Databricks CEO Discusses Delay in IPO Plans

Databricks has recently completed one of the largest funding rounds in history, raising an impressive $10 billion in new capital. Following this achievement, many technology investors are curious about what this means for the company's anticipated initial public offering (IPO). During a recent event in San Francisco, Databricks CEO Ali Ghodsi shared insights on why the company is postponing its public offering until at least 2025.

Ghodsi emphasized that this year, being an election year, creates an environment of uncertainty. He noted concerns surrounding interest rates and inflation, leading him to conclude that going public would not be wise at this time. "This year was an election year. We wanted to get some stability – people are worried about interest rates, inflation… So we said look, it’s dumb to IPO this year, so we’re definitely going to wait," Ghodsi said during an interview at the Axios AI Summit.

He added that the earliest potential for an IPO would be next year, but due to the lock-up periods following an IPO, the time for employees to gain liquidity would be excessively long. Consequently, Databricks has decided to leverage the recent Series J funding to allow early employees to cash out while continuing to grow.

Despite the uncertainty of 2024, there have been successful IPOs from companies like ServiceTitan and Reddit. However, Databricks chose not to take the risk given its financial success, having raised nearly double its initial fundraising goal of $3 billion to $4 billion.

Ghodsi recounted the strong interest from investors, revealing that initial offers amounted to $19 billion. "I saw this Excel sheet where they keep a tally of all the people that want to invest. It was $19 billion of interest, and I almost fell off the chair," he said.

While Ghodsi has not entirely ruled out a 2025 IPO, he acknowledged that it could be pushed to 2026 instead. He pointed out that going public is less critical today than it was a decade ago and indicated that the substantial recent funding round illustrates Databricks' strong market position. He also mentioned being mindful of the “AI bubble” that has recently inflated valuations across the tech sector.

Ghodsi remarked on the current trend of highly inflated evaluations for startups lacking substantial products or innovation, highlighting the precariousness of these valuations. He stated, “I mean, it’s peak AI bubble. It doesn’t take a genius to know that a company with five people which has no product, no innovation, no IP – just recent grads – is not worth hundreds of millions, sometimes billions. You get billion-dollar valuations on these startups that have nothing – that’s a bubble.”

Despite potential challenges, Ghodsi remains confident in Databricks, believing the company has successfully navigated past competition, particularly with rival startup Snowflake. He revealed an initiative named "SnowMelt" aimed at capturing Snowflake's market share.

Databricks invested significantly, reportedly $2 billion, to acquire a smaller company, Tabular, which Snowflake had also been considering buying at the time. Now, Databricks aims to challenge larger competitors with products comparable to those from enterprise giants such as Salesforce and Microsoft.

In summary, Ghodsi believes that the influence of data and AI will only increase in people's lives moving forward, positioning Databricks as a key player in this evolving landscape.

Databricks, IPO, funding