E223: Databricks targets $100b in new round; Canva launches tender at $42b valuation; Eight Sleep raises $100m at $1.5b

0:00All right, fellas, three good topics here.

0:02Clint Sorenson:We got like almost a fire round because I know some people have to leave here in like 20 minutes or so. But Databricks, big round. So they announced$100 billion valuation round. They're doing a billion capital raise. Thrive, Insight Partners, A16Z, All Investing. The secondary market, I had them at$81.6 billion. So it's a little bit uptick from there, right? And they got 10 ,000 plus customers. It's a proper company, right? This is an AI infrastructure play. That's how I would categorize it, right? But thoughts on Databricks new round. Also thoughts on like when this company might go public. Like they've been talking about these guys going public for two years, I think it's been, right?

0:50Clint Sorenson:So maybe Evan, we'll start with you and then Nick, you can bet clean up on this guy, right? But what do you think? What do you think of Databricks? I mean, it's an amazing company. They've been talking about going public since 21 or 22, I feel like. I mean, I remember getting offers to invest around$35 billion in 22. That was right around the valuation. And they were actually considering doing a little bit. I think the prices were a little bit lower than their actual venture round that they had done at that time. And since then, it's almost 3x, which is insane. The company is amazing. Look, at the end of the day, they're valued at this round almost 30 % higher than Snowflake, which is pretty wild.

1:27considering Snowflake's also an incredible business. But from my understanding, they are crushing it on the sales side. They are winning customers left and right. Customers love their product, incredibly high retention. They've got an amazing round of investors. I can see this company staying private for a long time, especially as they continue to invest in the CapEx side to increase the data centers for AI. It seems like a very reasonable approach to stay private, continue to take private dollars, grow the valuation, build an even stickier flywheel for AI. I'm all in on day bricks. I'm kicking myself for not investing four years ago.

2:02Clint Sorenson:Well, you know what? It sounds like you're bullish. Maybe you should do it now, right? Yeah, maybe I should. So Nick, listen, a billion dollar raises not that much money relative to what other people in the world are doing these days, right? Do you think that this is just them wanting to put a valuation stamp out there at the$100 billion mark? Or what do you think? What's the logic here with just a billion? That is the easiest thing to do. I know these are big numbers, but I remember there was this kid that came out in the news like 18 months ago. He sold one share of his company for some extortion at valuation.

2:41He said, I'm the richest man in the world or something on paper. So yes, when you're raising$1 billion on a$100 billion valuation, it could very easily attract a whole bunch of investors because there's not a lot of supply. That's really helpful. It's a little bit different than the Revolut playbook, which was, oh, let me mark up by 25 % where we were on the last round and see who comes to it. But the secondary market we are seeing as pretty reactive here. and probably for good reason. So like Evan said, it's an attractive company. They are growing faster than the closest comp, which is a Snowflake.

3:22They do now have more revenue than a Snowflake. So revenue multiples on a Snowflake is about 18. Databricks is like a 24 from our own data in-house. But then you're seeing the bids and offers just fly out once that announcement was made. So they're both up. bids are up to about 80 billion, offers are up to about 105 billion for valuation. But they're now wide enough apart, you could drive a bus through the spread. So usually Databricks was acting around like a 8 % bid offer spread. And now it's like 30. So I think the investment sentiment is, let's see how this thing shakes out and see how well received that$100 billion valuation is going to be in the market.

4:11Clint Sorenson:I mean, I was getting some unsolicited stuff coming across my desk at a discount to this $100 billion round, which is, I think, interesting that people are like... I mean, I'm not even asking people for quotes and they're just sending it to me at a discount. So what does that tell you? It's really compelling to me. This, to me, feels like a proper valued company. If not, it's a little bit high, like Evan was saying, right? You know, but like this is where it's like if they're going to go public like this would be this this to me doing a billion dollar raise. Right. Is like you're kind of planting your flag in the sand that the company is worth 100 billion and then like, you know, an IPO to follow.

4:54Clint Sorenson:Right. You know, like especially since these guys have been talking about going public for so long and now like the IPO window is open. You know, core we've just went with just also an AI infrastructure play that did really well. I mean like this thing this is a time to go if you're going to go this would be it right this would be the time to go you know what I mean so why wouldn't you just go right now right so I think the 100 starts to put you know your game of connect the dots with the you're saying go do the IPO before the 100 or do the 100 and then the IPO I personally think they're doing the right thing but to your point, why wouldn't you just go now?

