Databricks: What Lies Ahead

Databricks, the third-largest component of the Prime Unicorn Index, is the developer of an integrated analytics platform aimed at simplifying complex data analysis. The platform streamlines data amalgamation, enables real-time data investigation, offers interactive digital notebooks, and incorporates seamless workflows while ensuring enterprise-level security. By bringing together data science, engineering, and business operations, the platform enhances the efficiency, performance, and security for data science teams in a fine-tuned runtime environment.

Databricks has been active in the news lately, with rumors of an upcoming raise, large cash burns, and a partnership with Microsoft that threatens the latter’s investment in OpenAI. Given the company’s significant influence on the Index, let’s look at what they’ve been up to.

Rumored Upcoming Raise

According to a recent article from Bloomberg, Databricks plans to raise at a $43 billion valuation. One of its previous investors, T. Rowe Price, has already agreed to invest more than $250 million in the next round. According to the Information, this round would be raised at about the same preferred price per share (PPPS) as the previous round.

Databricks has raised nearly $3.5 billion over eight rounds, with the most recent round being a $1.6 billion Series H round in August 2021 at a PPPS of $73.48. This valued the company at $31.3 billion on a post-money valuation basis and included participation from T. Rowe Price, Tiger Global, Andreessen Horowitz, BlackRock, Fidelity, Coatue Management, and others.

Databricks was marked down in the Index to a PPPS of $68.36 on October 12, 2022, following consecutive EPEN filings that indicated a decrease in the value of common shares granted to company executives. This had little impact on the valuation due to the issuance of new shares.

Large Cash Burns

According to The Information, Databricks has been increasing its cash burns in order to accelerate revenue growth. Between 2022 and 2025, Databricks plans to burn $1.5 billion while seeing revenue grow >50% each year for the next three years. The company’s projected revenue for 2023 is $1.6 billion.

Microsoft Partnership

According to another article from The Information, Microsoft plans to sell a version of Databricks’ software that enables customers to make specific AI apps for businesses. This service, offered through Azure, would help companies to build AI models from scratch or repurpose open-source models, which could compete with OpenAI’s closed-source models. Since Databricks’ software was initially geared towards experienced data scientists, Microsoft will use an OpenAI-powered chatbot to help less sophisticated customers use the platform.

See how Databricks has performed against the Prime Unicorn Index below.