The Rise of Databricks: From Free Software to a $62 Billion Startup

In the world of Silicon Valley, where startups often rise and fall at a dizzying pace, one company has quietly transformed from a humble research project into a $62 billion tech giant.

That company is Databricks, and its CEO, Ali Ghodsi, is the visionary behind this meteoric rise. What makes Databricks’ journey especially fascinating is not just its financial success, but how Ghodsi strategically reshaped the company, including giving away its first product for free before charging for it.

A Passion for Problem-Solving and Innovation

Ali Ghodsi’s story begins far from the tech hubs of California. Born in Tehran, Iran, in 1978, Ghodsi’s early years were shaped by the turmoil of the Iranian Revolution. When he was just five years old, his family fled to Sweden to escape political persecution. Despite the hardships, Ghodsi’s passion for technology was evident from a young age. He began coding on his home computer in fourth grade and later started a business fixing computers for classmates.

Ghodsi’s journey continued at Mid-Sweden University, where he pursued a dual major in computer science and business. His interest in technology was matched by a drive to understand how companies work. This interest would play a crucial role later in his career, as he came to view companies as “patients” that could be healed through strategic changes—what he calls “strategic surgeries.” This approach would become the core of his leadership style at Databricks.

The Birth of Databricks: From Research to Startup

In 2009, Ghodsi moved to the U.S. to pursue a Ph.D. in computer science at UC Berkeley. During his time at Berkeley, he and a group of researchers developed Spark, an open-source data analytics tool that could process vast amounts of data at record speeds. Spark quickly gained popularity in the tech community, and Ghodsi and his team saw an opportunity to build a business around it.

With the backing of venture capital firm Andreessen Horowitz, which invested $11 million in the company, Databricks was born. Initially, Databricks focused on providing Spark as a cloud-based platform for businesses to analyze large datasets. But while the technology was groundbreaking, the company faced an early challenge: many potential customers were downloading Spark for free instead of paying for the more user-friendly version Databricks offered.

The First ‘Surgery’: Charging for the Product

In 2016, Ghodsi took over as CEO, replacing Ion Stoica, one of the original founders. Under Ghodsi’s leadership, Databricks began its first major “strategic surgery.” He realized that to sustain growth, the company needed to stop giving away its product for free. Instead, Databricks started charging for an upgraded version of Spark, offering additional features and support that weren’t available in the free version.

This was a turning point for the company. To drive sales, Ghodsi hired a team of salespeople and targeted large enterprises like JPMorgan and Capital One. He also introduced changes to the company’s internal culture, sharing important decisions with employees and encouraging collaboration. These moves helped Databricks secure major customers and set the stage for its rapid expansion.

Strategic Partnerships and Expanding the Business

One of Ghodsi’s key achievements as CEO was his ability to forge strategic partnerships. In 2017, he secured a pivotal deal with Microsoft to integrate Databricks with its Azure cloud platform. This partnership gave Databricks access to a larger market and helped establish the company as a leader in the data analytics space.

Databricks continued to grow, expanding its offerings beyond Spark to include more comprehensive data management tools. By combining different types of data—both unstructured (like server logs) and structured (like sales data)—Databricks created a product that was even more valuable to its customers. As a result, sales skyrocketed, even during the tech downturn that followed the COVID-19 pandemic.

The ‘Second Surgery’: Focus on Efficiency

By 2022, Databricks had grown rapidly, but its expanding size led to inefficiencies. The company was hiring too many people, and investors were pressuring Ghodsi to make the company profitable. This led to a second major “surgery” in 2023, where Ghodsi focused on increasing efficiency. He introduced measures like offshoring jobs to countries with lower labor costs, streamlining operations, and automating tasks using AI bots, including a bot named R2-D2, after the famous Star Wars character.

Despite these cost-saving measures, Ghodsi did not lay off employees, unlike many other tech companies during the same period. Instead, he emphasized the importance of maintaining morale and keeping the team focused on the company’s long-term goals.

Mergers and Acquisitions: Positioning for Future Growth

In 2023, Ghodsi took a bold step by acquiring smaller companies to position Databricks for future growth. He purchased MosaicML, an AI startup, for $1.3 billion, enabling Databricks to offer AI tools to its customers. Later that year, he acquired Tabular, a data management startup, for $2 billion, outbidding competitor Snowflake for the deal. These acquisitions allowed Databricks to expand its capabilities and solidify its position as a leader in the data and AI industries.

The Road Ahead

Today, Databricks is valued at $62 billion, making it one of the fastest-growing startups in Silicon Valley. Under Ghodsi’s leadership, the company has become a key player in the world of big data, helping businesses analyze massive amounts of information and make data-driven decisions. Companies like Walgreens use Databricks to optimize inventory, while electric vehicle maker Rivian uses it to improve the battery life of its trucks.

Looking ahead, Ghodsi is contemplating whether to take Databricks public, with a potential IPO slated for 2025. Regardless of whether Databricks goes public or remains private, one thing is clear: Ali Ghodsi’s ability to adapt, innovate, and make tough decisions has made Databricks one of the most successful tech companies in recent history.

Conclusion

The story of Databricks is a testament to the power of strategic vision and adaptability in the fast-moving world of tech startups. Ali Ghodsi’s leadership has turned Databricks into a company worth $62 billion, but it didn’t happen overnight. From giving away its first product for free to making bold acquisitions and focusing on efficiency, Ghodsi’s “strategic surgeries” have shaped Databricks into the powerhouse it is today. As the company continues to grow and innovate, its future looks brighter than ever.