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Welcome back!
Good afternoon from Las Vegas, where I’m writing this newsletter from a hotel room with a Strip view of the Encore, the hotel where bankers, investors and tech executives will slide from meeting to meeting at Goldman Sachs’ annual private tech confab. Say hi if you’re there. (I’ll be one of the many bald guys roaming around, but I’m younger than average and have a mustache and wire-rimmed glasses.)
The conference will feature some of the buzziest companies in private tech, including Anduril and Perplexity. Also roaming the halls will be some private tech zombies—startups that lost their edge and are praying they get bought.
But much of the conference talk will likely be about two firms with compound names that won’t be on stage: Databricks and ServiceTitan. That’s where we focus today’s Dealmaker.
Databricks’ $8 Billion Ask
If Databricks completes the multibillion-dollar fundraising effort we scooped last week, it would likely be the largest private placement in history, beating out fundraisings over the past year by OpenAI and Stripe.
Databricks is looking to raise $7 billion to $9 billion, it has told investors, to cash out employees that hold restricted stock units and cover the employee taxes it would immediately owe. It has told investors verbal commitments are due by the end of this week. Bloomberg reported that Thrive Capital, a Stripe and OpenAI backer, has committed $1 billion to the fundraising.
The valuation is slated to be higher than the $55 billion previously reported—about $61 billion, or over $92 a share, Databricks executives have told potential investors. That would be about 24% higher than Databricks’ primary funding round last year. The deal is also likely to include some debt.
Investors seem confident the deal will get done. The company’s fundamentals look good: Revenue growth is expected to accelerate compared to last year to roughly 57% on a $2.5 billion annualized basis, I’m told. The company is still burning significant cash, but at a lower rate than it had anticipated last year, as we wrote then.
Still, it’ll probably be too rich for some. Investors would be valuing it at a significant premium over Snowflake, which has a $43 billion market cap at 12 times this year’s expected revenue. Databricks would command a valuation at more than 23 times this year’s expected revenue. (Read my colleague Anita Ramaswamy’s analysis from June on why Databricks’ edge over Snowflake might not be as big as investors think.)
If Databricks completes the round, that shows there is almost no limit right now for private market investors that want exposure to the “best” private companies.
That has created a strange dynamic over the past two years: Databricks’ fundraising deal would mean seven venture-backed tech firms have raised a total of $18.8 billion since last March purely to cash out employees or investors, or to pay taxes on the employee cashouts. Most of that total would be for Stripe and Databricks, but the list also includes CoreWeave, Figma, Canva, Revolut and Rippling. (It doesn’t even include companies like SpaceX and ByteDance: It’s not immediately clear how much money they have raised to buy shares.)
That total of $18.8 billion would dwarf the $12 billion 13 U.S. tech companies have raised from actually going public over the last two years, through mid-October, according to Morgan Stanley. That list includes Instacart, Reddit, Klaviyo and Rubrik.
ServiceTitan’s IPO Winners
Iconiq Capital, the investment firm best known for its deep ties to Silicon Valley billionaires, is likely to be the big winner in the initial public offering of a software company that caters to landscapers and plumbers: ServiceTitan.
Despite its blue-collar market, the Glendale, Calif.–based company has raised a ton of venture capital over the years—$1.4 billion to be exact, ServiceTitan’s IPO filing published Monday showed.
Iconiq was its biggest outside shareholder, with a stake worth $1.2 billion based on where the company shares have been trading in the secondary market lately, according to Caplight. We don’t yet know where ServiceTitan hopes to price the offering.
Iconiq made its bet seven years ago by leading ServiceTitan’s Series B at about $6 a share, compared to the current secondary market price of around $80. Iconiq invested in later rounds at much higher prices, too, watering down some returns and giving it a 19% stake before the listing. But the firm is likely assured at least a cool 10 times gross return on its investment.
The other biggest winners are Series A lead Bessemer Venture Partners ($730 million stake), Series C lead Battery Ventures ($390 million stake) and Series D lead Index Ventures ($160 million stake).
Will ServiceTitan’s IPO go well? The revenue growth rate we scooped last month—about 24%—isn’t eye-popping by any means. And the company still isn’t profitable, despite raising all that venture capital.
But expect to hear a lot about one metric in particular as ServiceTitan makes its case: its 95% gross dollar retention rate. In other words, customers barely churn. That likely makes it a safe long-term bet for IPO investors, at the right price anyway.
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