Insight VC describes Databricks’ wild $10B deal and the bad advice the CEO ignored

Date:

Share post:


It’s been a wild week for investors clawing their way into Databricks’ record-breaking $10 billion fund raising, 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 who 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, Reuters reported 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 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 “non dilutive,” which implies a good chunk.

Interestingly, 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 cofounder 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, nor hold his bad advice against him.

At the time, traditional data warehouse vendors – which store vast amounts of enterprise data used for analytics – were also struggling against the likes of rising cloud stars like Snowflake and products owned by the cloud vendors, like AWS’s Redshift.

But, in late 2020 Databricks launched its data warehouse product anyway – Databricks SQL – and quickly became a big Snowflake competitor.

Then came LLMs, which are continuously thirsty for high-quality enterprise data. “Where is this high quality data coming from? For the enterprise, it’s going to come from a place like Databricks,” Mathew said.

Flash forward to the end of 2024, with an IPO market still locked and investors dying to get a piece of AI infrastructure products, like data warehouses that can serve LLMs. 

Databricks says that by the end of its fiscal fourth quarter, it will be on a $3 billion revenue run rate, with a $600 million revenue run rate for Databricks SQL, up 150% for the year. 



Source link

Lisa Holden
Lisa Holden
Lisa Holden is a news writer for LinkDaddy News. She writes health, sport, tech, and more. Some of her favorite topics include the latest trends in fitness and wellness, the best ways to use technology to improve your life, and the latest developments in medical research.

Recent posts

Related articles

EV startup Canoo files for bankruptcy and ceases operations

Seven-year-old electric vehicle startup Canoo has filed for bankruptcy and will “cease operations immediately.” The company is...

Amazon suspends US drone deliveries following crash at testing facility

Amazon has paused testing of its delivery drones following a crash involving two of its models, according...

ChatGPT’s head of product will testify in the US government’s case against Google

The U.S. government wants to prove that Google’s competitors face overwhelming barriers to entry as part of...

Netradyne snags $90M at $1.35B valuation to expand smart dashcams for commercial fleets

Distracted driving is one of the leading causes of car accidents and a major reason why auto...

Perplexity acquires Read.cv, a social media platform for professionals

Read.cv, a social media platform for professionals that competed with LinkedIn, has been acquired by AI-powered search...

TikTok ban: How to download your videos and data

The Supreme Court has upheld a ban on TikTok. Before the app goes dark on Sunday, you’re...

AI startup Character AI tests games on the web

Character AI, a startup that lets users chat with different AI-powered characters, is now testing games on...

Bluesky saw 17x increase in moderation reports in 2024 after rapid growth

Bluesky on Friday published its moderation report for the past year, noting the sizable growth the social...