San Francisco-based start-up Databricks was growing fast into a respected provider of cloud software for managing data on behalf of companies, doubling its revenue on an annualized basis. Then came the coronavirus pandemic.
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"There was a little bit, maybe a month or two, when everybody was frozen in time as to what was going to happen," said Pete Sonsini, an investor at New Enterprise Associates who joined Databricks' board in 2014.
But after that initial period, Sonsini said companies rushed to start analyzing data in the cloud, where they could tap computing resources without having to worry about managing infrastructure in their own data centers.
"They definitely accelerated through the pandemic," he said, adding that acceleration would continue through 2021. "We invested in Databricks when they had zero software revenue, and they're going to do about $1 billion in GAAP revenue next year….Could be more."
Databricks said in February it had raised $1 billion at a $28 billion valuation, with the top three U.S. cloud infrastructure providers — Amazon, Google and Microsoft — all participating. Investors were interested in sinking $2 billion to $3 billion into Databricks during the funding round, CEO Ali Ghodsi told CNBC at the time.
Databricks is increasingly going after companies — such as Snowflake — that offer data-warehouse products used by large companies store data from several sources, Sonsini said. In September, Snowflake made a monster debut on the New York Stock Exchange, ending its first day of trading with a $70 billion market cap, up from $12 billion just seven months earlier. The stock has lost some of the momentum it gained after going public, but it's still worth more than $60 billion.
Snowflake's revenue growth accelerated when the pandemic first arrived. Growth has since slowed down, although the company is still doubling revenue every quarter, making for an obvious competitive target.
Snowflake and Databricks initially focused on different things. Engineers relied on Databricks to clean up large volumes of data and prepare it for analysis, while data analysts often looked to Snowflake to execute queries on the data and learn about it. But the two have converged somewhat. Databricks introduced in November technology for querying data stored in its software using the popular SQL query language.
In 2019, when Snowflake tapped former ServiceNow CEO Frank Slootman to replace former Microsoft executive Bob Muglia as Snowflake's chief executive, Muglia's separation agreement said he could not work with Databricks — or, for that matter, the world's top cloud-infrastructure companies. "They were a great partner, but wanted to do more of what we do," Snowflake CFO Mike Scarpelli said in a fireside chat hosted by JMP Securities in March.
It's gotten to the point that data science consulting company Datagrom published a blog post in November titled, "Snowflake vs. Databricks: Where Should You Put Your Data?" The image at the top of the post was a Venn diagram showing what the two companies have in common.
Ghodsi tried to distinguish Databricks from competitors in his February CNBC appearance. Databricks doesn't require clients to copy data into its software in order to work with it. Instead, data can stay where it already is, such as in Amazon Web Services' widely used S3 object-storage system, and Databricks can still crunch the data, he said.
