How to Invest in Databricks in 2024

Databricks is a cloud-based platform for big data analytics, machine learning, and artificial intelligence.

It helps businesses manage data, conduct data science projects, develop AI and machine learning tools, and analyze data. With it, companies are able to make faster, more informed decisions, work more efficiently, and create better technologies.

To outsiders, this may seem rather run-of-the-mill, but Databricks' technology is anything but. Which is why it's on pace to generate $2.4 billion in annual revenue and earned a valuation of $43 billion in September 2023. Currently, Databricks is the 10th most valuable private company in the world.

Despite its size and previous plans to go public (more on this below), Databricks is and will remain a private company for the foreseeable future. But that doesn't necessarily mean you can't invest in its stock.

Here's how to buy Databricks before its IPO.

Can you buy Databricks stock?

Since Databricks is a private company, it doesn't have a stock symbol and there's no way to buy it in your regular brokerage account.

Retail investors will have to wait for its IPO to buy shares of its stock. More on when this may be below.

However, there is a way for accredited investors to buy its shares today, and there are several ways for retail investors to gain exposure two different venture capital funds.

How to invest in Databricks

1. Accredited investors

Accredited investors can buy shares of Databricks stock from existing shareholders on Hiive, an investment platform for pre-IPO companies.

Are you an accredited investor?

You can qualify as an accredited investor if:

• You have an annual income of $200,000 individually or $300,000 jointly
• Your net worth exceeds $1,000,000, excluding your primary residence
• You are a qualifying financial professional

Hiive connects existing shareholders - who may be current or former employees, VC firms, or angel investors - with accredited investors who want to buy shares of private companies.

With 45 unique listings, Databricks is one of the most active securities on the platform:

Sellers create listings by setting an asking price and quantity of shares available. Similar to a traditional stock exchange, buyers can accept a seller's asking price as listed or place bids.

Buyers can also add companies to their watchlist and get notified of any new listings or successful transactions.

Hit the button below to view current offerings for Databricks:

Register for Hiive

2. Retail investors

While SEC regulations prevent retail investors from directly buying private companies, there are other ways to gain exposure to Databricks.

a) Fundrise's Innovation Fund

Fundrise's Innovation Fund is a venture capital fund that is open to all investors. The fund targets private, high-growth technology companies for its portfolio.

It invested $25 million in Databricks in July 2023 and is one of the fund's largest holding. The fund has also invested in Canva, Anduril Industries, and Anthropic.

The fund has a minimum investment of just $10 and an annual management fee of 1.85%.

Check out the Innovation Fund

b) ARK Venture Fund

The Innovation Fund isn't the only retail-friendly VC fund with exposure to Databricks. Cathie Wood's ARK Venture Fund also has a stake.

At the time of this writing, Databricks makes up 3.13% of the fund, the 13th largest position. Its largest positions are SpaceX and Epic Games. Anthropic and Figure AI are also in the top 10.

The fund invests in both public and private companies, so long as they meet the fund's theme of "disruptive innovation."

It charges an annual management fee of 2.90%. Accredited investors can invest in the fund via the ARK website while retail investors can invest via SoFi.

c) Invest in Databricks' publicly traded investors

In all, Databricks has raised over $4 billion from 53 investors over 12 rounds.

While the vast majority of these investors are private equity firms and venture capitalists, there are a handful of publicly traded companies that own stakes in Databricks. 

Here's a quick breakdown:

• Microsoft (MSFT) participated in the Series E round in February 2019, which raised $250 million at a valuation of $2.8 billion.
• Microsoft and BlackRock (BLK) both invested in the Series F round in October 2019. The round raised $400 million at a $6.2 billion valuation.
• Amazon (AMZN), Salesforce (CRM), and Franklin Templeton (BEN) participated in the Series G round in February 2021, which raised $1 billion at a $27 billion valuation.
• Morgan Stanley (MS), BlackRock, Franklin Templeton, and T. Rowe Price (TROW) all invested in the Series H round in August 2021. $1.6 billion was raised at a $36.4 billion valuation.
• Nvidia (NVDA), Franklin Templeton, Capital One (COF), and T. Rowe Price all invested in the latest funding round in September 2023, which raised $685 million at a $43 billion valuation.

