This morning, Skyflow announced that it has raised $30 million in Series B extension funding led by Khosla Ventures. This deal is interesting on many fronts, including the structure of the round and how Skyflow has been impacted by the growth of AI.
The new funding comes after Skyflow expanded its data privacy business last year to support new AI technologies. Skyflow co-founder and CEO Anshu Sharma said in an interview with TechCrunch that the company's AI-related software products have quickly become a significant part of its overall business.
The startup has recently grown its revenue from usage related to large-scale language models from 0% to approximately 30%. This suggests that the company's growth rate was driven by the market need for data management services resulting from LLM's large amount of data.
Skyflow's business began as an API that stored personally identifiable information (PII) on behalf of its customers. AI has expanded the types of data that can be stored. In the current era of data appendage, it's no coincidence that Databricks and Snowflake have become household names in today's technology industry, using AI models to leverage that data and ensure that only authorized data We want it to be used by LLMs and those who facilitate it. No small amount of authority and governance tasks are required.
It's no big shock that the startup is now raising more funding. After raising $45 million in Series B in 2021, the company told TechCrunch that it will use some of that capital to help companies better address data residency rules, which are becoming increasingly important in regulations. He said the investment was made to build a regional presence to better support the company. (Skyflow said in its latest news dump that it has expanded its support for China and its market-specific data rules.) A few years from now is never a strange time to raise more capital, but The fact that the round was small, and in the form of an expansion, caught our eye.
When asked why Skyflow is calling this round an extension rather than a Series C, even though it was raised at a slightly different valuation, Sharma said his company and its customers are not familiar with what the round is called. He said he wasn't too concerned about it. “Money is money to us,” he said. More importantly, in his words, his company has “very low dilution; [was] You can raise capital to grow even faster. ” fair enough.
However, there's a little more detail to this round name that's worth your time. Speaking to venture capitalists on this round, Sharma said that while later-stage investors are reducing their investments, those he tagged as “early growth” are more aggressive. He said he learned something. So calling this round a Series B extension will allow us to better coordinate the funding process. Mr. Sharma also highlighted that Khosla Ventures has made numerous AI investments and that the company's data in his LLM use is important.He also emphasized that he recognizes the importance of privacy and security.
Vinod Khosla said in a canned statement that “the need for trust and privacy infrastructure is key to protecting sensitive data,” and that tools are needed to ensure that data is not leaked under any circumstances. He said that creating one is “essential to any corporate business.” That's when the contract with Skyflow was struck.
In terms of broader growth, Skyflow has more than doubled in size and grown revenue by 110% in the last year. Sharma did not specify specifically what type of revenue that number is associated with, such as annual recurring revenue or trailing revenue. But he said the company is now in double-digit sales territory.
This Skyflow round fits neatly into several trends we've observed recently. Startups that raised money at the peak of the 2021 venture boom are now seeking more modest funding rounds. The explosive growth of AI is creating healthy business for LLM infrastructure and support companies. And finally, companies that offer tools via APIs are still doing very well, even though they've suffered some damage from pay-as-you-go pricing in recent years.
Given that AI-related data privacy efforts have become a key revenue proposition for Skyflow, its growth will depend on how quickly enterprise demand for LLM expands, and whether digital picks or shovels in this space It will give you a clue as to how much profit you can make by selling. The latest software Gold Rush.