Databricks has quickly become a leading name in cloud-based data and AI. The company, built around the innovative Lakehouse architecture, has seen explosive growth and reached a staggering valuation. It’s a company that many investors are watching closely.
However, there’s a catch: Databricks is currently a private company. This makes directly investing in Databricks a challenge for most people. So, how can you get involved in this data and AI powerhouse?
In this article, we’ll explore the potential avenues for investing in Databricks, including pre-IPO opportunities (if any exist), potential IPO timelines, a brief overview of the company itself, and alternative investment strategies that might offer exposure to Databricks’ success. Let’s dive in.
Understanding Databricks: A Deep Dive
Before you consider investing, it’s important to understand what Databricks is and what it does.
Company Overview
Databricks is a cloud-based platform designed for working with big data. It brings together data warehousing and data science using a “Lakehouse” architecture.
The platform can be used for:
- Processing and analyzing large datasets
- Building and deploying machine learning models
- Performing real-time data analytics
Key products include Databricks SQL (a data warehousing solution), Machine Learning Runtime, and Delta Lake (an open-source storage layer).
Databricks’ Financial Performance
Databricks has seen significant revenue growth in recent years. In 2024, their Annual Recurring Revenue (ARR) surpassed $3 billion. In the third quarter of 2024 alone, revenue surged by over 60%.
The company is also on a path toward profitability, with expectations of positive free cash flow in the fourth quarter of 2024.
In a Series J funding round, Databricks raised $10 billion, giving the company a valuation of $62 billion. This valuation represents significant growth from previous funding rounds.
Is Databricks publicly traded?
No, Databricks is currently a private company. So, you can’t just buy shares on the stock market right now.
There’s been a lot of speculation about a potential IPO (Initial Public Offering). CEO Ali Ghodsi has hinted at a possible timeline, but nothing is set in stone.
How to Invest in Databricks Before the IPO
Eager to get in on the Databricks action before the IPO? Here’s how you might be able to, depending on your investor status:
Accredited Investors
If you’re an accredited investor, you can explore buying pre-IPO shares through secondary markets. These platforms, like Hiive and EquityBee, connect shareholders with potential investors.
Keep in mind that to qualify as an accredited investor, you generally need to meet one of these requirements:
- An individual annual income of $200,000
- A joint annual income of $300,000 (with your spouse)
- A net worth of $1,000,000, not including your primary residence
Retail Investors
Don’t meet the accredited investor criteria? There are still a couple of ways to potentially gain exposure to Databricks’ growth:
- Venture Capital Funds: Some VC funds, like Fundrise’s Innovation Fund or the ARK Venture Fund, may include Databricks in their portfolio. Do your research to confirm their holdings.
- Publicly Traded Companies: Companies like Microsoft and Amazon have partnerships with Databricks. Investing in these larger companies gives you indirect exposure to Databricks’ success.
Remember to carefully consider the risks involved before investing, and consult with a financial advisor if needed.
What are some other ways to invest in this space?
If an investment in Databricks isn’t yet possible, there are still ways to put your money to work in similar companies and technologies.
Investing in Databricks’ competitors
You might consider investing in Snowflake, a publicly traded data warehousing company. Compare Snowflake’s market cap and revenue to similar companies to get a sense of how it’s performing.
MongoDB is another alternative in the data platform sector.
The “double down” strategy: Lessons from the past
Some investors have had great success identifying companies with high growth potential and investing early. Consider these examples:
- Nvidia. Early investors in Nvidia have seen significant returns.
- Apple. Apple is a classic example of a company that has delivered long-term growth.
- Netflix. Netflix is another example of a company that has generated substantial investment gains.
The “double down” strategy involves identifying companies with the potential for significant growth and investing in them early on. While it carries risk, the rewards can be substantial if the company succeeds.
Databricks IPO: Timeline and what to keep in mind
Everyone’s waiting for Databricks to go public, but the timing is still up in the air. A lot of factors could influence the decision, including overall market conditions and the company’s own performance.
If and when an IPO happens, here are some things to consider before investing:
- Company financials: Look closely at Databricks’ revenue, growth rate, and whether they’re actually making a profit.
- Market conditions: The overall economic climate and how investors are feeling can significantly impact an IPO’s success.
- Competitive landscape: How does Databricks stack up against competitors like Snowflake? What are their strengths and weaknesses?
Doing your homework is key before jumping into any IPO, and Databricks is no exception.
Who owns Databricks?
Databricks is a privately held company, which means it’s not traded on the public stock market. So, you can’t directly buy shares in Databricks… yet, anyway.
Ownership is spread among a number of investors and employees. The biggest stakeholders are venture capital firms and other public companies, most notably Microsoft and Amazon. These companies have participated in several series funding rounds, pouring capital into Databricks to fuel its growth.
Because Databricks remains private, the exact ownership percentages aren’t publicly available. But it’s safe to say that a diverse group of institutional investors and company insiders hold significant stakes.
Summary
As a private company, investing in Databricks isn’t as straightforward as buying shares of a publicly traded company. Your options include accredited investor platforms and venture capital funds. However, it’s worth reiterating that investing in a private company can be complex, with less readily available information and potential restrictions on selling your shares.
The potential rewards of investing in Databricks are significant, driven by its high growth in the burgeoning data and AI space. However, this must be balanced against the risks. Private investments lack the immediate liquidity of publicly traded stocks. Your capital could be tied up for an extended period.
Before making any investment decision, thorough due diligence is essential. This involves researching Databricks’ financials, understanding its market position, and carefully evaluating your risk tolerance. Remember that diversification is key to a sound investment strategy. Don’t put all your eggs in one basket. Spread your investments across different asset classes to mitigate risk.
Ultimately, Databricks presents an intriguing opportunity for investors interested in the data and AI revolution. However, it demands careful consideration, a long-term perspective, and a commitment to thorough research.