Not being sustainable after all this time and billions of dollars is a sign company is just burning money, and a lot of it. wework vibes.
[0]: https://www.databricks.com/company/newsroom/press-releases/d...
i.e. when we exclude a bunch of pesky costs and other expenses that are the reason we’re not doing so well, we’re actually doing really well!
Non-GAAP has its place, but if used to say the company is doing well (vs like actual accounting) that’s usually not a good sign. Real healthy companies don’t need to hide behind non-GAAP.
Really what they don't tell you is how much SBC they have. That's what crushes public tech stocks so much. They'll have nice fcf, but when you look under the hood you realize they're diluting you by 5% every year. Take a look at MongoDB (picked one randomly). It went public in 2016 with 48.9m shares outstanding. Today, it has 81.7m shares outstanding. 67% dilution in 9 years.
However genuinely curious about the thesis applied by the VC’s/Funds that invest in such a late stage round? Is it simply they are taking a chance that they won’t be the last person holding the potato? Like they will get out in series L or M rounds or the company may IPO by then. Either ways they will make a small return? Or is the calculus diff?
Its less financially/legally saavy parties like angel investors and early employees who (sometimes) get screwed out of valuation
But the pref stack always favors later investors, partly because that's just the way it's always been, and if you try to change that now no one will take your money, and later investors will not want to invest in a company unless they get the senior liquidity pref.
Why they do it via an equity offering and not debt is unclear. You'd imagine the latter is cheaper for a hectocorn.
1) It's evaluated as any other deal. If you model out a good return quantitatively/qualitatively, then you do the deal. Doesn't really matter how far along it is.
2) Large private funds have far fewer opportunities to deploy because of the scale. If you have a $10B fund, you'd need to fund 2,000 seed companies (at a generous $5m on $25m cap). Obviously that's not scalable and too diversified. With this Databricks round, you can invest a few billion in one go, which solves both problems.
OpenAI is still early, burning VC money to acquire customers by operating at a loss. This makes it appear cheap.
DataBricks is further along, attempting to claw back the value they provided to customers by raising prices.
That costs a fair bit of dosh.
I can’t know if it’s completely true ofc, but that’s what employees are told.
if you were to apply the same ratio to Databricks it would have to trade at 42 000 000 000 000 000 USD - enough to buy the entire US sovereign debt, the moon, all earth's minerals with plenty to spare. A completely rational market if you ask me.