Databricks’ pending IPO is a building block in unleashing the AI Technological wave.
By: Billy D. Aldea-Martinez
Tags: Startup, Databricks, IPO, Data Lake, AI

Databricks’ pending IPO is a building block in unleashing the AI Technological wave.

A San Francisco headquartered Tech company, Databricks is increasingly attracting the attention of investors. With a US$1 billion Series G raised last February, led by Franklin Templeton, it reached an impressive US$28 billion post-money valuation. It is the most highly valued pre-IPO technology company in the world. Analysis are calling it the next Snowflake, a company that share where listed at US$120 on September 16 2020, and increased to US$245, a 104% jump in the first day of trading — it’s now sitting at US$237.

Historical Stock Performance Chart for Snowflake Inc.

Founded in 2013, by a group of science students, it is an enterprise software company, data-and-AI focused. It develops a web-based platform that interacts with corporate information stored in the public cloud.

Among them, more than 5000 clients, big names like Nationwide, Condé Nast, and Comcast can be found.

Databricks backing by such big players can be understood because of the value that they deliver to enterprises; private, public and governmental. They remove the technical challenge and expertise of building, collecting and centralizing data for an organization’s important yet non-core business of data, that then can be used for developing Artificial Intelligence driven business models.

Machine learning teaching and data collection are good examples of how tasks necessary to the development of new systems and products can drain resources. Data collection by its nature often requires data scientists to process and analyze through petabytes of data.

In-house solutions are costly to implement, insourcing architecture and technical professionals can be time-consuming, complex to manage and highly expensive.

That’s where Databricks comes in. It works as a cloud that enables a disruptive project to run smoothly. They take care of these tasks, which lets companies’ teams do what they do best.

This is part of a present tendency in the tech industry, “renting” the services a company needs to perform their main activity as opposed to “buying” by directly hiring and owning the infrastructure and expertise.

It’s CEO, the Swedish-Iranian computer scientist and entrepreneur Ali Ghodsi, who is also a Berkeley adjunct professor, co-founded it with Scott Shenker, Berkeley professor, and co-founder/former CEO of Nicira; Ion Stoica, Berkeley professor and co-founder and CTO of Conviva; Matei Zaharia, who created Apache Spark and is currently a professor at Stanford University. All of them still occupy a position at Databricks. The other co-founders are Andy Konwinski, Patrick Wendell, Reynold Xin, and Arsalan Tavakoli-Shiraji, all former Berkeley Ph.D. students and Apache Spark committers.

They initially partnered up to launch Spark, an open-source engine for managing big data, still at Berkeley’s AMPLab in 2009. Increasingly needs to use systems such as artificial intelligence and machine learning made the platform be widely adopted.

From this venture, Databricks was spawned, for commercializing the software for enterprises.

Through the years, the company has performed very well, starting from a tiny office in California to over 1000 employees and operations in Canada, UK, Netherlands, Singapore, Australia, Germany, France, Japan, China, and India. Its business model has proven successful, with a series of four open-source products with a core data lake product called Delta Lake as the flagship. It closed 2020 at US$425 million in ARR, a 75% increment over the same period in the previous year.

Two years ago, after a US$400 million round, the company was valued at $6.2 billion, less than ¼ of the current US$28B. This rapid pace of growth made investors compete for a share of it. In addition to Franklin Templeton, Fidelity, Microsoft, Amazon Web Services and Salesforce Ventures have also secured theirs.

The interest of top players in it is not solely based on a multiplying investment factor, but also on the role Databricks has in the tech Ecosystem. Its developments in the Open Source Ecosystem helps to simplify Machine Learning workflows, which makes for increasing its clients’ own development projects efficiency. Its CEO, Ali Ghodsi said Databricks is the fastest-growing enterprise SaaS company ever.

No one wants to miss the chance of participating in a company with such good fundamentals.

When looking for promising companies as an investment opportunity, those that can provide value for other enterprises are certainly a safe bet. In this group, Databricks stands out. These are some of the reasons for its US$28 billion valuation.

Although Databricks has not filed the IPO documents yet, it’s believed its IPO will come anytime this year.

Let’s wait and see. Certainly, it is worth keeping an eye on this one.