× Startups Business News Education Health Finance Technology Opinion Wealth Rankings Politics Leadership Sport Travels Careers Design Environment Energy Luxury Retail Lifestyle Automotives Photography International Press Release Article Entertainment
×

Accidental Billionaires: How Seven Academics Who Didn’t Want To Make A Cent Are Now Worth Billions

May 29, 2021

Inside a 13th-floor boardroom in downtown San Francisco, the atmosphere was tense. It was November 2015, and Databricks, a two-year-old software company started by a group of seven Berkeley researchers, was long on buzz but short on revenue.

The directors awkwardly broached subjects that had been rehashed time and again. The startup had been trying to raise funds for five months, but venture capitalists were keeping it at arm’s length, wary of its paltry sales. Seeing no other option, NEA partner Pete Sonsini, an existing investor, raised his hand to save the company with an emergency $30 million injection.

The next order of business: a new boss. Founding CEO Ion Stoica had agreed to step aside and return to his professorship at the University of California, Berkeley. The obvious move was to bring in a seasoned Silicon Valley executive, which is exactly what Databricks’ chief competitor Snowflake did twice on its way to a software-record $33 billion IPO in September 2020. Instead, at the urging of Stoica and the other cofounders, they chose Ali Ghodsi, the cofounder who was then working as vice president of engineering.

“Some of the rest of the board was naturally like, ‘That doesn’t make any sense: Swap out one founder-professor for another?’ ” recalls Ben Horowitz, the company’s first VC backer and himself initially skeptical of entrusting the business to a career academic with no experience running a business. A compromise was reached: Give Ghodsi a one-year trial run.

By Horowitz’s own admission, Ghodsi, 42, bald and clean-shaven, has become the best CEO in Andreessen Horowitz’s portfolio, which spans hundreds of companies. Databricks is already shaping up to be the firm’s best software success thanks to a recent valuation of $28 billion, 110 times larger than when Ghodsi took over. Databricks now boasts more than 5,000 customers, and Forbes estimates that it’s on track to book more than $500 million in revenue in 2021, up from about $275 million last year. It features on Forbes’ latest edition of the AI 50, ranked fifth on last year’s Cloud 100 list and could soon be headed for an IPO that ranks among the most lucrative in the history of software. Already, Ghodsi’s magic act has minted at least three billionaire founders—himself, Stoica, 56, and chief technologist Matei Zaharia, 36—all of whom, by Forbes’ estimation, own stakes between 5% and 6%, worth $1.4 billion or more.

 

It is a staggering achievement made even more incredible by the fact that many of the original founders, Ghodsi in particular, were so engrossed with their academic work that they were reluctant to start a company—or charge for their technology, a best-of-breed piece of future predicting code called Spark, at all. But when the researchers offered it to companies as an open-source tool, they were told it wasn’t “enterprise ready.” In other words, Databricks needed to commercialize.

“We were a bunch of Berkeley hippies, and we just wanted to change the world,” Ghodsi says. “We would tell them, ‘Just take the software for free,’ and they would say ‘No, we have to give you $1 million.’ ”

Databricks’ cutting-edge software uses artificial intelligence to fuse costly data warehouses (structured data used for analytics) with data lakes (cheap, raw data repositories) to create what it has coined data “lakehouses” (no space between the words, in the finest geekspeak tradition). Users feed in their data and the AI makes predictions about the future. John Deere, for example, installs sensors in its farm equipment to measure things like engine temperature and hours of use. Databricks uses this raw data to predict when a tractor is likely to break down. E-commerce companies use the software to suggest changes to their websites that boost sales. It’s used to detect malicious actors—both on stock exchanges and on social networks.

Ghodsi says Databricks is ready to go public soon. It’s on track to near $1 billion in revenue next year, Sonsini notes. Down the line, $100 billion is not out of the question, Ghodsi says—and even that could be a conservative figure. It’s simple math: Enterprise AI is already a trillion-dollar market, and it’s certain to grow much larger. If the category leader grabs just 10% of the market, Ghodsi says, that’s revenues of “many, many hundred billions.”







Source: Forbes
Image Source: Getty Images