By Krystal Hu, Kenrick Cai and Echo Wang
(Reuters) - Software (ETR:SOWGn) firm Databricks is nearing a deal that could become one of the largest venture capital funding rounds in history, as investors have shown a strong appetite to own a piece of the fast-growing data analytics firm, three sources said on Friday.
The round, almost twice oversubscribed, could top $9.5 billion when it is finalized next week, exceeding the company's original goal and higher than what was discussed earlier, the sources told Reuters, cautioning the final number could still go up.
The San Francisco-based company, which helps enterprises process and analyze their data, is expected to fetch a valuation of over $60 billion at a price of $92.50 per share. That price is considered a bargain in the eyes of some investors, given that the company's projected revenue for the next fiscal year is $3.8 billion, said the sources, who requested anonymity to discuss private matters.
Thrive Capital and returning investors Andreessen Horowitz, Insight Partners, as well as Singaporean sovereign wealth fund GIC are expected to lead this mega round, according to one of the sources.
In conjunction with the equity raise, the company is also in talks to raise $4.5 billion in debt financing, including a $2.5 billion term loan from direct lenders, one of the sources added. Bloomberg first reported on the private debt raise.
Databricks, founded in 2013, is a data analytics and artificial-intelligence company. It provides a cloud-based platform to help enterprises build and govern data and AI applications.
Databricks and Thrive Capital declined to comment. Insight, Andreessen Horowitz and GIC did not immediately respond to request for comment.
This high-profile round would mark a jump in valuation for the 11-year-old company that has yet to make a profit. The firm was valued at $43 billion in September. The move would also be a major win for early employees, as the company plans to dedicate the funding to buy back expiring restricted stock units from early employees and cover the associated tax costs. As part of the deal, the company plans to issue preferred shares to investors participating in the round, the sources said.
Databricks has benefited from the AI boom by selling more tools that help clients build and deploy AI applications using the growing volume of data they already store with the company. It competes with Snowflake (NYSE:SNOW), which commands a market cap of about $56 billion with expected revenue of $3.4 billion in the fiscal year ending in January 2025.
The move to raise outsized funding specifically to address the expiring employee options issue, instead of adding to its balance sheet, mirrors a move by payment company Stripe, which raised $6.5 billion last year at a valuation of $50 billion.
Such mega deals highlight the amount of funds available in the venture capital system and the appetite for top-notch names. Investors are doubling down on AI companies and supporting firms to remain private longer, enabling rarely seen round sizes such as OpenAI's $6.5 billion raise at a $165 billion valuation and xAI's $6 billion raise.
The move signals that Databricks and other top public market candidates are in no rush to go public, despite expectations of a resurgence of venture capital-backed initial public offerings in 2025.