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Does a $27 or $29 billion valuation make sense for Databricks?

Late final week, unbiased journalist Eric Newcomer reported that Databricks is elevating new capital at a valuation of “about $27 billion.” A couple of days later, one other publication chimed in, saying that they’d heard that the spherical may very well be price $29 billion at a barely greater valuation.

Well, properly!

Last 12 months, The Exchange coated Databricks’ monetary progress as a non-public firm. Databricks, as a refresher, gives its prospects with analytics and knowledge science tooling and crossed a $350 million run fee on the finish of Q3 2020.

That determine was up from $200 million within the year-ago interval. As we wrote on the time, Databricks was “an apparent IPO candidate” and an organization with “broad private-market choices.” Reports that it has raised extra capital underscore our earlier notes.

But we took all of it one step additional after information surfaced that Databricks might go public within the first half of 2021, noodling round with all of the monetary info we might scrape collectively for the corporate to give you a valuation vary. Our ensuing figures have been a bit low in comparison with current information, which kinds the crux of our work at present: Can we give you a set of numbers that assist make sense of Databricks at $27 billion?

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Databricks declined to remark. But that received’t cease us from having enjoyable. So, let’s remind ourselves of what we learn about Databricks’ progress historical past, economics and scale.

From there we can test our estimates in opposition to its purported new valuation vary and give you some implied multiples. Then, we’ll distinction these with some high-flying public corporations.

Do the numbers considerably match? Can we see Databricks making sense at greater than $25 billion, greater than 4 occasions its 2019-era personal valuation of $6.2 billion? Let’s discover out.

What’s it price?

In our earlier work, we ran plenty of progress eventualities to give you completely different estimates for Databricks’ present scale. Sparing you many hundred phrases, given how the corporate grew from $200 million in annual run fee to $350 million between Q3 2019 and Q3 2020, we estimated that the corporate would shut Q1 2021 with between $425 million and $486.5 million in annualized income.

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Looking at completely different knowledge factors from the Bessemer Cloud Index on the time whereas utilizing some flexible-but-not-conservative estimates for Databricks’ income high quality, we got here up with market comps that may have given it a gross sales a number of of between 20x and 38x. At the excessive finish of our income run fee guess for Q1 2021, and prime a number of, you get a valuation of $18.5 billion.

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