Cockroach Labs doubles valuation in red hot market for private software start-ups

  • Enterprise software company Cockroach Labs has raised a $278 million Series F funding round that boosts its valuation to $5 billion.
  • The New York City-based company has now raised $633 million to date.
  • Cockroach Labs' new financing is the latest activity in a red hot private market of enterprise software companies that are raking in cash.
  • The recent correction occurring in high-multiple publicly traded software stocks hasn't trickled down to the top end of venture-backed software companies, which continue to attract big valuations after a 10-year-plus bull market.

Cockroach Labs has raised $278 million in a Series F funding round that values the enterprise software company at $5 billion — more than double its valuation from earlier this year. The New York City-based company, ranked No. 27 on this year's CNBC Disruptor 50 list, has now raised $633 million to date.

Its latest funding round is being led by Greenoaks Capital, and it includes new investors Index Ventures, Coatue, FirstMark, and Redpoint, among others. Existing investors including Altimeter Capital, Tiger Global Management, Lone Pine Capital, Bill Gurley's Benchmark Capital and GV, the venture capital arm of Google-parent Alphabet, also participated in the round.

In 2015, Cockroach Labs set out to rewrite the database using a cloud-native, open source environment, helping companies create apps that can scale as needs change. The company's management systems have helped businesses move their capabilities online quicker throughout the pandemic. CockroachDB, the company's proprietary, cloud-native database was designed to help Cockroach Labs' compete in a cloud world dominated by the likes of Microsoft Azure, Amazon Web Services (AWS) and big software vendors like Oracle and Salesforce, as well as a crowded field of other database start-ups.

Cockroach Labs' clients include eBay, CNBC parent company Comcast, and newly public Brazilian fintech juggernaut Nubank, among others.

"This latest round of funding is a reflection of our customers' rapid advances in production deployments, supporting the growth of our business as we lead the shift of transactional data to the cloud," Cockroach Labs co-founder and CEO Spencer Kimball told CNBC in an email. "It allows us to accelerate our investment in R&D and continue the innovation necessary to fulfill our vision."

All eyes on enterprise software

The company's new financing is the latest activity in a red hot private market of enterprise software companies that are raking in cash.

Earlier this week, low-code software company Airtable raised a fresh $735 million, boosting its valuation to $11 billion and becoming the fourth most valuable software start-up behind Grammarly, which last month raised $200 million at a $13 billion valuation. Databricks is now worth $38 billion following an August fundraising round, and Canva topped a $40 billion valuation around the same time.

The correction that has been occurring in publicly traded high-multiple software stocks hasn't trickled down to the top end of venture-backed software companies, which continue to attract big valuations after a 10-year-plus bull market.

Databricks — which ranked No. 37 on this year's CNBC Disruptor 50 list and has raised $2.6 billion from investors this year — is putting its money where its mouth is, announcing last week that the company is getting into the venture capital business with its new Lakehouse venture fund, named after its proprietary open-source project called Data Lakehouse.

"We will see more and more of this happen in the future," Databricks CEO Ali Ghodsi said on CNBC's "TechCheck" last week, adding that every major software company will "replatform" around super-intelligence and will need to invest in AI start-ups. "There is so much money flowing into start-ups in the data and AI ecosystem," he said. "Start-up founders kept coming to us and knocking on our door."

In addition to its fresh valuation, Cockroach Labs says it has tripled its annual recurring revenue in the last year and seen 500% growth in cloud revenue in the last quarter alone. Still, stock market investors have reduced their exposure to cloud stocks in recent months. The WisdomTree Cloud Computing Fund is negative year-to-date after more than doubling in 2020.

In a 2022 outlook report on software technology, JPMorgan analysts including Sterling Auty and Jackson Ader lowered their ratings on 13 companies, while upgrading just five.

"The reasons for the downgrades include a combination of limited upside to our price targets, valuation in light of risk that interest rates rise in 2022, adjusting discount rates for the current rate environment and re-evaluating reasonable cash flow expectations," the analysts wrote.

The threat of rising rates in an environment of high inflation has been spooking tech investors for the past month.

Sign up for our weekly, original newsletter that goes beyond the list, offering a closer look at CNBC Disruptor 50 companies like Cockroach Labs, and founders like Kimball who continue to innovate across every sector of the economy.

Source: Read Full Article