Re-rethinking Databricks’ valuation in a more conservative startup market

Just how hard will it be for some high-flying unicorns to go public? The question gets more serious and worrisome by the week.

To understand how much the late-stage market has changed in the last few months, we’re once again pulling public market data that we will contrast against mega-unicorn Databricks’ known results. Recall that we executed this experiment in February, when the data analytics company announced that it closed 2021 with $800 million in ARR, and in April, when we took a look at the company under the harsher lights of a declining market for software revenues.

That downward trend continued, meaning that it’s time to take another pass at the exercise.

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I promise that we’re not picking on Databricks for any reason other than that it committed the well-known sin of being more transparent than is traditional during its growth phase. By that I mean it shared a host of data points during its life as a private company. For that we are thankful. Sadly, because many of its peers preferred to hide their — let’s be clear: lesser — results, we are left using Databricks as our benchmark for how much things have changed in SaaS land.

It’s never great to punish the honest for their candor, but we also can’t avoid working to understand the current market — it’s our job. So, more with Databricks data today, even if we are reaching the point of cruelty.

So let’s chat results and valuations and see just how much work Databricks might have ahead of it to go public. Keep in mind that extension rounds at prior terms are coming back into vogue (Gusto is one example of this trend among the multi-unicorns), so we could see the company collect quiet capital without a public repricing before it does list. Our eyes, of course, are peeled.

Now, let’s have some fun.

A historical tour of Databricks’ valuation multiples

Pulling from our February and April coverage, a historical rundown of Databricks’ valuation and fundraising:

• Q3 2019: $200 million run rate, $6.2 billion valuation — 31x run-rate multiple
• End of 2020: $425 million ARR, $28 billion valuation — 66x ARR multiple
• August 2021: $600 million ARR, $38 billion valuation — 63x ARR multiple
• End of 2021: $800 million+ ARR, $38 billion valuation — 47.5x ARR multiple

Knowing what we did in April about the historical growth of Databricks’ revenue, we estimated that the company was at around $1 billion in ARR at that date, so we’ll go ahead and calculate the following ratios using both $1 billion and $1.1 billion ARR numbers for the company. You can decide which you think is a fairer estimate.

Now, at $1.0 billion in ARR, Databricks is worth 38x its annual recurring revenue. At $1.1 billion, 34.5x. That’s not a huge difference, mind, so no matter how you handicap the company’s recent growth, Databricks is worth around mid-to-high 30x its current top line. The question is how far from market reality that number is today.