Cockroach Labs Raises $278M Series F at $5B Valuation

Cockroach Labs Secures Significant Funding in 2023

Cockroach Labs, the company behind CockroachDB, has experienced substantial financial gains throughout the current year. The company commenced the year with a $160 million Series E funding round, establishing a $2 billion valuation. This was followed by a $278 million Series F round, resulting in a valuation exceeding $5 billion – effectively doubling the company’s worth in under twelve months.

Investment Details and Growth

The latest funding round was spearheaded by Greenoaks, who also participated in the previous round. Additional investors included Altimeter, Bond, Benchmark, Coatue, FirstMark, GV, Index Ventures, J.P. Morgan, Lone Pine Capital, Redpoint Ventures, and Tiger Global.

To date, the company has raised a total of $633 million in funding. A significant portion, over $550 million, was secured through three investment rounds beginning with an $86.6 million round in May 2020.

Market Dynamics and Investor Alignment

The rapid growth in the database market is likely a key driver behind this influx of capital. Spencer Kimball, co-founder and CEO of the company, notes considerable investor interest following the January funding round, facilitating the swift completion of this latest round.

Kimball emphasized the alignment between the investors’ understanding of the business and the company’s vision. He described a dynamic where investors actively sought to invest, rather than requiring persuasion, fostering a complementary relationship that enhances strategic perspectives.

Customer Base and Revenue Growth

Currently, Cockroach Labs serves 200 paying customers. The cloud-based segment of the business has demonstrated remarkable growth, increasing by 500% over the past year.

Annual Recurring Revenue (ARR) has tripled year-over-year, from Q3 to Q3. While self-hosted deployments currently generate the majority of revenue, the company anticipates that the hosted version will experience faster growth in the future.

A serverless product, launched in beta in October, further expands the company’s offerings.

Cloud-Native Trends

These developments align with findings from a recent Battery Ventures report, "State of the Open Cloud." The report indicated that cloud-native companies are achieving greater revenue growth from their hosted versions compared to self-installed solutions.

Cloud Partnerships and Future Support

The company currently collaborates with Amazon and Google for cloud deployments. Plans are in place to add support for Microsoft Azure in 2022.

Evolving Relationship with Amazon

Cockroach Labs has navigated a complex relationship with Amazon, particularly concerning open-source licensing practices. Previously, concerns arose regarding Amazon’s approach, prompting companies like Cockroach, Elastic, and MongoDB to adjust their licensing strategies.

However, the current relationship is characterized by partnership. Cockroach Labs utilizes Amazon’s services internally, hosts its SaaS version on Amazon’s infrastructure, and collaborates with Amazon as a go-to-market partner.

Strategic Outlook and Runway

The company’s focus remains on sustaining momentum and expanding its product portfolio, with the new funding providing crucial support. Kimball estimates the current funding provides at least 3-4 years of operational runway.

This financial cushion also serves as a safeguard against potential economic downturns and tighter funding conditions, although no such conditions are currently apparent.

Potential for IPO

Kimball suggests this funding round may be the last the company undertakes, though he remains open to future opportunities. The long-term goal, established from the company’s inception, is to become a public company.

“Our Total Addressable Market (TAM) is substantial, and our growth trajectory supports this ambition. We are now evaluating the steps required to achieve this objective,” Kimball stated.

The recent hiring of a CFO, a common precursor to an Initial Public Offering (IPO), along with the substantial funding, high valuation, and growth rate, indicate the company is preparing for a potential public offering, awaiting the optimal timing.