Databricks private valuation faces public market reality
The speakers argued that Databricks' private valuation of over $130 billion is unsustainable in the public markets when compared to its public peer Snowflake.
The argument
The guest noted that while private markets only require a few investors to set a high valuation, public markets involve millions of participants who prioritize free cash flow over pure top-line growth. They expressed skepticism that Databricks could successfully IPO at a premium to its last private valuation given Snowflake's $55 billion market cap.
The thesis, stress-tested
✓ What validates it
- ✓Databricks files for an IPO at a valuation below its private peak
- ✓Public market multiples for data warehouse and analytics firms contract further
▸ Risks discussed
- ▸A broad recovery in tech IPO appetite could validate high private valuations
- ▸Databricks could demonstrate significantly stronger free cash flow margins than Snowflake upon filing
Hear it yourself
"If a guy's been at salesforce.com for the last five years, he's never opened a new logo. ServiceNow? ServiceNow. Right? Let's go hire people from ServiceNow. Why would you wanna hire people from ServiceNow? They don't know how to do any pipeline generation. Why do you say that for people listening that don't understand? Well, Salesforce has a monopoly. Mhmm. And so how much outbound are you doing if you work at Salesforce? You just first of all, everybody's already a customer. So how many new customers are you going after? Like, you could talk to a guy at Salesforce. He's like, yeah, I closed Wells Fargo."
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