Databricks set to raise $9.5bn in VC funding

Databricks will reportedly use the funding to buy back expiring stock units and cover tax expenses. Credit: Tada Images/Shutterstock.

San Francisco-based data analytics firm Databricks is close to securing a deal that could become one of the largest venture capital funding rounds ever, reported Reuters, citing three sources.

The round, which is nearly twice oversubscribed, could exceed $9.5bn when finalised this week, surpassing the company’s initial target and previous discussions, the sources told.

However, the sources cautioned that the final amount may still increase.

Set up in 2013, Databricks specialises in data analytics and artificial intelligence. It provides a cloud-based platform that enables businesses to develop and manage data and AI applications.

It is projected to be valued at over $60bn, with shares priced at $92.50 each.

Some investors view this price as a bargain, considering the company’s forecasted revenue of $3.8bn for the upcoming fiscal year, according to sources who spoke anonymously.

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Thrive Capital, along with returning investors Andreessen Horowitz, Insight Partners, and Singaporean sovereign wealth fund GIC, are expected to lead this major funding round, one of the sources said.

Under the agreement, the company intends to issue preferred shares to investors participating in the round, according to the sources.

The company plans to use the funding to repurchase expiring restricted stock units from early employees and cover the related tax expenses.

Along with the equity raise, the company is also negotiating $4.5bn in debt financing, according to one of the sources.

This includes a $2.5bn term loan from direct lenders, reported Bloomberg.

JPMorgan Chase & Co. is contacting a range of direct lenders, including Blackstone Inc., on behalf of the company to secure a first-lien term loan, according to sources who spoke anonymously to Bloomberg due to the private nature of the matter.

The deal could be structured as an annual recurring revenue loan, a typical financing method used by private lenders to fund high-growth companies that have not yet achieved profitability, the sources added.

The company competes with Snowflake, which has a market capitalisation of approximately $56bn and is projected to generate $3.4bn in revenue for the fiscal year ending January 2025.