5:38So I do believe they want to put that optic, it's a very clear optic number. It's a hundred billion, line in the sand. They stamp it out there. Everybody understands that is the valuation and people start to buy into it, even if it was just like 1 % of the company transacting here. But then they could also use that number when they're trying to reposition the cap table too. So coming into an IPO, oftentimes it's very smart to have your traditional asset managers step in and start to replace the VCs. So getting some of the VCs out, despite all the names, the insights and thrives of the world, A16Zs that have come in, but you want to have folks like Fidelity, BlackRock, T.

6:20Rowe Price

6:21Clint Sorenson:on the cap table coming into that IPO as well. So now you've got a nice number that people can point to and say, okay, if we're going to move things around, we can move things around at 100 billion. Is everyone comfortable with us? Oh yeah, we were oversubscribed at a hundred billion. Yeah, yeah, yeah. True. So I think there are a number of smart and clever ways to do it. And even though I think they could IPO right now and do great, this probably helps build conviction and support for when they do do the IPO down there. Yeah. Yeah. That makes a lot of sense. Just to add, I do think that Sam Altman has talked about this a bit from the open AI perspective.

7:00there's just such an advantage to being private in a market that requires a lot of spending of capex and so you know when their number one competitor snowflake every single month every single quarter they're doing audited financials every single quarter they're doing reporting you know everything's being scrutinized being private especially in this ai boom where you need to invest in the infrastructure side so heavily there's probably a big advantage to staying private and not having to deal with the scrutiny and the effort required of being a public company at this stage.

7:33Clint Sorenson:So you're thinking they're going to stay private for longer, even longer now? No IPO in the future? What do you think? I mean, I kind of agree with your point, which is that if they were to go, this seems like the right time. So why would you raise a billion dollars now at a hundred billion if you're going to go soon, unless you needed the cash? So it just seems a little bit like, well, maybe they will stay for private. Well, it could also be just bragging rights. I mean, it's rarefied air to have a hundred billion dollar private company, right? Growth company. So you never know. Maybe that's all.

8:04Yeah. And I don't think they need the money, right? This is, if you needed the money, you were going to take in five. Exactly. Why don't you take in one?

8:13Clint Sorenson:Yeah. That's what I'm saying. It's such an interesting number. Or it's just like you had a group of investors that wanted to get in and you didn't really want to take their money. So you're like just, you know, like doing it for them. You know what I mean? Okay, fine. We'll get you in. You know, it's like one of those things. But you know, conspiracy hat on with saying like, the investors are like, Hey, do you mind if you do a round so that we can mark up our book? Yeah. You know what? You're not wrong. Your words, not ours. Yeah. You're not wrong. I mean, this is like, you're not wrong. You're not wrong.

8:42Clint Sorenson:Okay, guys, let's talk about Canva. So Canva is doing a tender at a$42 billion valuation. So Canva is like, you know, design, graphic design for the everyday man, right? And they're starting to use more and more AI in their solution too. So it's almost becoming like an AI kind of AI app, if you will, if you want to think about it in those terms. But Fidelity is getting in, JP Morgan's getting in, Nick, to your point earlier, right? They're getting some kind of cornerstone shareholders on the books here. They got 200 million monthly active users. 2024 revenue is 2.5 billion. It's up 50 % year over year, right?

9:22Clint Sorenson:User base is 90 % of the Fortune 500. That's nuts, right? So the secondary market, I had them at 40.6 billion kind of pre-announcement. So it's pretty much like right there, right where they did the tender, which I would have to think the secondary market was kind of impacting this tender valuation, right? But Nick, maybe we'll start with you this time, man. What do you think of Canva? What do you think about the valuation? Maybe just as it relates to the secondary. It seems like secondary market was influencing the primary market here with the tender. What are your thoughts? Sure. I think Canva is a great company.

9:59If we were to put the comp out there, it's not a perfect comp knowing the business is a little bit more deeply, but a Figma. Figma was trading at a 14X, Canva's at a 12. If I were an employee, I would take it. I'd be really happy with that. But I just don't know that the long-term value on Canva is going to continue at that pace or it's a justifiable valuation. But that's just more of my sentiment on the company and where it's headed as a whole. It might be a tough pill to swallow for an IPO. But yeah, it's been a stellar one to watch over a long period of time.

10:41Clint Sorenson:Well, I mean, like, so Canva is not an AI, like an AI company. And all the buzz, right? Evan is like AI. Everything's AI these days. Either AI infrastructure, AI platforms, right? AI specific. I mean, they're starting to add more AI into their solution. But to Nick's point, it's like firmly a SaaS business, right? So, I mean, what do you think about Canva? Can you play this as an AI play? or is this, or like, how do you think about it? I think you could definitely play it as an AI play. At the end of the day, you know, there's the opportunity for distribution. They have 200 million monthly actives, as you said.

