(Bloomberg) — Databricks Inc., one of the most valuable startups in the U.S., is still planning an initial public offering even as Wall Street has become more skeptical about growth in the software industry, according to Chief Executive Officer Ali Ghodsi.
Volatility in the stock market “doesn’t affect IPO timing,” Ghodsi said in an interview. “We’re not in a super hurry to IPO. We’re not pushing it out or anything like that. We’re on a long journey.”
Databricks, which provides tools to help companies glean insights from large amounts of information, has raised $3.5 billion and commands a $38 billion valuation. It is the ninth-most valuable startup in the world, according to research firm CB Insights. The potential for Databricks’ market will reach an estimated $130 billion by 2025.
And as investors clamor to find the next blockbuster IPO in the data analytics sector after Snowflake Inc.’s historic 2020 offering, some suggest it will be Databricks. The San Francisco-based company said it ended 2021 with more than $800 million in annual recurring revenue, more than an 80% jump year-over-year. Snowflake had an estimated $530 million in ARR when it went public in 2020. Databricks said it has more than 7,000 customers and a net retention rate — the percentage of recurring revenue from existing customers — of higher than 150%, which is significantly more than the industry average for pre-IPO software vendors.
Databricks’s results thus far don’t include revenue for services like data storage and compute, Ghodsi said, which customers instead pay directly to the major public cloud vendors like Microsoft Corp. However, the company is beginning to give users the option to pay Databricks for those services alongside the cost of the underlying software. That’s noteworthy because other vendors make hundreds of millions of dollars a year alone from usage fees.
“The number is just pure software,” Ghodsi said of the company’s ARR. “Going forward, we are going to have compute in our accounts.” He declined to comment on the timing of a potential IPO.
Shares of publicly traded software companies, many of which jumped during the pandemic, have dropped thus far in 2022. The 124-member S&P North American Technology Software Index has declined 14% this year.
Databricks is attracting top-tier talent, including former executives from the cloud divisions of Amazon.com Inc. and Alphabet Inc. Among them are Michalis Petropoulos, who oversaw Amazon’s Redshift product before moving to Google as director of engineering, and Sridhar Machiraju, who managed Google Cloud’s relational database Spanner. To build out the executive team, Databricks hired former Salesforce.com Inc. executive Andy Kofoid as head of field operations, former Google product security leader Fermin Serna as chief security officer and former Palo Alto Networks chief information officer Naveen Zutshi.
The software vendor has already begun selling industry-specific products, following in the footsteps of companies like Snowflake, Microsoft, Salesforce and others that are increasingly tailoring their tools to sectors like retail and health care.
On Tuesday, Databricks launched a new offering targeted at the financial services industry. Among other uses, the product is aimed at helping businesses like Nasdaq bring the vast amount of customer transaction information stored over decades of operations into one common repository to improve functions like fraud detection.
“We do have a lot of very large data that historically has been really hard to process,” said Bill Dague, Nasdaq alternative data head. Databricks “allows us to share and manage access to very, very large data sets without having to move them in really inefficient ways.”
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