Record funding round reflects Databricks' differentiation
Based on its AI development and expansion within data management, the record $10 billion the vendor raised shows it is viewed differently than its competitors.
The funding rounds Databricks has been able to execute are a demonstration of how the vendor has been able to separate itself from other data management and analytics vendors that have ventured into AI development.
But raising huge amounts of funding is nothing new for San Francisco-based Databricks, which began as one of the pioneer developers of the data lakehouse architecture for data storage before branching out into AI development over the past two years.
Before its record Series J round, the vendor raised $1.6 billion in August 2021, $1 billion in February of the same year and $500 million in September 2023. In total, Databricks had amassed $4 billion in total funding over the course of 11 years before adding another $10 billion.
Meanwhile, many of Databricks' data management and analytics brethren who remain private have yet to raise $1 billion in total funding, much less a single round. For example, fellow data management vendor SingleStore has amassed $464 million in total funding, while MongoDB has raised $311 million. Cloudera has reached $1 billion exactly.
"Databricks has differentiated itself from the start through its open lakehouse architecture and unified data platform that can handle all data types," said Mike Leone, an analyst at Informa TechTarget's Enterprise Strategy Group.
Databricks has differentiated itself from the start through its open lakehouse architecture and unified data platform that can handle all data types.
Mike LeoneAnalyst, Informa TechTarget's Enterprise Strategy Group
But beyond merely its start, its evolution has factored into how it's been able to separate itself from other vendors in the eyes of investors, he added.
"As you factor in areas they've rapidly expanded into, it's clear they've continued to emphasize the criticality of a complete, open stack to enable customers to scale from data to analytics to AI," Leone said.
Thriving in tough times
Perhaps just as striking as the amount of funding Databricks has been able to raise in recent rounds is that it's been able to do so during a period when venture capital investment in data management and analytics vendors has slowed dramatically.
Throughout 2021 and into early 2022, funding seemingly flowed freely into data management and analytics, with 12 vendors raising $100 million or more in funding rounds. But when interest rates increased and fears of a recession rose in early 2022, investors abandoned the tech sector, including data management and analytics.
Purses loosened somewhat in 2024, with Cribl, Aerospike and Sigma Computing all topping $100 million in funding rounds and a smattering of others topping $50 million. The common theme among most of those able to raise funding is an expansion beyond traditional data management and analytics into providing tools that enable AI development.
Still, none came close to the funding rounds Databricks has experienced.
Now, Databricks isn't viewed merely in comparison to other data management and analytics vendors but also AI developers such as OpenAI and Anthropic, which are the types of companies that like Databricks are executing massive funding rounds.
But what separates Databricks from others in data management and analytics is not only its successful expansion into AI but also the speed with which it has done so, its history of innovation and ability to execute new ideas, according to Leone.
"Databricks is on a different tier than virtually every other data/analytics vendor between their maturity, customer adoption, openness, completeness of platform, ability to move quickly in the face of an insanely dynamic market, ability to execute on a vision that truly resonates with customers and the fact they're doing all of this as a private company," he said
Among many moves Databricks has made over the past two years to expand beyond data management into AI development, the vendor acquired MosaicML in June 2023 to form the foundation of its AI development suite. In addition, it made tuck-in acquisitions to further add generative AI development capabilities, launched vector search and retrieval-augmented generation tools, developed its own LLM called DBRX, and has integrated with other AI model developers such as Mistral and Anthropic.
But like Leone, Doug Henschen, an analyst at Constellation Research, suggested that Databricks' appeal to investors stretches past its aggressive interest in AI and includes its expansion within data management and analytics.
Beyond its lakehouse, Databricks is adding data integration tools to get data from its source into its platform. In addition, the company introduced data analysis capabilities.
"With the likes of AWS with QuickSight and Microsoft with Power BI going after the [analytics] space, it makes sense that Databricks, too, might make a grab for that spend," said Doug Henschen, an analyst at Constellation Research.
A positive sign
While Databricks stands apart from other privately held data platform vendors in its success executing $1 billion-plus funding rounds -- publicly held Snowflake has had similar success attracting investors in the stock market -- economic conditions could be turning more favorable for other data management and analytics vendors as well, according to David Menninger, an analyst at ISG's Ventana Research.
The recession many feared in early 2022 never materialized, and interest rates are expected to drop. That could mean more investors are willing to put money into technology.
"I don't have a VC crystal ball," Menninger said. "But if you look at the larger economic picture, most are expecting interest rates to decline, freeing up more capital. And with only 15% of GenAI projects fully in production -- according to our research -- there is still significant upside to AI."
And AI vendors -- even those that have tangential relationships with AI, such as data integration specialists whose tools prepare data for informing analytics and AI -- are where investors are focused, he continued.
For example, in addition to Databricks, OpenAI and Anthropic, xAI raised $6 billion in a single round earlier this month. Meanwhile, among data management and analytics specialists, Aerospike and Coalesce are part of a group that has attracted funding, with both citing enablement of AI development as a way they plan to invest their capital.
"There appears to be an appetite to invest," Menninger said.
Among data management and analytics specialists, Qlik and Starburst are two that could draw interest from the investment community, according to Leone.
Qlik, which as of January 2022 was planning an initial public stock offering but never went through with it due to unfavorable market conditions, recently received a sizable investment from Abu Dhabi Investment Co. Starburst, meanwhile, has raised more than $400 million in funding to date.
"As Starburst sharpens their AI story, there could be some opportunity there," Leone said.
Eric Avidon is a senior news writer for TechTarget Editorial and a journalist with more than 25 years of experience. He covers analytics and data management.
