When Andrew Ferguson started Databricks’ corporate venture arm three years ago, he never expected to write checks so quickly.
Databricks Ventures has already backed 25 companies. In 2023, the fund completed an investment on average every month, Ferguson told Term Sheet.
Of course, Ferguson also did not foresee the onslaught of new entrants and startups in the AI space as soon as GPT hit the market in late 2022, and that LLM’s competitors Nor did they expect the valuation to skyrocket immediately after. Databricks introduced its own open source large-scale language model called DBRX earlier this year. This fall, it began investing in other models (one of which is Mistral AI) and companies that use multiple models, such as Perplexity AI.
Now, Ferguson wants to formalize Databricks Ventures’ investment strategy accordingly. The first fund, launched in 2021, focused on companies adopting Databricks’ “lakehouse” architecture. This removes traditional data silos and enables teams to pull data from a single data source. Databricks’ new venture capital fund, which is officially launching today, will target a broader subset of companies that sit on top of, or work in conjunction with, the Databricks Data Intelligence Platform, on which DBRX is built. focus on.
Databricks’ second VC fund is not of any particular size. The fund invests from companies’ balance sheets on a transaction-by-deal basis (Databricks declined to disclose how much capital it has invested in the 23 startups it has backed). There is no specific implementation period, and Databricks CEO Ali Ghodsi approves all investments. So when Databricks says it’s launching a “second fund,” you can think of it as the company debuting a new thematic strategy. Like many corporate VCs, Databricks is looking for strategic partnerships and ways to improve the product experience for its customers, not just financial gain. And while that’s not the fund’s objective, Ferguson said it does ultimately end up closing one or two M&A deals with portfolio companies that fit into the firm’s broader strategy. Of course he said. (For example, Databricks ultimately acquired his data ingestion company Arcion in 2022, in which Databricks invested)
This strategic approach has given Mr. Ferguson some comfort in tapping into some of the soaring valuations currently being commanded by AI startups with relatively modest revenues. He said his forehead was “uncomfortable and tense” and also admitted he “won’t remove it with a pencil.” At least for now.
Because these startups add value to Databricks’ existing customers and encourage new users to use Databricks, Databricks has a different economic opportunity than just a big IPO or M&A exit. Worth it. “This is valuable in a different way than having to think about financial valuation when investing,” Ferguson says.
Databricks tends to enter at the Series A or Series B stage, when companies have already brought products to market. Additionally, the company will not lead the deal, but will follow with a round led by venture capital (including its own investors such as Andreessen Horowitz and his NEA). Investors bring him into rounds because the company already works directly with some companies or has direct access to its customer base for feedback, which helps with due diligence, he said.
This influenced Databricks’ investment in Un Structured. “By talking to our own customers, we were able to validate the quality of the products we offer,” says Ferguson. Or, a Databricks employee passed up on a deal because he had no personal experience working for the company or because he received “mixed feedback” from one of his customer’s girlfriends.
In a nascent and rapidly evolving ecosystem of AI providers, Ferguson wants to stay on top of the latest trends and see where Databricks can help. create It strengthens the ecosystem itself and partners with companies that are at the forefront of sectors that are “still under the radar because the industry moves so fast.”
“Use cases continue to change. AI development patterns continue to change. Therefore, we are confident that this venture is a vehicle we can leverage to help our customers build the ecosystem of partners they need. We want to make sure,” Ferguson said.
Allie helped me report this article last week, and I wrote this essay this weekend on my way to her wedding in Malibu. I can confirm that vows were exchanged, two former term sheet authors were in attendance, and I have never seen her happier. Mazel Tov, Allie! And while she’s on her honeymoon, I hope she listens to the other reporters on staff (including me!).
see you tomorrow,
jessica matthews
twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.
venture deal
– alicorn venture partners agreed to the acquisition Glass Boxacquired a London, UK-based customer intelligence platform for approximately $150 million.
– KetosThe Milpitas, Calif., and New Braunfels, Texas-based company, which develops technology to measure, manage and predict water quality and efficiency for industrial, agricultural and municipal applications, has raised $10 million in funding. Tenfour Holdings Lead the round and be joined by: Danu Venture Group.
– Overland AIThe Seattle, Washington-based developer of autonomous off-road mobility technology for vehicles used in the defense sector has raised $10 million in seed funding. Point72 Ventures led the round, with participation from the following teams: Shasta Ventures, Ascend VC, pioneer square lab, voyager capitaland qubit capital.
– teala New York City-based company that develops accounting infrastructure for vertical SaaS companies that develop software for specific industries, has raised $8 million in seed funding. torch capital Lead the round and be joined by: Basis Set Ventures, General prepayment, dash fundangel investor.
– Tenonan Indianapolis, Indiana-based work management platform for marketing teams, has raised $8 million in Series A funding. high alpha and Stepstone Group Lead the round and be joined by: ServiceNow Ventures.
– RimuraThe Lausanne, Switzerland-based developer of a single device designed for on-demand, large-scale manufacturing of cell therapy drugs has raised $6.8 million in seed funding. Life X Ventures lead the round, verve ventures, Zuhlke Ventures, oxford seed fundothers.
– 7 analysisa Bergen, Norway-based developer of AI and machine learning models designed to predict floods and landslides, has raised €4 million ($4.3 million) in funding from: scale capital.
– Has to bea London, UK-based app designed to show users products owned by their friends and notify them when a friend buys or sells something online, has raised $1.4 million in pre-seed funding. speed investment Lead the round and be joined by: a16z, Atomico, concept venturesothers.
private equity
– Centivowas supported by harbor vest partnerobtained Eden Health, a New York City-based employee health care platform. Financial terms were not disclosed.
– heartland paving partnerwas supported by sound coreobtained Klekamp & Company, a paving contractor based in Cincinnati, Ohio. Financial terms were not disclosed.
– juniper landscapingis a portfolio company. Bregal Partnersobtained davis landscapingis a landscaping maintenance and installation provider based in Harrisburg, Pennsylvania and Raleigh, North Carolina. Financial terms were not disclosed.
– Sports initiativesis a portfolio company. seawall capitalobtained ewing sports, a supplier of customized soccer apparel based in Ewing Township, New Jersey. Financial terms were not disclosed.
Exit
– CyberArk (NASDAQ: CYBR) agreed to the acquisition VenafiMachine identity management platform based in Salt Lake City, Utah thoma bravo$1.5 billion.
other
– Bumble (NASDAQ: BMBL) agreed to the acquisition geneva, a New York City-based platform for meeting people with common interests. Financial terms were not disclosed.
Fund + Fund of Funds
– ETF partnersThe London, UK-based venture capital firm has raised €285 million ($310 million) for its fourth fund, which focuses on companies that have a positive impact on the environment.
people
– GV (Google Ventures)a San Francisco-based venture capital firm, is hiring Elena Sacatch As an investment partner.she was with me before Kotwe.
– Pillar VCA venture capital firm based in Boston, Massachusetts, has been hired Liz Kettler As Chief Financial Officer.she was with me before open view.
