When Databricks announced earlier this month that it crossed a run rate of $1 billion, it was certainly a big milestone for the company, but it wasn’t a huge surprise. The data lake startup has been flying. Almost exactly a year ago, Databricks announced a $1.6 billion raise on an astonishing $38 billion valuation with $600 million ARR. That grew to $800 million ARR by February this year.
Databricks now says that it’s no longer counting ARR, but instead looks at quarterly earnings and calculates a yearly run rate instead. However you measure it, the company is making money fast and the external economic conditions that have put the brakes on many companies’ growth rates don’t seem to be having much impact on Databricks.
Databricks reports that the 80% growth rate it was experiencing last year has not slowed, and it is seeing consistent and steady interest across its line of products, especially the Lakehouse, a service that combines a data warehouse with a data lake in a single product, versatility that customers really seem to like. The data warehouse has traditionally been used to store structured data, while the data lake was created to store growing amounts of unstructured data. Combining the two, while challenging, reduces some of the complexity of managing them separately.
“Now’s not the time for us to skimp. We don’t need to.” Databricks CEO Ali Ghodsi
The concept has resonated with customers and translated into customer and revenue growth. Meanwhile, Databricks is aggressively hiring to meet the demand it’s seeing in the market. It has plans to hire 2,500 new employees this year, a strong counterweight to the steady stream of tech startup layoffs we have been hearing about through much of this year.
Databricks, on the other hand, started 2022 with 3,000 employees, now has over 4,000 and expects to hit 5,500 by year’s end.
We sat down with CEO Ali Ghodsi to discuss the revenue milestone, where he sees his company going in the next year, and Databricks’ remarkable ability to run counter to the general malaise of the SaaS market this year.
What, me? Worry?
Ghodsi said that between Databricks’ performance and the money he has in the bank from last year’s massive funding rounds — he also raised an additional $1 billion in February 2021 — the company is not going to let external economic factors slow it down.
“Now’s not the time for us to skimp. We don’t need to. We have a very supportive board. And we’re very aligned on the strategy of grabbing market share now,” he said.
In fact, he said, Databricks is taking the opposite approach of many companies because it’s in a unique position to do so, with money in the bank and gaudy revenue numbers extending its cash hoard. Databricks has plenty of money, and Ghodsi intends to take advantage of that position.
“Databricks is probably one of the largest, if not the largest, well-funded private company now in the enterprise software space. We raised $2.5 billion in capital last year, so we have a lot of funding, and we’re also private,” he said.
“Many other private companies are looking at how do they get more funding or how do they make the money [they have] last longer. So we feel like we’re in this really privileged position that we can actually right now take an asymmetric strategy and kind of do the opposite of the market,” Ghodsi explained.
He fully intends to leverage that cash position to his full advantage. “We are investing. We think that this is the time for us to invest ahead of the market. We think this market is there. We finally see Lakehouse adoption massively taking off with CIOs. Now it’s not the time for us to be penny-wise and pound-foolish. Now’s the time for us to invest,” he said.
He intends to run full speed, straight into the economic headwinds. “There are three things that we can do. … First, we’re hiring the best of the best aggressively in this market, because we have the funding, and we think it makes sense to have the best of the best at Databricks,” he said.
Secondly, he plans to explore M&A opportunities.”We look at everything from very, very small tuck-ins, where we can pick up really good talent to technology innovations that would really augment our platforms, all the way to what are adjacent markets where we could get into, that we’re not at all playing in today.”
Finally, Ghodsi said he’s looking at partnering closely with really large customers that may need help in the current economic situation. What he means is that the company is doing so well that it can afford to be flexible on terms with companies that might not be as fortunate right now, giving them more time to pay their bills if needed.
Plenty of resources
Ghodsi said that if there is inflationary pressure out there — and it appears that it might be slowing down — he’s not feeling it anyway. “If you want to analyze the data from a financial perspective, it’s a healthy software, gross margin business, and it’s a SaaS model. … And we have almost no hardware costs. So our biggest expenses are people and buildings,” he said.
Over time, he doesn’t see those costs having any long-term drag on Databricks. “If you fast-forward five years, those things are not going to grow linearly with the revenue — the number of buildings and the number of people. So this is going to be a very lucrative business in the long run. So we invest now ahead of the game.”
With a performance like this in any other year, Databricks would probably be looking at an IPO in the not-too-distant future. But with a market that’s being unkind to SaaS companies, Ghodsi is content to wait and continue as a private company for the time being.
“This is probably not the best market to IPO in, but in general, we will be public. … Our long-term plans are to operate a public company that’s going to be very successful in its own right over many, many years. The exact timing I can’t share with you. I don’t have a date for you, unfortunately.”
But neither does he feel pressure to make that move. “I would just say that it’s not really an important strategic big deal to the company exactly when we IPO. It is of course important for employee liquidity, which matters to us, and that’s the primary reason probably for us to do it [at some point].”
With cash on the books from a couple of huge raises and revenue flowing in to the tune of a $1 billion run rate, Databricks has options. It will go public whenever the time is right. For now, it’s doing just fine regardless.