Databricks IPO in 2021? The Next Data Science & Machine Learning Platform to go Public
Which of vendors placed in the 2020 Gartner Magic Quadrant for Data Science and Machine Learning Platforms will be the next to go public, following the Alteryx IPO in 2017? Is a Databricks IPO the most likely? Let’s take a look at the data.
Data Science & Machine Learning Platforms Considered
First, we narrow down the companies in the 2020 Gartner Data Science & Machine Learning Magic Quadrant to those which are relevant to this discussion. The following filters are applied:
Private Companies: This obvious filter eliminates public companies Microsoft Azure AI, IBM Watson Machine Learning, Google Cloud AI Platform, Alteryx, and Altair from the discussion
Founded After 2000: Only companies founded after the year 2000 are considered. This eliminates SAS (1976), Mathworks (1984), and Tibco (1997)
Over $25Mil ARR: Only companies with Annual Recurring Revenue over $25 Million are considered. Based on publicly available information, this filter eliminates Anaconda, RapidMiner, and Knime from the discussion
After applying these filters, here are the 5 data science & machine learning platform companies which remain (in alphabetic order):
Data Science & Machine Learning Platforms Compared for Likelihood of IPO
In order to predict which of these data science tech companies will be the first to go public, we’ll take a look at several industry comparables. Specifically, we will consider:
Google Search Volume — A successful IPO hinges on consumer demand. A 2011 study in the Journal of Finance, argues that Google Search Volume can be used as an effective measure of investor attention, and as a precursor of trading volume and IPO performance.
Annual Recurring Revenue (ARR) — Compare ARR based on publicly available revenue information gathered from sources which may include Growjo, Craft, Crunchbase, and Owler (among others)
Company Valuation — Compare valuation based on publicly available information also gleaned from sources like Growjo, Craft, Crunchbase, and Owler (among others)
Google Search Volume for Data Science & Machine Learning Platforms
If we compare these companies to each other based solely on Google Trends Web Search volume data over the past five years, we immediately see a relative standout.
Show Interactive Chart which Compares Search Volume for Data Science & Machine Learning Platforms
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Google Search volume data seems to indicate substantial relative interest in Databricks. One reason for this may be the partnership Databricks formed with Microsoft in 2017. Even though Databricks search volume was already trending higher than the field prior to 2018, we see this trend begin to accelerate towards the end of 2017. A polynomial trend line fitted to Google Trends data, seems to indicate a positive inflection point during the week that Databricks announced a close partnership with Microsoft, and the new Azure Databricks offering in March, 2017.
Databricks announces Microsoft partnership Nov 15, 2017
This alliance with Microsoft immediately expanded the Databricks salesforce and customer ecosystem to also include every Microsoft sales rep along with their growing list of customers. And in 2018, Microsoft had an army of at least 10,000 salespeople. These sales reps are compensated to drive consumption of Azure cloud resources. Azure Databricks provides Azure sales reps with a credible data science platform, built by the original creators of Apache Spark, to further incentivize customers to increase Azure consumption. This is very much a “win-win” synergistic relationship.
This close alliance with Microsoft Azure, vs Amazon Web Services (AWS) or Google Cloud Platform (GCP), makes further sense if we compare Google Trends web search data for the leading cloud platforms over the past five years.
Databricks perhaps wisely noticed this trend and bet big on Microsoft by forming the closest cloud partnership it has, when compared with its relationship with the other major cloud vendors.
It is difficult to understate the impact of this strategic alliance formed between Databricks and Microsoft. As Rishi Jaluria, an analyst at DA Davidson suggested (to CNBC) that “I would say Databricks may not be here without the Microsoft partnership.”
As these are all private companies, they generally do not disclose annual revenue numbers. There are some publicly available estimates, however, which may be useful in a limited capacity.
What is clear, is the data science & machine learning platform company (of those considered) with the highest Annual Recurring Revenue (ARR) is Databricks. ZDNet reports a Databricks run rate of $200M. Below Databricks, we have these rough estimates (which may vary substantially from actuals):
DataRobot: $100M ARR (Owler estimate)
Dataiku: $68M ARR (Growjo estimate)
H2O.ai: $30M ARR (Owler estimate)
Domino: $27M ARR (Owler estimate)
Databricks is clearly performing well from a revenue standpoint, relative to the field, with roughly 2X the annual revenue of the next company on the list.
According to publicly available information of company valuations, Databricks enjoys a comfortable lead which dwarfs the field of data science & machine learning platform companies. With a valuation of $6.2 Billion, Databricks is valued at more than 4X the next runner up, Dataiku, which is valued at a healthy $1.4 Billion (as of the date of this article).
Prediction: Next Data Science & Machine Learning Platform Company to go Public
From the list of companies considered, Databricks will very likely be the next data science & machine learning company to go public, based on the analysis presented above. Following a Databricks IPO, from this selected field of data science & machine learning companies, it seems likely that we could expect to see either a DataRobot, or Dataiku IPO in the years that follow.
Will We See a Databricks IPO in 2021?
According to CNBC, Databricks wants to be ready to go public in 2021, and Databricks CEO Ali Ghodsi says there’s plenty of investor demand. Timing, however, of a Databricks IPO in 2021 may not be ideal within context of the recession caused by the COVID-19 pandemic. To that point, Ghodsi comments that “If this crisis lasts five or six years, we could just go on and continue hiring and be unaffected by this.”
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