AI Hustle: News on Open AI, ChatGPT, Midjourney, NVIDIA, Anthropic, Open Source LLMs: Databricks Secures $500M Investment, Valued at $43B with Nvidia and Capital One

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So in a move that really defies current trends in startup valuations, Databricks, which

is a frontrunner in data analytics and artificial intelligence software, recently closed their

series AI funding round, amassing over $500 million, like I said, their valuation is

now at $43 billion.

The funding round is notable, especially as a lot of other late-stage startups, like

I was mentioning, have seen their valuations slashed due to a funding slowdown.

So this doesn't seem to apply to Databricks.

The last time the company did a round of funding, I think, was actually back in August

of 2021.

It got $1.6 billion, and it had a valuation of $38 billion.

So now it's up to $43 billion.

I'm assuming like their valuation actually went down from $38 billion after that round

because they did that in 2021.

So they probably tanked a little bit, then they've done a lot of really good plays, bumped

the valuation up, and now are able to raise at an increased valuation, so big kudos to

them on getting over that valuation slump that most companies have been stuck in.

The additional $5 billion really tacked into the latest valuation indicates that not all

of the ships out there are sinking with the tide.

So the investor lineup for this series I round, they just did, was a bunch of pre-IPO and

strategic funding.

They had T-Row Price, Morgan Stanley, Fidelity, Franklin Templeton, among a bunch of the investors

that were filling the pre-IPO quota, and this I think is suggesting an anticipated transaction

to the public market.

They're raising a ton of money, their valuation is going up a lot.

Once you get into the $40 billion, you're getting pretty dang close to an IPO.

I think Instacart, their valuation recently kind of tanked, but they're looking at doing

something like $27 billion if the numbers I was seeing recently are accurate.

So you can say like that is definitely like a household name, and Databricks is not, but

Databricks will be quite a big player in the space, and so I think this is going to be

really interesting to see where this goes exactly.

One other thing I will say is that on the strategic end, they had Capital One Ventures

and NVIDIA that also put some money into this round, so it looks like they're also grabbing

some really solid strategic partners.

I think the partnership with NVIDIA is definitely not a surprise.

Databricks has kind of been doubling down on its AI capabilities, contemplating its traditional

strength and data and machine learning software, and NVIDIA concurrently is witnessing heightened

demand for its AI-driven chips and software so much that countries are reportedly working

to secure chip supplies for their own economic interests.

It's like an economic interest thing.

You're seeing the US block certain chips from NVIDIA from not being able to go to China

and other places because it's like a national security thing.

So in addition to all of these new investors, I think you also had private investment firms

like Andre St. Horwitz and Tiger Global also participated in the series iFunding.

So really, they had all the big players in the space.

How has Databricks managed to secure a quote-unquote up-round in the landscape, which is full

of investment strategies and people that are a lot more conservative, looking for more

conservative revenue multiples?

So according to the company, its revenue run rate for the quarter ending in July 31st exceeded

1.5 billion and it also has a global customer base exceeding 10,000 with 300 of those clients

contributing at least a million dollars in annual revenue for its software and services.

So they have over 300 clients paying at least a million dollars in annual revenue, 300 million

dollars boom right there.

They have 10,000 clients.

These guys are printing money right now.

So while some earlier data hinted at slowing revenue growth, Databricks contends that its

fiscal second quarter saw the quote, strongest quarterly incremental revenue growth end quote

in its history.

So such performance, I think, is making investors really bullish about the company's potential

to surpass even its current loft evaluation once it goes public, right?

So the kind of this valuation is in the end of, I think, where we're going to see Databricks

rise, I think post IPO, all things remaining, Databricks is going to see some solid growth

into the future.

So however, I don't think this means that Databricks is a, is like in a rush to make

an IPO, given its effective revenue multiple of 29x, the company's pricing seems slightly

high for the current market.

And I think that this implies a strategy of continued growth to justify its current valuation

once it hits the public market, which is kind of signaling a deferred IPO.

So I think the new influx of capital seems less like a lifeline and more like an enabler

for Databricks, which is hardly scraping the bottom of its cash reserves.

It has a ton of cash.

It's making a ton of cash.

And I think the additional funding may very well offer the company the kind of the latitude

for other strategic maneuvers.

It has this massive AI market.

And I think the fresh half a billion dollars is going to serve as a significant booster

for Databricks is kind of competitive ambitions.

This is also actually after I've recently seen a report saying that almost 50% of CEOs

said that AI was one of their biggest spending expenses that they're forecasting for in the

future.

And so I think that Databricks is going to get a ton of that cash.

And we're going to see this company continue to climb in the future.

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Machine-generated transcript that may contain inaccuracies.