Comment by elAhmo
4 days ago
Regardless of the product and idea they had, a company that is 15 years old and raised 10+ billion dollars still needing to raise money after all this time is ridiculous.
Not being sustainable after all this time and billions of dollars is a sign company is just burning money, and a lot of it. wework vibes.
They were expecting to be cash flow positive in Jan 2025, according to [0]. That said, it is hard to tell if they actually became cash flow positive since with them still being a private company, they aren't required to release that information.
[0]: https://www.databricks.com/company/newsroom/press-releases/d...
Whenever companies release glowing fluff PR about their amazing financials they key word in there is “non-GAAP.”
i.e. when we exclude a bunch of pesky costs and other expenses that are the reason we’re not doing so well, we’re actually doing really well!
Non-GAAP has its place, but if used to say the company is doing well (vs like actual accounting) that’s usually not a good sign. Real healthy companies don’t need to hide behind non-GAAP.
Yes but free cash flow is free cash flow, and that's what matters for survival (i.e. run-rate). So long as fcf is positive, you'll never go bankrupt.
Really what they don't tell you is how much SBC they have. That's what crushes public tech stocks so much. They'll have nice fcf, but when you look under the hood you realize they're diluting you by 5% every year. Take a look at MongoDB (picked one randomly). It went public in 2016 with 48.9m shares outstanding. Today, it has 81.7m shares outstanding. 67% dilution in 9 years.
This. To me if you are still unprofitable after 15 years you are not really a business.
However genuinely curious about the thesis applied by the VC’s/Funds that invest in such a late stage round? Is it simply they are taking a chance that they won’t be the last person holding the potato? Like they will get out in series L or M rounds or the company may IPO by then. Either ways they will make a small return? Or is the calculus diff?
The last person in usually gets the best deal, in that they can get preference and push everyone else (previous investors, founders, and employees) down. If things goes south, they get their money out before anyone else.
Isn’t everyone “the last” at the moment they are taking participation in the round? If someone thinks they’re gonna get preferential treatment in Series C or D, and then comes someone in E with preferential treatement, then
Why don't early investors put clauses in their investment to protect themselves against being screwed over by later investors? It seems like an obvious thing to ask for if you're giving someone a lot of money, so I'm assuming there must be a very good reason it's not done.
2 replies →
> However genuinely curious about the thesis applied by the VC’s/Funds that invest in such a late stage round
1) It's evaluated as any other deal. If you model out a good return quantitatively/qualitatively, then you do the deal. Doesn't really matter how far along it is.
2) Large private funds have far fewer opportunities to deploy because of the scale. If you have a $10B fund, you'd need to fund 2,000 seed companies (at a generous $5m on $25m cap). Obviously that's not scalable and too diversified. With this Databricks round, you can invest a few billion in one go, which solves both problems.
I guess making a quick buck pre-IPO? It's essentially lending cash on loose terms.
Why they do it via an equity offering and not debt is unclear. You'd imagine the latter is cheaper for a hectocorn.
Anchoring IPO expectations and hype. 100B valuation is useful.
Even more if you are familiar with their pricing.
This! We did some simple testing on their platform to integrate it into our product for a customer. In a few days of light work rang up a huge bill. Many multiples of what we spend on OpenAI, which gets heavy use.
It does have some good aspects for engineers working with these tools in some cases: https://ludic.mataroa.blog/blog/i-accidentally-saved-half-a-...
1 reply →
Granted, OpenAI is burning tons of cash as well. The great tech race of cash burning is at full steam!
Its unfair to compare Databricks to OpenAI because they're at very different points in the enshittification[1] process.
OpenAI is still early, burning VC money to acquire customers by operating at a loss. This makes it appear cheap.
DataBricks is further along, attempting to claw back the value they provided to customers by raising prices.
[1] https://en.wikipedia.org/wiki/Enshittification
2 replies →
Them and Snowflake have been in an acquisition race, gobbling up data engineering startups like Pac-Man.
That costs a fair bit of dosh.
What's the end game? What are investors expecting and how are they expecting the company to get $100b in profits and over what period of time?
Being the dominant player, I presume, starve out the rest by being _the_ way to do your big data.
Do we know that they need to raise and are not sustainable? I don't think them raising is evidence of either.
Why would they raise money if they do not need? Raising money dilutes existing shareholders - who are probably not too happy about it.
I worked at a place once where the CEO basically said that it's a lot easier to raise money when you don't need it than to raise it when you do. The US economy is looking pretty weird with a bunch of conflicting predictors. Maybe they're buffering for a recession.
1 reply →
depends on who is making a decision and how exactly is the funding round structured - for some investors, diluting other shareholders is actually a good thing. For existing employees, if they get an option to partially cash out now is probably better than waiting indefinitely for an IPO etc
Afaik databricks is just selling shares on private markets rather than IPOing in order to retain more independence.
I can’t know if it’s completely true ofc, but that’s what employees are told.
At least it is not unprecedented. Palantir raised a series I in 2020 after 17 years of operation.
At that time the Palantit valuation was considered 'hefty / overpriced' at $9B. Current stock price valuation, post IPO is a completely detached from fundamentals ~$378B
if you were to apply the same ratio to Databricks it would have to trade at 42 000 000 000 000 000 USD - enough to buy the entire US sovereign debt, the moon, all earth's minerals with plenty to spare. A completely rational market if you ask me.
Is this just a case of waiting to stay private while still giving current employees some liquidity?
It feels like they may have got market share using low costs and this has led to this situation.
The costs of using Databricks are anything but low, though.
True, but it can still be lower than alternatives or lower than the cost to provide.
1 reply →
Same story was with Spunk. Yet it was acquired by Cisco for $28 billion. Valuation and ability to burn cash for 10+ years of the Silicon Valley companies never cease to amaze me.