Databricks’ Record-Breaking $10 Billion Fundraising: A Wild Ride for Investors
It’s been a wild week for investors trying to get their hands on Databricks’ record-breaking $10 billion fundraising, one of the VCs leading the deal told TechCrunch.
"There were calls that went well late into the night, and that’s okay, that’s how good opportunities emerge," George Mathew, managing director at Insight Partners, described with a grin. Along with new investor Thrive, Joshua Kushner’s firm, Insight was one of the six firms that led the deal. All but Thrive were existing investors.
"We worked to make sure that we could be a co-lead, despite being already an investor on the cap table," Mathew said. Insight first invested in Databricks in 2021. But to get into this enormous deal, Insight had to tap into the Insight Partners Public Equities fund, which was set up to buy public stocks, under managing director John Wolff.
There was so much rabid interest that the allocation — and valuation — rose fast. In mid-November, the deal was on track to be around $8 billion, according to Reuters at the time. A few days later, it was $9.5 billion at a $60 billion valuation, and by Tuesday, it had closed at $10 billion with a $62 billion valuation.
For perspective, this is bigger than OpenAI’s $6.6 billion raise in October, the largest venture round of all time.
"There was so much institutional demand and interest for a generational company," Mathew said. "I’ve been an investor at Insight for the last four years on all things related to data, AI, ML. This is the thing I live for."
The Investment: A Complex Process
The investment involved a large secondary tender offer, where Databricks employees or other existing investors can sell shares. New preferred shares were issued to the new investor. Databricks didn’t specify how much of the raise was secondary, except to call the $10 billion "nondilutive," which implies a good chunk.
A Decade-Long Journey: From Big Data to AI Infrastructure
Databricks, founded in 2013, could have been a tragic tale. A decade ago its founders created a technology, Spark, that was key to yesteryear’s ‘big data’ trend. Spark helped enterprises analyze their in-house big data super fast.
With the rise of data hosted in the cloud, the company was processing data, then handing it over to other players. It could have found itself slowly relegated to an irrelevant big data feature.
Databricks co-founder and CEO Ali Ghodsi (pictured) sought out advice from Mathew, who had run big data company Alteryx as COO before becoming a VC. The two had been friends since Databricks’ early days.
"Ali called me a few years ago and said, ‘Hey, I’m thinking about going into the data warehousing market.’ And I just said, ‘That’s the stupidest idea I’ve ever heard.’ And I could not have been more wrong," Mathew laughs, adding he’s glad Ghodsi didn’t listen to him.
A Game-Changer in AI Infrastructure
Databricks’ move into the AI infrastructure space has proven to be a wise decision. With the rise of machine learning and deep learning, companies are looking for ways to scale their data processing capabilities.
Databricks’ platform is designed to handle large-scale data processing and analytics workloads, making it an attractive solution for companies looking to build AI-powered applications.
A Record-Breaking Fundraising: What’s Next?
The $10 billion fundraising is a record-breaking amount for any company. With this influx of capital, Databricks will be able to further develop its platform and expand its reach into new markets.
This investment round also validates the growing importance of AI infrastructure in the tech industry. As more companies look to build AI-powered applications, the demand for scalable data processing capabilities will only continue to grow.
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