As you can see, there are plenty of companies with at least some exposure to Databricks. By investing in these companies' stocks, you will get indirect exposure to Databricks.

The problem, however, is that all of these companies' stakes are likely very inconsequential investments in relation to the total size of their primary businesses.

d) Invest in Databrick's publicly-traded competitors

If you're not happy with any of the above options, you may decide investing in Snowflake (SNOW), Databricks' leading competitor.

Snowflake's platform enables enterprise clients to consolidate data and uncover meaningful business insights. It generated $3.2 billion in revenue in the 12 months and has a market capitalization of $38.4 billion.

If you're bullish on data analytics and database provider industries in general, Snowflake should be on your radar.

When will Databricks IPO?

Databricks was on track to IPO back in 2021 after raising $1.6 billion at a valuation of $36.4 billion, but decided to wait until a later date.

In late 2022, The Information reported that Databricks told its investors it was planning on an IPO by the summer of 2023. In June 2023, however, CEO Ali Ghodsi told Bloomberg those plans were postponed due to the weak market.

The company has not given an updated timeline for its IPO, though it looks destined for a public offering.

When Databricks does go public, you'll be able to look up its stock symbol and buy it in your brokerage account. If you're looking for a new broker, you may want to check out Public.

About Databricks

How it's used

Databricks is a platform for building, sharing, and maintaining enterprise-level data, analytics, and AI solutions at scale.

It also deploys cloud infrastructure on behalf of its clients.

The Databricks workspace provides a unified workspace for a variety of data tasks, including:

• Data processing
• Generating dashboards and visualizations
• Managing security, governance, and disaster recovery
• Machine learning modeling, tracking, and generative AI solutions

These solutions save companies both time and money.

Products

Databricks offers a handful of products, which all integrate.

• Spark: The company's core offering, a web-based portal for data scientists to write queries in SQL, Python, and other languages for running data analysis.
• MosaicML: Acquired in June 2023 for $1.3 billion, MosaicML is used to train large language models (LLMs) and image generation models.
• MLFlow: Here, data scientists can build machine learning (ML) models, track their experiments, deploy them to production, and monitor their performance.
• Delta Lake: Delta Lake speeds up data queries and is the company's primary initiative to move into the data analytics category.
• Databricks SQL: This is a data warehouse that allows users to run SQL on top of Delta Lake, create visualizations, build and share dashboards, and more tools for improving the usefulness of SQL.

Revenue

Databricks hit a $2.4 billion annual revenue run rate in the first half of 2024, up 60% from the same period last year.

Revenue growth is coming from two places. In addition to adding more clients, net revenue retention was higher than 140% in FY24, indicating significant revenue growth from existing customers.

Gross margins for FY24 were over 80%.

Profitability

While its revenue has grown substantially over the last few years, it's unlikely the company is profitable.

In the last few years, Databricks has increased its number of employees from 3,500 to 9,200, creating a significant drag on reaching profitability.

We can also use its main competitor and their net income (Snowflake, at -$1.02 billion TTM) to help estimate Databricks' bottom line. Remember, Snowflake generated $3.2 billion in TTM revenue, roughly 33% higher than Databricks' current run rate.

These figures do not guarantee Databricks is unprofitable, but we can reasonably draw that conclusion given that most pre-IPO technology companies with outside funding operate at a short-term loss in order to maximize growth.

Who owns Databricks?

In addition to the public companies listed above, there are a number of private equity firms that have invested in Databricks.

Notable investors include Andreessen Horowitz (a16z), Tiger Global Management, Founders Future, Green Bay Ventures, Alkeon Capital, Greenoaks Capital Partners, ClearBridge Investments, and more.

Co-founder and CEO Ali Ghodsi and other co-founders (Reynold Xin, Matei Zaharia, Ion Stoica), as well as other executives and employees, all likely own portions of the company.

The exact ownership breakdown, however, is not publicly available.

Databricks valuation chart

Databricks most recent round was the $500 million Series I it raised in September 2023 at a valuation of $43 billion.

Here's a look at how Databricks' valuation has grown over time:

Source: Crunchbase