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. 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.

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How to trade Databricks

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How much is Databricks worth?

Databricks is worth around $38 billion following its latest fundraise of $1.6 billion in August 2021, led by Counterpoint Global. This valuation came after a fundraise of $1 billion and a $28 billion valuation in February the same year.

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.

Most recently 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 September 2021, the revenues for Databricks, covering its most recent financial year, were $425 million, with an employee count of around 2,000.

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 3,000 and elevate the R&D and sales and marketing push.

The coronavirus pandemic is said to have accelerated companies’ eagerness to analyse data in the cloud. Indeed, as of September 2021, the company has said it’s on track for $1 billion in revenue for 2022. However, prospective speculators on the impending IPO will be interested to learn more about the margins on that figure, 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