11:21You know, they have very loyal customer base. Their product is really great. I think that the jury is still out on what the user interface in which most people interact with AI over time. I do feel like they have headwinds in the competition because, you know, with AI, it does allow other competitors to come in. It does question whether or not the UX of, you know, a Canva or a Figma is the future versus, you know, generative speaking to it, et cetera. Right. But I mean, I think you can definitely make the AI story because at the end of the day, they have a massive distribution towards the consumer, toward like the, as you said, like the every person sort of user.

12:05And those people are still exploring AI. They haven't made their decision yet of where they're going to work, like what they're going to use. And we're still so early in the AI cycle that it's unclear, like, you know, the killer feature that AI will generate for images and things like that. So I think that there's a story you can play there. I kind of agree with Nick that I don't, I mean, if you're an employee taking it right now, it's probably something to consider because I don't know if the growth trajectory will continue at the pace that it has, but there's no reason to go after against it right now.

12:37Clint Sorenson:Yeah. Yeah. I mean, it's like, you're not wrong. Like 200 million monthly active users is no joke. That's a lot of people. And it's almost like there's the lose, right? If they can continue to innovate on the product side, integrate more AI and kind of be that, at least stay on par with other solutions that might be hitting the marketplace or even hopefully deliver better products and services as it relates to AI and make it even easier for people to create beautiful things, marketing content, etc. Then it would stand to say they would continue to grow. I mean, the brand's great, right? Yeah. I feel that some of the generative AI magic is most applicable to businesses or to customers who want a magic experience.

13:24Like the professional world, like Figma, they're used to being in the details. They're used to wanting exactly what they want. But I can see a lot of customers at Canva who are just like, look, I really want to generate wedding invitations. I'm not an expert designer. And so AI creates the opportunity for a very magic experience for the prosumer or the consumer. And so there's a lot. I think their target audience is very much going to be happy with generative AI when it gets integrated or as it's being integrated. The one thing I will say about their numbers here that I do get a little eyebrow-y about is that they're a freemium product.

14:02And so 200 million monthly active users, it doesn't require a lot of effort to log into the platform once. 90 % of Fortune 500 companies, how many of them are paying? How many of them are paying massively? I do wonder, when you have a freemium product, the numbers are as strong as, say, something like Databricks or a paid-all-only company for SaaS. right right yeah i i mean this company is um

14:33Clint Sorenson:this company's i mean it's an australian business right which i don't think that's like good or bad as it relates to uh you know the investment opportunity but um yeah i just don't know how i feel like now like i gotta tell you guys like you know how i feel about AI apps. I'm on the fence about AI apps, right? And I think this is quickly becoming an AI app, which might be telling too, because if the whole world's going to become AI first, you got all these legacy businesses that have to make that shift, right? But it stands the reason that they could still be winners in this post AI app world or AI first world, but they got to make that switch.

15:15Clint Sorenson:I will give Canva this though. They're definitely doing it. They're definitely doing AI. Like every new product and solution they're coming out with is AI first, right? So it'd be interesting to see how these guys play out. But all right, let's hit this last topic real quick, fellas. So 8Sleep just raised$100 million at a$1.5 billion valuation. So the reason I put this on here, okay, is because yours truly is now a man of a certain age and I am having a very hard time sleeping through the night. So I have started to obsess about sleep. Okay. I mean, I'm like totally geeking out. I got like different sound machine things like eye mask.

15:57Clint Sorenson:I was never an eye mask guy. For those that haven't met me in person, I'm a six foot four guy, right? Like 220 pounds. Don't usually wouldn't probably sit, you know, put eye mask on a person like that. Right. I'm doing it. Like I'm just, I'm trying anything. eight sleep blackout curtains for sure all of it man i got like a different mattress like i still can't i don't know what's going on right so eight this eight sleep thing is like ai folk for those that don't know you put this thing over your mattress now they got one with a blanket there's this thing like this machine that sits next to the bed it controls the temperature there's like ai involved, it totally dials it in so that you can effectively have better sleep at night.

16:44Clint Sorenson:I'm fascinated by this. My question to you guys, do you have one? Have you tried it? I'm dying to get your opinion. What do you got? Let's start with Evan on this. I think he's got more background. Yeah. I told you before this, but I've known this company for a very, very long time. When they were just getting started. They were called, you know, they weren't even called eight sleep at the time. Um, they've iterated on this product for more than 12 years now. I was involved very, very early on and helping, you know, get them started. Uh, I have used the product. I, you know, I'm not the best customer cause I can literally sleep anywhere.

