Data Startup Airbyte Is Set To Become A Unicorn, Intensifying Showdown With Rival Company Fivetran

Data company Airbyte, which helps with connecting and integrating different types of data, is set to become the next unicorn in the cloud.

Airbyte is said to have targeted a valuation of $1.5 billion to $1.6 billion, multiple sources told Forbes. The funding round comes while the company’s annual recurring revenue is less than $1 million, according to the sources. Crossover funds Coatue and Altimeter Capital are believed to be investors on the round, according to one of the people with knowledge of the matter.

The company confirmed to Forbes on Friday that it had closed a $150 million round at a $1.5 billion valuation, with Coatue and Altimeter leading the investment. Thrive Capital, Salesforce Ventures, Accel and Benchmark also participated in the round. It declined to comment on its revenue.

The San Francisco-based startup has moved with blistering velocity since it was founded in January 2020. After iterating its business through Y Combinator, Airbyte settled on building a product for moving data more efficiently. It raised a $5 million seed round led by Accel in February of this year, followed by a $26 million Series A round led by Benchmark in May. In its company handbook, Airbyte writes that its goal is “to become the industry’s open-source standard.”

In the data software space, the open source model—in which a free-to-use core offering is monetized into a full product suite—has become increasingly popular. Open source companies such as GitLab, Confluent and HashiCorp have all gone public in recent months, and the largest data analytics startup, Databricks ($38 billion valuation), also originated from an open source project. Investors have demonstrated a willingness to fund companies backed by strong open-source usage, even if the revenue is sparse; for example, Anyscale recently raised at a $1 billion valuation despite reports that its annual recurring revenue was less than $5 million.

Airbyte’s open source project operates in the market for data integration, which involves unifying different types of data from disparate sources—from Facebook to technical databases like MySQL—so that they can be used for purposes like analytics or predictive modeling. Data integration is a key component of the modern data stack, a set of cloud computing tools to store and harness large quantities of data. Airbyte faces stiff competition from rival data integration firm Fivetran, which has been a unicorn since June 2020. In September, Fivetran, which is not open-sourced, raised $565 million and announced it had acquired another data integration company, HVR, for $700 million.

Cofounder John Lafleur tells Forbes that he believes data integration can be a winner-take-all market where the leader holds at least 80% of the market share. The long-term edge, he says, will come in the product that allows users to make the most connections to link data from different sources. Airbyte believes its open-source nature fosters the community of users necessary to develop these connectors. Both Airbyte and Fivetran currently offer about 150 data connectors, but Airbyte intends to field 500 by the end of next year, incentivizing its users to help create the connectors through a revenue sharing model. Unless you have a community of people who can actually extend your platform, you won't be able to access all of that data,” says cofounder and CEO Michel Tricot.

The new funding for Airbyte is yet another indication of frothiness surrounding the modern data stack. Forbes reported Wednesday that data transformation startup Dbt Labs is seeking funds at a valuation of at least $6 billion. In both cases, the fundraises come fast on the heels of the last round—Airbyte raised $26 million at a $123 million valuation in May, while Dbt Labs raised its $150 million at $1.5 billion in June. “There’s no way to deploy the kinds of capital they’re raising in the timeframes they’re raising it at,” one source told Forbes.

Appetite for the space has been well documented in recent months. Snowflake, the market leader in data warehousing software (the core component of the data stack), is trading publicly at a market cap exceeding $100 billion. Its stock is up about 45% compared with the price at its September 2020 IPO, all as it sees increased competition from Databricks, last valued at $38 billion, and cloud giants like Amazon and Microsoft, who are building similar warehousing products. Companies have been met with similarly strong enthusiasm on the private market, as evidenced by recent funding rounds that valued data integration startup Fivetran at $5.6 billion and data analytics firm ThoughtSpot at $4.2 billion.

For Airbyte, the funds may indicate the ramping up of an arms race against Fivetran to carve out a share of the data integration market. The stockpiling of capital is apparent in other corners of the data space. Dbt Labs CEO Tristan Handy wrote in a blog post for its June funding round that the company had decided to “raise more money and build [the] product fast” instead of to “hope that our current products and roadmap velocity are defensible enough to create a lasting independent business.” In Airbyte’s space, the startup Stitch was acquired by Talend for $60 million in 2018 (Talend itself was bought out by software-focused private equity firm Thoma Bravo for $2.4 billion in March).

Airbyte’s next act entails aggressively expanding its operation—increasing the headcount to 200 employees from 30 at the moment—and launching its software offering for availability to the general public. The cloud-based product is the “most requested feature by far,” Lafleur says, with 1,500 companies on the waitlist ripe to help Airbyte to start generating revenue. “Most companies don't want to host and operate Airbyte on their own. It’s okay when you have five connectors, but most companies need 20, 50 or 100 connectors and at that point it's impossible.”