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Welcome back! It’s Katie and Cory here. Sometimes being a centicorn isn’t enough…especially when you’re worried the AI bubble could burst. Shortly after Databricks said in September it had raised more than $1 billion at a valuation of more than $100 billion, leaders at the database software provider told investors they were likely to raise even more soon, our sources tell us. As we reported late Monday, the 12-year-old company has started to discuss raising more money at valuation of at least $130 billion. We have since learned investors could value it at $134 billion pre-money, as the company reviews an offer from Insight Partners to lead the round. The fundraising haul will likely total between $3 billion and $5 billion, a person close to the company said. Investors in the September round, which included Andreessen Horowitz, Thrive Capital and the United Arab Emirates’ MGX, are now primed for a quick markup in the value of their Databricks investments. The company could also use the new round to allow employees to sell shares. Gains in Databricks’ valuation, if the round closes, may seem at odds with the fears starting to emanate from the public market. Peter Thiel’s hedge fund, Thiel Macro, dumped its Nvidia holdings in the third quarter, it disclosed late last week. The chipmaker has seen its gains for the entire month erased after its shares fell 7% in the last week, wiping hundreds of billions from its market cap. Meanwhile, the Nasdaq is off more than 6% from a recent high. Databricks CEO Ali Ghodsi is savvy at fundraising and knows to strike when the iron is hot. This is Databricks’ Series L, after all! Capital-intensive businesses often take advantage of frothy market cycles to receive more favorable terms before the music stops. Helping Ghodsi is the fact that the company increased its revenue run rate 50% in the July quarter—more than nearly every publicly traded software firm—and recently turned cash flow positive. Private stock investors haven’t put away their wallets, even for businesses that are likely awash in red ink. Mira Murati, co-founder of Thinking Machines Lab, has told investors the nine-month-old startup wants to raise between $4 billion and $5 billion and is aiming for a valuation of around $50 billion. That’s a phenomenal price for an AI startup that has just begun to release products. Ghodsi, like other tech leaders including OpenAI CEO Sam Altman, has noted the market seems to be in an “AI bubble.” “Look at the valuations of companies with zero revenue. It’s insane,” Ghodsi said at a Goldman Sachs conference in September. “So that’s a bubble.” But naturally these leaders don’t think their businesses will be at risk. “There will be companies that survive and do really well,” he added, pointing to Google and Amazon, which thrived after the dot-com bubble. Other tech founders are likely to follow Ghodsi’s path if they can, lining up another round even if it comes on the heels of their last one. “Capital can dry up quickly,” said Greg Martin, founding partner at Archer Capital Group, which buys existing shares in private startups. “Even the elite companies are mindful of the capital-raising environment and will more aggressively close rounds in good times.”
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