AI startup Databricks hits $62 billion valuation in record VC round

By Krystal Hu and Niket Nishant

(Reuters) - Databricks has secured a $62 billion valuation after raising a whopping $10 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 AI.

The oversubscribed round, led by 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 and to cross the $3 billion revenue run rate in January. It also expects to generate $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 startups 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 M&A opportunities for startups, according to Ali Ghodsi, co-founder and CEO 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. 

Widely seen as a public market candidate, 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 to the employees," said Ghodsi.

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

The San Francisco, California-based company enables its 10,000 customers, including Jack Dorsey-led payments firm Block, telecom giant Comcast, electric vehicle maker Rivian and energy company Shell to analyze data.     

The company, with 7,000 employees, competes with Snowflake, which has a market capitalization of about $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's more advantages to scale," said Vince Hankes, partner at Thrive Capital.

Insight Partners, which wrote one of the firm's biggest checks this year of about $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 organizations to unlock the full potential of their data," said George Mathew, managing director at Insight Partners.

(Reporting by Niket Nishant in Bengaluru and Krystal Hu in Toronto; Editing by Tasim Zahid and Alan Barona)