Databricks on the Verge of a Historic Funding Round

Software firm Databricks is close to securing a deal that could rank among the largest venture capital funding rounds in history. This move underscores investors' strong interest in the rapidly growing data analytics company, according to three sources who spoke to Reuters on Friday.

The round, which is nearly twice oversubscribed, is expected to exceed $9.5 billion when finalized next week, surpassing the company's initial target and earlier discussions. The final amount could still increase, the sources cautioned.

Based in San Francisco, Databricks assists enterprises in processing and analyzing their data. The company is anticipated to achieve a valuation of over $60 billion at a share price of $92.50. This price is considered a bargain by some investors, given the company's projected revenue of $3.8 billion for the next fiscal year, according to the sources who requested anonymity to discuss private matters.

Thrive Capital and returning investors Andreessen Horowitz, Insight Partners, as well as Singapore's sovereign wealth fund GIC are expected to lead this significant round, according to one of the sources.

In conjunction with the equity raise, Databricks is also in talks to secure $4.5 billion in debt financing, including a $2.5 billion term loan from direct lenders, one of the sources added. Bloomberg first reported on the private debt raise.

Founded in 2013, Databricks is a data analytics and artificial-intelligence company. It provides a cloud-based platform to help enterprises build and govern data and AI applications.

Databricks and Thrive Capital declined to comment. Insight, Andreessen Horowitz, and GIC did not immediately respond to requests for comment.

This high-profile round would mark a significant jump in valuation for the 11-year-old company, which has yet to turn a profit. The firm was valued at $43 billion in September. The move would also be a major win for early employees, as the company plans to use the funding to buy back expiring restricted stock units from early employees and cover the associated tax costs. As part of the deal, the company plans to issue preferred shares to investors participating in the round, the sources said.

Databricks has benefited from the AI boom by selling more tools that help clients build and deploy AI applications using the growing volume of data they already store with the company. It competes with Snowflake, which commands a market cap of about $56 billion with expected revenue of $3.4 billion in the fiscal year ending in January 2025.

The decision to raise outsized funding specifically to address the expiring employee options issue, instead of adding to its balance sheet, mirrors a move by payment company Stripe, which raised $6.5 billion last year at a valuation of $50 billion.

Such mega deals highlight the amount of funds available in the venture capital system and the appetite for top-notch names. Investors are doubling down on AI companies and supporting firms to remain private longer, enabling rarely seen round sizes such as OpenAI's $6.5 billion raise at a $165 billion valuation and xAI's $6 billion raise.

The move signals that Databricks and other top public market candidates are in no rush to go public, despite expectations of a resurgence of venture capital-backed initial public offerings in 2025.