Artificial intelligence startup Databricks is now worth $2.75 billion after raising $250 million from Andreessen Horowitz and Microsoft

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alighodsiDatabricks

  • Artificial intelligence startup Databricks announced Tuesday that it has raised $250 million in a round led by Andreessen Horowitz.
  • Microsoft and other firms also participated in this round, and this startup is now worth $2.75 billion.
  • Databricks' close ties with academia, and UC Berkeley in particular, have helped it gain traction in the A.I. space.

Companies are eagerly lining up to use artificial intelligence, but the problem is, they don't know how to use it.

That's what the buzzy artificial intelligence startup Databricks aims to do. At the mention of "artificial intelligence," robots and autonomous cars come to mind. But Databricks helps companies solve problems like analyzing massive data sets and building a database for genetic diseases and drug discovery.

"Many companies are excited to AI, but they're struggling. It's because the problems they're trying to solve is different from sexy A.I.," Ali Ghodsi, CEO and co-founder of Databricks, told Business Insider. "We're the only company that focuses on how can you do the boring things and A.I. together. We don't see any vendors out there that try to do that."

And the demand is growing. Databricks has generated over $100 million in annual recurring revenue, and its subscription revenue has tripled during the last quarter of 2018. And on Tuesday, Databricks announced it has raised $250 million in a round led by Andreessen Horowitz. Microsoft and other firms also participated. The startup is now worth $2.75 billion.

Read more: A $1 billion data-crunching startup that was initially rejected by investors aims to do for drug companies what it did for Netflix

In total, Databricks has raised $498.5 million. With the funding, Databricks plans to expand its quickly growing presence in Asia, Europe and the Middle East. It wants to expand into the health, fintech, media, and entertainment sectors. Meeting this demand has been Databricks' biggest challenge, Ghodsi says.

The UC Berkeley connection

Databricks has a close relationship with academia. Ghodsi is an adjunct assistant professor at UC Berkeley, and the technology behind Databricks started with academic research. Many graduate students work closely with Databricks.

Databricks is also known for its early project, Apache Spark, which started at UC Berkeley. Although it's still a key ingredient at the company, now it's only a small part of what Databricks does. Databricks has shifted its focus to machine learning, it has seen over 100,000 downloads of its new open source machine learning project MLFlow.

"As an academic in a university, you always want your research to have an impact. You publish the paper, write the software, but most of the time, people don't pick up the software and it doesn't have the impact you want," Ghodsi said. "It wasn't until we started Databricks that we get closer to that."

Although Ghodsi has to work extra hours as both a CEO and a professor, he says Databricks has benefitted from exposure to both worlds.

"The A.I. space is evolving so fast," Ghodsi said. "You have to stay on top of that innovation cycle. It would be advantageous if more companies were more closely collaborating with universities."

Databricks' secret sauce

Ghodsi says that Databricks has been able to grow so fast because there aren't many other companies doing the same thing. Databricks has a platform that supports both machine learning algorithms and data. Meanwhile, he says, most companies only focus on one or the other, leaving companies to do the manual work of stitching both together.

"Frankly speaking, the market is yearning for AI solutions for these enterprises," Ghodsi said. "There isn't much out there to help them. These companies really want to move the needle. There's incredible demand. We've been trying to ramp up our efforts to get our product to as many customers as possible."

Databricks started with all its web services on Amazon, but now more customers are using multiple clouds or a hybrid cloud. Just last year, it announced a partnership with Microsoft Azure by starting Azure Databricks, and now Microsoft has become Databricks' newest investor.

As a cloud, artificial intelligence and open source company, Ghodsi recalls that in Databricks' early years, people were skeptical on all three fronts. However, the market has changed dramatically in the last two to three years.

"All three of those are now central to everyone's strategy," Ghodsi said. "We're just really lucky to be at the center of those three trends."

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