Is Databricks the last great AI pre-IPO bet? Clear Street thinks so

Fintech prime broker Clear Street has launched a platform that enables accredited investors to acquire pre-IPO shares in late-stage tech companies. The initiative allows investors to invest in an investment area that heretofore was reserved for only large institutions. Databricks, an AI and data software company with a valuation of $188 billion, is the first business to be introduced on this platform.

The platform is emblematic of a larger trend in AI investment. With the likes of Databricks, Anthropic, and OpenAI staying private longer than earlier tech behemoths, an increasing share of the value of the industry is being created before public debuts. Clear Street is betting that making this investing approach accessible will provide additional funds, although it is unclear whether this will spur AI innovation or lead only to higher private valuations.

Margin loans on private stakes set the platform apart

Chief Executive Officer and co-founder of Clear Street, Uri Cohen, said that the objective of the firm is “to remove friction and give more people the ability to invest in more products.” He claimed that a major part of making today’s wealth takes place in private markets and that demand from retail investors keeps growing.

In contrast to the majority of private market platforms, Clear Street intends to include financing as well. The company aims to provide loans based on pre-IPO investments by taking care of asset servicing and risk on its own, which is uncommon, given that it’s difficult to sell private stock before the actual exit.

Clear Street hopes to onboard 30 startups by the end of the year. The company is focusing on tech startups worth $5-$20 billion that are about six months to two years away from going public. The company is also launching a specialized private company research unit led by Owen Lau.

Databricks anchors the launch at a $188 billion valuation

Databricks is a natural choice for a first public offering. Its Lakehouse Platform melds together all the benefits of data lakes and data warehouses, while being equipped with the likes of Delta Lake and MLflow for enterprise AI development. Its valuation of $188 billion shows a strong interest by investors in the infrastructure that underpins AI.

However, Databricks is still far from being publicly traded. As reported by Kiplinger, referencing information from June 18, the company is expected to have its IPO in 2027, while Anthropic will go public in 2026. The extended timeline gives investors only a few regulatory means through which they can invest before the company goes public, providing an avenue for firms like Clear Street.

Wealth is pooling in private markets before the bell rings

Clear Street is not the only entity making strides to fulfill such a need. Goldman Sachs has also broadened the reach of its private company investment offerings to wealthy customers, a move that reflects a bigger trend in the industry as early-stage companies put off going public and create more value without entering public markets.

The IPO market has shown hopeful first indications of recovery. According to data from Renaissance Capital, total IPO filings for the year as of August 1 reached 155, which is an increase of 10.7% compared to the same period last year. The number of IPOs offered this year is 93, with total proceeds of $144.0 billion, thanks to the successful IPO by SpaceX worth $75 billion.

Meanwhile, Clear Street is delaying its own entry. The startup that was worth about $12 billion this year has moved its potential IPO to 2027 as it has achieved cash flow-positive operations and completed a $ 400 million investment-grade bond issue.

The valuation-versus-revenue gap hangs over the bet

The valuation of Databricks, which stands at $188 billion, raises another, more general question surrounding private AI markets: to what extent is today’s valuation driven by expectations for the future and by current performance of the company?

One thing that has been pointed out by Cryptopolitan earlier is that AI companies’ valuations look overly high compared to their actual revenues, thus indicating that investors make bets on future returns rather than invest in the companies based on their current performance.

Clear Street offers a platform that enables investors to gain early access to this trading opportunity. In the event that AI companies deliver the anticipated growth, investing prior to IPOs may yield significant rewards. However, if revenue takes longer to catch up with valuations, early investors may be taking on increased risk.

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