One way to survive a valuation dip is to grow like hell
Big Data Analytics Unicorn Databricks is back in the news, revealing new revenue and its growth rate for 2021. TechCrunch has been following the company for years, curious about its growth and what its rising value says about its market. Today, we revisit its latest private round measured against its most recent financial data. But to do that, we need to do a little groundwork first.
When Databricks raised a $1.6 billion seed round in August 2021 at a post-money valuation of $38 billion, TechCrunch phoned the CEO Ali Godsi to discuss his company’s latest mega-rise. We had a few questions.
One of mine was how he felt about the inherent pressure that such a private market valuation would seem to create – after all, startup valuations are estimates until they exit, which means that prices higher mean higher expectations for future success. Ghodsi was not sweating.
He said at the time that he didn’t feel much pressure and slept well.
He gave a few reasons for this. First, according to our notes of the conversation, he believed his company was creating a new service category. Second, he hadn’t maxed out the valuation at the fundraising event, and that in his company’s two 2021 rounds there was more demand to invest than there was. room to accept it.
The above is somewhat standard CEO fare when it comes to startups and busy unicorns. More interesting was his third point, which was that rapidly expanding companies – he threw in a 75% growth rate as a talking point – can overcome market corrections through growth. In simpler terms, if the market changed its mind about the value of software revenue, as long as Databricks continued to grow, things would be fine.
Well the market do change since that conversation, with the value of software revenue being repriced by public markets beginning in late 2021 and continuing through early 2022. And Databricks has continued to grow.
So we can have a little fun this afternoon calculating the company’s revenue multiples for August and year-end using today’s market data. Experience will show us how much ground, if any, Databricks has to traverse before its valuation in the private market can translate to a 1:1 basis in the public markets. I promised myself to stop making “when will Databricks make public jokes”, so let’s get into the math.
Databricks then, Databricks now