17:21I could sleep on the floor of the subway. So I'm not that, you know, target customer. I've used the product a few times. I think it's pretty interesting. I have a lot of friends that do use it. I think the reviews have been quasi mixed. Um, but people really like it at the end of the day, as we've seen, um, um, a substantial interest in longevity and health metric tracking, you know, having a sleep wearable that, you know, tracks your sleep, tracks your quality of sleep provides, you know, benefits to help you sleep longer and more effectively and deeper. Um, it's attracting a very specific customer and they're doing a great job of winning that market.

17:59Um, so this I mean, they've raised a lot of money, a good amount of money over the past several years. I'm not an investor, full disclosure, but I wish I was. But I do love the founders, Alex and Mateo. And I think that the product is, if you are the person that is interested in tracking your sleep, which remember most humans spend 50 % of their life in bed sleeping, you know, it's probably worth exploring this product.

18:25Clint Sorenson:Right, right. Okay, Nick, how do you sleep? And what do you think of the product? the company i'm probably i'm probably closer to to evan um sleep routine you know i could take a power nap at nine o 'clock for 20 minutes wake up and go until whatever hour and then fall back to sleep no problem uh so maybe this isn't for me but i i am prior prior to us hitting record on this you know i was asking about the the wearables and certain aspects it's it's just becoming so integrated in our life that we like assistance or we like actually understanding the metrics around how we operate. Whether it's a watch, a whoop, a mattress, or what have you.

19:11And yeah, if it's a quarter of your life, spend the money. Think about how Casper came out of nowhere, Avocado came out of nowhere. This is a different product. And it's pretty novel compared to anything else that's out there because i've at least heard of heard of this it's it's it's very well marketed um i don't i don't know about the reviews as evan was saying some of them are are mixed but you know i think they had a half a million users that's yeah that's a lot you know to start to start and then a three thousand dollar product it's the new ones four thousand nine hundred

19:51Clint Sorenson:because I was just looking at it last night. But if you could think of a world where maybe that price stays steady or even comes down, you do the Henry Ford approach, you could see a lot of people coming out with this. Everyone that poo-pooed the iPad or the Apple Watch, now they're all wearing them. I mean, that's what I was talking about prior to this podcast. So yeah, I think this is just a good product. I can't really speak to the valuation because it's so small relative to a lot of the other companies that we have. And I would deem it as hardware. And we don't actually do a lot of hardware.

20:30It's like a combination of hardware and SaaS, I guess, and analytics, right? Right. But I'm intrigued. I'm very interested in how they're going to perform. So we will definitely have this on our radar to watch.

20:41Clint Sorenson:It's interesting, right, guys? Because to your point, Nick, there's Whoop. There's Aura Ring. there's function health, which is, you know, that's a little different, right? Because they're taking your, you know, blood work and everything multiple times a year and doing MRIs and stuff like that. But I think along the same lines, like data, right? You're getting like health data, you know, on your person. You know, this, I think, falls into that same bucket. This is cool because you can also calibrate it. So instead of, there's a feedback loop, right? So with the whoop, it's like, hey, your heart rate's going really fast, but I'm not going to regulate it for you.

21:18And this, it will say you're overheating. I'm going to cool you down or something. Yeah.

21:23Clint Sorenson:Well, I mean, like, so I have a, I'm a whoop guy, right? But I use it for like tracking calories burned during the day, the number of hours slept, which would be, of course, you know, same thing as an eight sleep. But I think, you know, for me, I can track how many hours I sleep, but the whoop certainly doesn't help me sleep. more hours or better sleep, right? Which I think, you know, this, you know, to your point, Nick, would do. But like, it's kind of compelling. You know, I'm of the opinion that in the next several years, we're going to start to see devices where it's like recording everything that you say and hear and see, right?

22:02Clint Sorenson:For an AI assistant to be able to, you know, help you manage. Yeah, but this is what this is. Now, I think parts of this is that. Yeah. So when you've had a bad night's sleep, now your eight sleep is going to talk to your AI agent, your 25-year-old person at the office that's fake. And they're going to say, you know, Aaron had a rough night's sleep. Go easy on him today. And maybe the agent will be nicer to you, right? It's going to be like, you know, hey, let's cancel this meeting because it's really not that important. So you can take a nap and like, you know, hey, maybe you should eat this food instead, you know because you were a little bit you know under whatever like you had too much to drink last night or whatever like you know whatever it is it's going to be this like proactive feedback loop right because all the data is available that's the key thing whether it's whoop ate sleep or ring function health whatever like your data is the data is available for the ai to like proactively start to help you like eat more easily manage your health i guess yeah i'm going evan it's funny i I was with Aaron and he went to pick up a Twinkie and his whoop had a gravitational pull and just.

23:09No, it shocked me. Electric shock, right? No, but that's a very cool concept, Aaron. I'm a good Twinkie guy. Those devices speaking to each other. That's next level.