Databricks IPO: What to know about Databricks

Databricks IPO: What do we know about the Databricks IPO?

The Databricks IPO date has not yet been confirmed, but interest is growing for its inevitable flotation. In January 2023, the company was reported to be building the internal software needed to report financial information and comply with regulatory requests once public. The post-IPO valuation of the company is hard to ascertain as a lot could happen between now and its listing but, judging by the current valuation, could be well in excess of $40 billion once the IPO is complete.

How much is Databricks worth?

Databricks is worth around $33 billion as of its most recent valuation in October 2022. The company was valued at $38 billion following its latest fundraise of $1.6 billion in August 2021, led by Counterpoint Global. The decrease occurred when Databricks trimmed its internal share price in accordance with a wider trend in the tech industry of slashing valuation amid economic downturns.

What does Databricks do?

Databricks is a San Francisco-based enterprise software company that was started in an attempt to commercialise the Apache Spark analytics engine. The business offers an open-source big data platform that helps enterprises manage data through machine learning and artificial intelligence.

The company was founded in 2013 by Swedish-Iranian computer scientist Ali Ghodsi, alongside a team of other engineers who had previously worked on Apache Spark at the University of California’s AMPLAB. The same year saw the company raise $13.9 million in initial funding in an early step towards emerging from stealth mode, and 2014’s $33 million Series B round allowed the company to make key hires and roll out new product, Databricks Cloud.

Over the following five years, the company was able to grow its userbase to around 5,000 companies and attract some $850 million in funding, largely from California-based venture capital firm Andreessen Horowitz. The investments culminated in a $400 million raise in 2019 that allowed the company to further expand its R&D and boost international expansion plans.

In 2021, the company secured $2.6 billion over Series G and Series H rounds. The funding was earmarked to develop its pioneering ‘Data Lakehouse’, combining the data management aspects of a data warehouse with the low-cost storage perks of a data lake.

As of August 2022, Databricks announced it reached $1 billion ARR. That same year the company unveiled Lakehouse, a new service combining both a data warehouse and data lake, allowing customers to store both structured and unstructured data together.

The company reported no slowing down on the 80% growth rate first announced in 2021, and a rise to over 5,000 employees by the end of 2022.

Who are Databricks’s competitors?

Databricks’s competitors include the likes of Domino Data Lab, Alteryx, and Snowflake, as well as offerings from giants such as Amazon Web Services, Google, and Microsoft. In general, Databricks has tried to differentiate itself from its rivals based on providing the most up-to-date unified analytics platform based on its Apache Spark open-source underpinnings.

The company has been praised for its superior technology, suitability for data science and machine learning workloads, and minimal vendor lock-ins. Meanwhile, competitors have variously been said to have an edge in business intelligence, support, and ease of use.

How does Databricks make money?

Databricks makes money through subscription to its Software as a Service (SaaS) tools. The company uses ‘Databricks Units’, or DBUs, to measure processing capability per hour, and bills its users on per-second usage rather than having a set cost. 

What is Databricks's business strategy?

Databricks’s business strategy from the beginning was centred around providing a service that allowed companies to manage vast amounts of data in as straightforward a manner as possible. The early goal, admitted Ghodsi to Forbes in 2021, was to sell the company for between $100 and $200 million, an aim now comprehensively eclipsed by the outsized growth the company has seen since.

Databricks was willing to bet on a trend that many believed wouldn’t take off – namely that the cloud would house all data without the need for an on-premise solution. The plan would naturally also have to account for monetising the service, as developers in the early days were using it for free. The company addressed this by continually updating the SaaS offering in the background and charging customers for this development in addition to running, operating, and hosting the software.

In 2020, Databricks acquired Israeli company Redash, which assists analysts and data scientists visualise their data and build dashboards around it. The acquisition represented a bid to compliment the backend Lakehouse functionality with a comprehensive front-end service to make Databricks a go-to platform for all data teams.

With the proceeds of an IPO, Databricks will continue developing its Lakehouse software with additional security and governance features, as well as fund a hiring spree that would bring headcount closer to 5,500 and elevate the R&D and sales and marketing push.

The coronavirus pandemic is said to have accelerated companies’ eagerness to analyze data in the cloud. However, prospective speculators on the impending IPO will be interested to learn more about the margins on the reported $1 billion in revenue for 2022, details that have so far not been forthcoming.

Is Databricks profitable?

As per above, Databricks does not releases figures in relation to its profitability, so any figure on this metric would be speculative.   

Who owns Databricks?

The ownership of Databricks is split between a range of individuals, such as the founders Ghodsi, Zaharia, and Stoica, as well as financial institutions such as Counterpoint Global, and Andreessen Horowitz. Numerous tech giants such as Microsoft, Google and Amazon also hold a stake in the company. 

Key personnel of Databricks

• Ali Ghodsi – Co-Founder and Chief Executive Officer
• Matei Zaharia – Co-Founder and Chief Technology Officer
• Ion Stoica – Co-Founder
• Ron Gabrisko – Chief Revenue Officer
• Rick Schultz – Chief Marketing Officer