Databricks Raises $10 Billion in Biggest US Venture Deal of 2023

Databricks, the US-based data analytics and AI company, has secured $10 billion in funding, marking the largest venture capital deal of the year in the US and valuing the company at $62 billion, reports Reuters. The mega-round was led by some of the largest and most active technology investors in the US, including Thrive Capital, Andreessen Horowitz, Insight Partners, and Iconiq Growth.

This funding round, for the 11-year-old company, is exceptionally large by venture capital standards, reflecting a shift in VC strategy as private markets expand.

"The talent war for AI is like no other time before," said Ali Ghodsi, co-founder and CEO of Databricks to Reuters. "Already it was pretty insane levels of compensation for software engineers in Silicon Valley, and it's gone up from there."

Thrive Capital alone invested at least $1 billion in the round, according to Vince Hankes, a partner at the firm. He described Databricks as "in this to build the next $1 trillion infrastructure company."

A significant portion of the $10 billion will be used to help Databricks employees cash out lucrative stock options and pay associated tax liabilities, explained Hankes. He compared this strategy to Stripe's $6.5 billion raise last year, which helped the payments company address tax obligations related to employee stock units.

Many long-standing private startups face similar challenges, with vested stock units often taxed as income and unrealizable until a liquidity event. This can create substantial tax burdens and limit employees' ability to diversify their wealth.

"Finding ways to 'release the pressure' for employees would help start-ups such as Databricks compete for talent with public companies such as Alphabet, where employees can sell their shares at any time," said Hankes.

The remainder of the funding will be invested in "new AI products, acquisitions, and significant expansion of its international go-to-market operations," Databricks stated.

Other investors in the round include Singapore's sovereign wealth fund GIC, Yuri Milner's DST Global, and MGX, a recently launched UAE fund focused on AI.

Databricks has experienced rapid growth in the past year, with annualized revenue projected to reach $3 billion by the end of next month. The company also expects to achieve positive free cash flow for the first time by the end of January. This growth has propelled Databricks' valuation from $43 billion in September 2022.

The new capital and increasing revenue mean Databricks is not in a hurry to go public, said Ghodsi. "The absolute earliest we would go public is next year, but we have flexibility now."