Databricks is launching an accelerator for AI startups.
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Databricks, the $100 billion-valued AI data storage and analytics company, wants to help nurture fledgling companies. On Thursday, the company said it’s launching an accelerator program for seed and pre-seed stage AI startups that use Databricks’ tools and platform.
The company will invest up to $250,000 in portfolio companies, which could take several forms, including cash, credits to use the Databricks platform, and credits with outside vendors vetted through the company, such as web designers. The program is a part of Databricks Ventures, the VC arm it started in 2021, which has invested in startups including AI search engine Perplexity and enterprise AI assistant startup Glean.
With the new accelerator, Databricks wants to go beyond standard venture capital, offering companies mentorship from its executives, and helping them grow, in some cases, even before the startup has a product out. “We can do this much better than a traditional VC can,” CEO Ali Ghodsi told Forbes. “The VC does not have 20,000 customers,” he continued, adding that Databricks could use its customer relationships and operational expertise to help young companies go to market.
Portfolio companies will also get access to Databricks’ network of venture capitalist relationships with firms including Andreessen Horowitz, Battery Ventures, General Catalyst, NEA and Menlo Ventures. Those introductions will come in handy when portfolio companies want to raise series A funding and beyond, Ghodsi said.
“We can do this much better than a traditional VC can.”
The inaugural class of the accelerator has five members. They include Ziggiz, a startup that helps security teams manage their data; Datalinx, which transforms customer data into analytics; and Alpha Level, which helps customers triage security alerts so they can focus on the most urgent threats. One of the biggest boons of the program is the association with Databricks, said Alpha Level CEO Mike Pozmantier, especially when trying to bag new customers. “Being able to come in with Databricks gives us a lot of validation,” he told Forbes.
For Databricks, the idea is to invest in young companies that will eventually work with its own customers, Ghodsi said, which is why it’s focusing mostly on enterprise software and infrastructure startups. Still, the field for startup accelerators is already crowded. Among them are Y Combinator, the storied Silicon Valley institution that has been investing in seed startups for two decades, Neo Accelerator, started by early Facebook investor Ali Partovi, and Arc, an incubator started by blueblood venture firm Sequoia.
Andrew Ferguson, head of Databricks Ventures, said he doesn’t see the program as a competitor to other seed funds or incubators like Y Combinator, which offers companies more of a boot camp experience. Instead, the Databricks program has a lighter touch. Ferguson also said the Databricks accelerator is complimentary to other programs because the company invests alongside other VCs, but it doesn’t lead rounds. Unlike Y Combinator, which takes 7% equity for $500,000 from every portfolio company across the board, Databricks’ accelerator doesn’t have cookie cutter terms. Deals vary based on the company and funding stage.
The announcement comes a week after Databricks announced a $1 billion series K fundraising round, valuing the company at $100 billion. Databricks’ vast fundraising history — it’s raised almost $20 billion total since it was founded in 2013 — will be an asset to its accelerator companies as they try to build relationships with new backers, Ghodsi argued. “Pretty much any investor that’s out there is already on our cap table.”
As for Databricks itself, its billion-dollar fundraise has again put the spotlight on its prospects to go public. The company has been a top IPO candidate for years now, which Ghodsi said is still in the cards. The company has chosen to put off an IPO for this long because it’s been able to raise the funds it needs in the private markets. “There’s so much capital now,” he said. “If this was 20 years ago, you’d have to go public.”
He said there’s no official timeline, but it’s unlikely to be this year. “As I’ve said before, it’s not an if, it’s a when,” he said. “It will happen.”