(Correct the product name to Lakebase from Lakehouse in paragraph 6)

By Pritam Biswas, Ateev Bhandari and Krystal Hu

(Reuters) -Analytics firm Databricks said on Tuesday its valuation was set to jump 61% to more than $100 billion in a funding round less than a year after its last, underscoring strong investor demand for fast-growing artificial intelligence startups.

The company said it has signed a term sheet for a very late-stage, or Series K, round, which would make it one of the world's most valuable AI companies. It is nearing a funding round of more than $1 billion from existing investors including Thrive Capital, Insight Partners and Andreessen Horowitz, according to a person familiar with the matter.

Thrive Capital and Insight Partners declined to comment. Andreessen Horowitz did not immediately respond to requests for comment.

Databricks has said it will generate $3.7 billion in annualized revenue by July, with year-over-year growth of 50%. It has also said it became cash-flow positive in January.

The San Francisco-based company is seen as one of the most prominent candidates to go public. Databricks CEO Ali Ghodsi said in an interview that the firm has been inundated with investor inquiries since the successful $1.22 billion initial public offering of design software firm Figma, another venture capital-backed startup, in July.

Databricks plans to invest the latest funding in its new data warehouse product, Lakebase, following its acquisition of startup Neon, which has already generated tens of millions in annualized revenue since its launch in June, Ghodsi said. The company is also building out so called AI agents, software systems that use artificial intelligence to autonomously perform tasks and achieve goals, he added.

"We're seeing this revolution happen in IT slowly, where IT is going from buying off-the-shelf software to coding their own internal applications for their companies," said Ghodsi. "You invest in the database migration, which might take many, many months, and then the revenue comes later, so that requires investments."

San Francisco-based Databricks has about 15,000 customers including payments firm Block, energy giant Shell and electric vehicle maker Rivian.

Late last year, Databricks had raised $10 billion in one of the largest venture capital funding rounds in history, which valued it at $62 billion.

It expects to use a portion of the latest funds for mergers and acquisitions in AI and hiring top talent in the sector as the talent war intensifies.

"This valuation level indicates a concentration of late-stage capital into companies identified as market leaders in foundational technology sectors," said Derek Hernandez, senior research analyst at PitchBook.

According to Hernandez, investors are assuming that "the total addressable market will be large enough to support multiple high-value companies and that Databricks will maintain a durable competitive advantage."

Databricks has around 8,000 employees globally and competes with listed companies such as Snowflake, which has a market capitalization of about $66 billion.

Startups are choosing to stay private longer amid higher interest rates and unpredictable appetite for IPOs in recent years. Capital is also available for larger late-stage rounds as private-market investors sit on record levels of dry powder.

OpenAI is also in talks to close an employee share sale, which would value the ChatGPT parent at around $500 billion, Reuters reported earlier this month.

"What used to be a pre-IPO round is now often Series G or later, and the capital coming in is frequently functioning like public equity, just without the public oversight," said Chris Lawrence, founder and managing partner of Labyrinth Capital Partners.