Databricks raises $500 million with backing from rival Snowflake’s top client

Databricks announced a fresh funding haul of over $500 million today, which values the company at a whopping $43 billion. The round is led by T. Rowe Price Associates, but two new investors are notable in this round: Nvidia and Capital One Ventures (Capitol One is the top client of Databricks’ main rival, Snowflake).

Databricks CEO Ali Ghodsi told VentureBeat on a video call that the new funding round is “really about the strategic nature of the partnerships and investors that we brought in into this round.”

Partnering with Nvidia, in particular, is about integrating better with the company and accelerating value, he said. “This is something I worked directly with Jensen [Huang, Nvidia’s CEO] on, really deepening our partnership from everything from obviously the GPUs that underpin all of these AI applications, but also all the way up to the software that runs on top of them,” Ghodsi said.

Founded in 2013 by the original creators of Apache Spark, an open-source unified analytics engine for large-scale data processing, Databricks is known for its “lakehouse” platform in the cloud — a combination of data warehouses and data lakes that unifies data, analytics and AI on a single platform so that customers can govern, manage and derive insights from enterprise data and build their own generative AI solutions faster.

In the second quarter of 2023, Databricks had plenty of momentum: The company reported the strongest quarterly incremental revenue growth in its history; more than 10,000 global customers; and closed its acquisition of MosaicML, a leading generative AI platform.

Since the end of 2022, there have been regular predictions about a potential Databricks IPO. But recent reporting by The Information, which leaked that the company was on the verge of raising the latest round of funding, focused on Databricks’ massive cash burn — which they reported doubled from last year to $430 million and is expected to “burn a combined $900 million over this fiscal year and next before generating cash starting in 2025.” In total, the article said that Databricks “expects to tally up to $1.5 billion of negative free cash flow.”

The report came just a few weeks after an earlier article in The Information that called Databricks “one of the most closely watched private tech firms,” that “has been trying to push itself to the front of the AI boom.” It speculated that Databricks’ latest fundraising suggested the company did not plan to go public soon, as many bankers and IPO-watchers had hoped.

“About The Information, clearly there has been an obsession with Databricks,” said Ghodsi when asked about the reporting, adding that the company’s finance team was “inundated by investors all over the world” after the articles were published.

“This is not like we need cash,” he said. “Our poor finance team was just looking at doing the strategic partnership…because of the leaks, now everyone wants to invest.”

Enterprises want to build their own, safe, private LLMs

Generative AI has already moved with lightning speed into the lives of kids, who use ChatGPT to help with their homework, but Ghodsi said enterprise customers are slower to adopt the technology because they want to make sure their data is secure and private. That’s where Databricks comes in.

“We’re at the very beginning of that same sort of explosion that happened on the consumer side, starting to happen on the B2B side,” he explained. “I think Databricks is really well-positioned to do that because we already have all the data of these large enterprises and they already trust us to keep it safe and private and confidential.”

Now, he added, “Every one of these CEOs, they want to build their own large language models. That becomes their intellectual property for their business, which then they can use to compete with their competitors and get ahead using generative AI.”

Databricks has been training its own open science-based large language models for enterprise use, most notably Dolly, which was released in March, and Dolly 2.0, released in April. Now, Ghodsi, said the time is right for an explosion of B2B generative AI applications. “I think you’re gonna see a lot of it in the second half of this year,” he said.