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The Logan Bartlett Show · 3 min · Nov 22, 2024

Databricks turned down $20 million to stay focused on cloud

A bank offered $20 million for an on-prem version when Databricks had ended the year at $10 million in revenue. Ali Ghodsi says the company stuck with cloud as its asymmetric bet.

Ali Ghodsi

Ali Ghodsi is cofounder and CEO of Databricks.

Co-founded Databricks, which he has led as CEO since 2016, and helped create Apache Spark.

  • Logan Bartlett, Host · Software Investor, Redpoint Ventures

    Backs enterprise software companies like Ramp, Cribl, Cyera and Legora.

About this segment

A bank offered $20 million for an on-prem version when Databricks had ended the year at $10 million in revenue. Ali Ghodsi says the company stuck with cloud as its asymmetric bet.

From “Databricks CEO on Super AGI and Unlocking AI’s Untapped Potential”, Nov 22, 2024. Watch the full episode

“if you go on-prem, they're a much bigger company. So we have to have an asymmetric bet that we believe in”
Ali Ghodsiat 32:08 · The Logan Bartlett Show32:08

Takeaways

  1. A bank raised its offer from $5 million to $20 million.
  2. Databricks ended 2016 with $10 million in revenue.
  3. Ghodsi believed larger rivals could outcompete Databricks on-prem.

In this episode

Full episode
  1. 8:18Compound AI systems can improve specific tasks more efficiently6:47
  2. 38:52Databricks pivoted from PLG to enterprise sales and paid innovationPro pick 5:30
  3. 54:45Test executive candidates by having them do the job4:45
  4. 19:55Databricks customers use AI more to read than to write2:40

  5. 30:00Databricks turned down $20 million to stay focused on cloud2:40

  6. 34:25Databricks moved engineering pay to the market's 90th percentile2:32Up next
  7. 44:16New products need startup-like autonomy inside a large company3:30
  8. 1:08:14A struggling executive may thrive in a different role2:33

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

  1. 30:05

    that needed to actually happen to have the market evolve to the point that they actually were able to do a lot of the things that you wanted them to do? I think there's these hype cycles that come and everybody's just focused on something. So that era was that Hadoop hype cycle and they were obsessed with it. And we couldn't, for the life of us, tell us AI is more interesting. It's just that you open the newspaper and everything is just about that.

  2. 30:24

    And it's happening now too, right? It's like, I think the market works like that. And to create a successful company, you have to kind of bet on something that's non-consensus at the time and you have to be right about it. So for us, it was AI, it was the cloud, it was open source. Those were the things that we were excited about, but there wasn't much excitement around that. And actually we were told that this is not going to work.

  3. 30:45

    All the data is going to be on-premises, you know, open source, you cannot monetize it and so on and so forth. So I think it's similar now, right? Were you intellectually, I heard a story that you, that a customer was going to offer you, I don't know if it was seven figures or eight figures or something to build an on-prem version of the product. And you rejected it at a point in time that maybe you could have used this now, now less so, but at that point in time, you definitely could have used the seven or eight figures or whatever it was. Did you just see this as an inevitable path you were building towards and therefore anything but that was a distraction along the way?

  4. 31:22

    Or what was that philosophical decision? Yeah, 100%. Like our view was we have to have an asymmetric bet on something that no one else believes in and we better be right about it. That's the only way. So if we're going to go on-prem and do what everyone else is doing, then there are way bigger sharks that can do them than us. And then this is going to fizzle out and it's not going to work. So yeah, it was a month or so in to my CEO job 2016 that one of the largest banks told me, you need to bring this stuff on premise.

  5. 31:50

    And I said, no, we're not going to do that. And they said, well, how much? And so how much what? They said, how much would we pay you for it? And they said, we're not going to do it. And he said, five million. I said, we're not going to do it. And he said, 10. I said, 20, I'll give you 20 right now. And at the time, 2016, you know, I guess we ended the year with 10 million revenue that year. So, you know, 20 million revenue was a lot.

  6. 32:12

    But the idea was like, if you go on-prem, they're a much bigger company. So we have to have an asymmetric bet that we believe in and we continue to double down on. And then once that bet becomes true, we'll be big enough that it's too hard for others to catch up with us. similar thing as i said is going to happen in this ai and llm era right now um i think you have to pick something that you think is different uh than the rest of market uh and then bet on it