At the end of last week, independent journalist Eric Newcomer reported that Databricks is raising new capital with a valuation of "about $ 27 billion". A few days later, another publication stepped in, saying it heard the round could be worth $ 29 billion at a slightly higher valuation.
Very well!
Last year, The Exchange covered Databricks' financial progress as a private company. Databricks, as an upgrade, provides its customers with analytics and data science tools and surpassed an execution speed of $ 350 million at the end of the third quarter of 2020.
That figure had increased from $ 200 million over the period a year ago. As we wrote at the time, Databricks was "an obvious IPO candidate" and a company with "broad private market options". The reports that raised the most capital underscore our previous notes.
But we took it a step further after news broke that Databricks could go public in the first half of 2021, by gathering all the financial information we could gather to allow the company to work out a valuation range. Our resulting figures were a bit low compared to recent news, which is the crux of our work today: We can find a number of numbers that help make sense of Databricks at $ 27 billion?
Databricks declined to comment. But that won't stop us from having fun. So, let's remember what we know about the history of Databricks growth, the economy and the scale.
From there we will be able to check our estimates against its supposed new valuation range and find some implied multiples. Hence, we will compare them to some high-flying public companies.
Do the numbers fit in some way? Can we see Databricks making sense at more than $ 25 billion, more than four times its 2019-era private valuation of $ 6.2 billion? Let's find out.
What is it worth?
In our previous work, we analyzed a number of growth scenarios to get different estimates for the current Databricks scale. Saving several hundred words, given how the company grew from $ 200 million in annual attendance to $ 350 million between Q3 2019 and Q3 2020, we estimated the company would close the first. quarter of 2021 with annual sales between $ 425 million and $ 486.5 million.
By looking at several data points from the Bessemer Cloud Index at that time, using some flexible but non-conservative estimates for Databricks' revenue quality, we came up with market comps that would have given it a multiple of sales of between 20x and 38x. At the top end of our revenue execution rate estimate for the first quarter of 2021 and at the higher multiple, you get a valuation of $ 18.5 billion.
