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The Takeaway

VC firms known for early-stage investments are planning to invest in Databricks, an 11-year-old firm that has told investors it wants to raise at least $7 billion. It’s a sign of renewed optimism that more companies will make their IPO debuts soon.

Silicon Valley investors often pride themselves on writing one of the first few checks in a startup, then doubling down if a winner takes off. But Databricks, an 11-year-old seller of databases and analytics software that’s raising billions of dollars, has prompted some elite investment firms to place a few very late bets as well.

Kleiner Perkins, Founders Fund and Lightspeed Venture Partners, all well known for making early investments in companies that became tech giants, are planning to participate in the latest Databricks financing that will value it at $61 billion, according to three people with direct knowledge.

Other new investors are beginning to round out the fundraising, the first phase of which is expected to close next week. Databricks has told investors it wants to raise at least $7 billion, but the exact size of the fundraise couldn’t be learned. SoftBank’s Vision Fund is also planning to invest less than $100 million in the round, another person said.

Thrive Capital also plans to sink $1 billion into the software company and has been helping Databricks round up investors, according to people close to the deal. With the aim of selling new stock to cash out some employee shares and pay taxes on them, the deal would be one of the largest ever U.S. tech private financings, surpassing OpenAI’s $6.6 billion haul earlier this year.

Bloomberg earlier reported Thrive’s involvement. Other new investors haven’t been previously reported. It’s not clear how much the new investors are spending.

These investors join a long list of firms that have had stakes in Databricks that typically invest in mature private firms. They include mutual funds BlackRock and Fidelity Management and hedge funds Tiger Global Management and Coatue Management. Venture capital firms with some of the biggest stakes in Databricks include early backers Andreessen Horowitz and New Enterprise Associates, people close to the company said.

While many VC firms have raised funds to invest in mature startups, those that focus on early-stage startups often tap those funds to maintain or increase the size of their stake in startups they backed years earlier.

For instance, Founders Fund has invested at least $875 million in defense startup Anduril, which one of its general partners co-founded. As part of that investment, Founders Fund co-led a financing earlier this year valuing Anduril at $14 billion including the new capital. Kleiner has continually backed enterprise search startup Glean—whose growth recently got the attention of OpenAI and Google—since the startup’s founding in 2019.

Lightspeed, meanwhile, has been in the process of raising capital for new funds that could total $7 billion, close to 40% earmarked for late-stage startups such as Stripe and Rippling. The firm has made several late-stage investments over the past year, including in artificial intelligence companies xAI and Anthropic, and co-leading a $1 billion round for cybersecurity firm Wiz. This would mark Lightspeed’s first investment in Databricks, according to a person with knowledge of the deal.

For SoftBank, the deal adds to a growing list of generative AI investments, though at a smaller scale than some of the bets it became known for before the pandemic.

The decision by VC firms to back mature startups for the first time points to a renewed optimism that the two-year drought in initial public offerings is close to ending. Listings can provide returns for late-stage investors, though they are rarely enough to return a fund’s entire capital to its investors. VC funds are also looking for safe bets to offset investments on artificial intelligence companies that haven’t proven they can generate revenue, investors say.

Databricks CEO Ali Ghodsi has said next year is the earliest an IPO could happen, but that the timing isn't certain. It has arranged the capital raise because it wants to cash out employees that hold restricted stock units and cover the employee taxes such sales would immediately trigger.

Also enticing investors: the company is growing sales unusually quickly for one of its size and has gained an edge on rival Snowflake with its AI-powered products. It has forecast nearly $2.6 billion in revenue for the fiscal year that ends in January, up 57% from the prior year, and an increase in revenue of more than 40% for each of the next two years as well.

Ghodsi has high targets for the company’s eventual size. He thinks his company could become as big as Salesforce, which has $35 billion in revenue per year.