Databricks becomes private markets’ AI lynchpin
By Pranav Kiran
Artificial intelligence startup Databricks is setting a firm foundation in unsteady times. The company is seeking fresh funds at a valuation of over $130 billion, up about 30% in just two months, according to The Information. It’s a hefty premium to $80 billion public rival Snowflake 
SNOW. Time was, stock markets set the valuation benchmark and were the path to enormous size. Concentrated venture capital cash and shelter from investor fears upends the dynamic.
Databricks’ products tame unstructured data like audio call transcripts or PDF files that can’t easily fit in traditional databases. That’s important for AI, which depends on devouring clearly classified information.
Given its size, one might expect Databricks to be well on the way to an initial public offering. Indeed, the company eyed a listing back in 2021, Bloomberg reported. Public markets have important attractions. The crowds of buyers on global stock exchanges can support capital needs. Investors with an eye on future cash flows have flocked to both fast-growing upstarts and mature, profitable stalwarts. Venture capitalists have a narrower focus, looking to strike big with one superstar that compensates for a clutch of inevitable duds. This, plus private markets’ illiquidity, should command a valuation discount.
Public markets’ charms, though, look strained. The pathway to a listing has narrowed: the number of tech launches crashed to just 29 between 2022 and 2024 from 126 in 2021 alone, according to Jay Ritter of the University of Florida. Fears that AI will destabilize traditional software hurt stocks from giant Salesforce 
CRM to Snowflake. The BVP Nasdaq Emerging Cloud Index, which tracks younger hopefuls, has lagged.
Worse, rising fears that the AI boom has led to a splurge of wasteful spending have rocked markets. As a private company, Databricks can sidestep much of that angst. As opposed to technology giants like Oracle 
ORCL, it isn’t splurging vast amounts on ever-larger data centers. Meanwhile, VCs are pot-committed: nearly two-thirds of U.S. venture dollars went to AI this year, Wells Fargo reckons.
It helps that the business seems strong. Databricks said in September that its revenue run-rate grew over 50% in the second quarter, surpassing $4 billion. That outpaces Snowflake’s 32% product revenue growth during the quarter ended in July. Databricks’ net retention rate is also above 140%, indicating that continuing customers stick around and keep spending more while new ones are coming onboard. Snowflake’s net revenue retention rate sits at 125%.
If sustained, a mooted $130 billion valuation would be nearly 22 times Databricks’ expected revenue, some 59% above Snowflake’s multiple. In a fearful time, a private juggernaut might seem safe harbor, even offering justification for VCs’ other concentrated bets. Databricks just might be the new AI standard bearer.
CONTEXT NEWS
Data software firm Databricks is in talks to raise funds at a valuation of more than $130 billion, about 30% higher than its last financing round two months ago, The Information reported on November 17, citing two people familiar with the discussions.
In September, the company closed a $1 billion funding round that valued it at over $100 billion, making it one of the world’s most valuable private companies.