simplifies the creation and leveraging of spark clusters, it supports multiple languages and multiple platforms, it has rich notebooks and dashboards and it has made significant contributions to the open-source community. Its two major contributions to the open-source community are MLfLow and the Koalas package. MLflow assists with the deployment, tracking and maintaining of models, while Koalas helps engineers to scale pandas code effectively in a distributed environment.
All of these elements existed before the additional $1 billion in funding. This functionality has brought Databricks to the point where it is a leader in the data market. Gartner places it ahead of companies such as Microsoft, Google and IBM. If you put $1 billion dollars into the hands of a company that has made this kind of progress since being founded in 2013, it may be poised to remain a market leader. Further developing their lakehouse platform with this $1 billion may be the factor that further sets Databricks apart from any emerging players in the data market
Databricks’ funding road and future
Databricks has been steadily making progress since 2013. They attracted the likes of Andreas Horowitz early on and continued to add big names to their investor list. These include New Enterprise Associates, Green Bay Ventures and Geodesic Capital, before adding Franklin Templeton and a new group of investors during their Series G round.
Given this history, along with its now $28-billion valuation, Databricks seems to be preparing itself for an IPO later this year. Adding a big name like Elena Donio, the former Concur president, to their board will certainly assist them in making this transition.
Tech companies have had great success recently going public. In addition, Databricks has apparently surpassed $425 million in annual recurring revenue (ARR), which represents over 75% year-over-year growth. With its planned product and geographic expansions, this revenue should grow.
While Ghodsi states that they enjoy being private for the time being and they want to implement more of their strategies more before going public, with the recent investment, they appear to have plenty of capital to continue their growth trajectory. We may well see a public Databricks later this year along with an even bigger valuation. Snowflake, another data company, was valued at $12.4 billion before going public and doubling its value.
Databricks’ journey has certainly been meteoric. You never know how the public markets may play out, but the company has a clear vision with Ghodsi at the helm. Ghodsi recognizes that while what they have is good, they need to keep spending on R&D. The data and AI markets are growing rapidly, and an ongoing R&D effort must be maintained in order to keep a competitive edge, particularly against tech giants aiming for the data market.
