Waiting for the Big Data Shakeout

More than a few industry experts are bracing themselves for a possible shakeout of Big Data companies in 2013. Many think it’s inevitable. With this potential shadow looming, how do you, as an enterprise customer, prepare for it? And, while you’re at it, what strategies can you adopt to take advantage of the situation?

The Big Data ecosystem is exploding with exciting start-ups, new divisions, and new initiatives from established vendors. Everyone wants to be the vendor/platform of choice for firms dealing with the data deluge and helping them translate data to information to insight and, ultimately, to bottom-line benefits.

Over the past three years, venture capital firms and funds have invested several billion dollars in more than 300 firms. In the MongoDB space, a small market of less than $100 million in current total revenue, investment has been a staggering $2 billion.

An interesting list of start-up vendors and the amount of venture capital each has raised, including lead investors, is featured at Wikibon (see table below). This list includes only Big Data pure-plays delivering products and/or services in one of the following markets: Hadoop, NoSQL, Next Generation (MPP) Data Warehousing, predictive analytics and/or advanced data visualization. While this represents a small piece of the Big Data market, it nevertheless illustrates the vibrant Big Data startup activity that’s taking place. What’s more, this list doesn’t include all the Social Intelligence and Analytics firms that are living off Facebook or Twitter data; with several hundred firms in that segment alone, they account for a different slice of the abundant Big Data pie.

The timing and grouping of major innovations under the banner of Big Data is one of the catalysts for the next wave of innovation and economic growth. It’s not an uncommon pattern: advances in technology combine to generate a series of coordinated technological transformations that are correlated with waves of investment and business efficiency. In the 1930s, Joseph Schumpeter, a leading 20th-century economist, studied these cycle patterns, which were later dubbed as “creative destruction” in innovative management circles.

The most recent incidence of this pattern occurred in the late 1990s around e-commerce. Thousands of new companies were created, bought, and merged from 1997-2000. As the cycle wound down, with the bubble burst, and a washout ensued, lasting from late 2000 to end of 2003.

Is it happening again? The signs for a similar shakeout – this time around Big Data and Social Intelligence/Analytics – are already popping up. Consider the evidence. First, there are too many startup companies chasing customers. Second, most of the projects are either low-budget ($100K or less) or free pilots. And last, enterprise customers who embrace innovation are piloting technologies to understand the business value, but they are having a hard time moving these pilots into production deployments.

After a slow start, the shakeout should pickup pace towards the end of this year. Not surprisingly, the catalysts for “creative destruction” is always the same: lack of next round of funding, lack of enterprise customers, declining valuations that prompt investors to pull back, and finally big established firms like Oracle, SAP and others moving to protect their turf by creating fear, uncertainty, and doubt.

What does this mean for Big Data startup firms? It means they must manage their funding aggressively and make sure it lasts until paying customers coming knocking. More simply put, a car with a full tank of gas will always beat the car that’s running on empty.

Enterprise customers, on the other hand, should create a roadmap for learning and knowledge-sharing. For those in experimental mode, it’s okay to do several pilots. But it’s critical to learn something from them and subsequently bring that knowledge back into the organization. Many companies are running interesting pilots – but they have no plans to assimilate, scale or leverage the insights. In the end, that’s called wasted effort.

In the entrepreneurial world, the birth and death of firms is a natural phenomenon. Those who survive the Big Data shakeout will have actively planned for it by acquiring assets – customers, technology, IP, patents — from the weaker players.

Big Data Start-up Ecosystem

Consolidation via mergers and acquisitions has already begun. Vertica (HP), Kitenga (Dell), Salesforce.com (Buddymedia, Radian6), Oracle (Vitrue), EMC (Greenplum), IBM (too many to name) and others have bought, sold or merged. The question then becomes: Of the innovations in Big Data – Hadoop, NoSQL, Next Generation (MPP) Data Warehousing, predictive analytics and/or advanced data visualization – how many will survive?

Big Data Start-up Funding by Vendor (adapted from Wikibon)

Vendor Founded Funding (in US$ millions) # of Institutional Rounds Investors
Palantir 2004 $301 7 SAC Capital, The Founders Fund, Glynn Capital, In-Q-Tel, Reed Elsevier Ventures, Ulu Ventures, Youniversity Ventures, and Jeremy Stoppelman
Cloudera 2008 $146 5 Accel Partners, Greylock Partners, Ignition Partners, In-Q-Tel, and Meritech Capital Partners
Mu Sigma 2004 $133 2 General Atlantic and Sequoia Capital
Opera Solutions 2004 $84 1 Silver Lake Sumeru, Accel-KKR, Invus Financial Advisors, JGE Capital, and Tola Capital
10gen 2008 $81 6 Intel Capital, Red Hat, New Enterprise Associates, Sequoia Capital, Flybridge Capital, and Union Square Ventures
Guavus 2006 $78 3 Investor Growth Capital, QuestMark Partners, Intel Capital, Artiman Ventures, and Sofinnova Ventures
ParAccel 2005 $73 5 Amazon, Menlo Ventures, Mohr Davidow Ventures, Bay Partners, Walden International, Tao Venture Capital Partners, and Silicon Valley Bank
Talend 2005 $61.6 5 Silver Lake Partners, Balderton Capital, Galileo Partners, and IDInvest Partners
GoodData 2007 $53.5 3 Andreesen Horowitz, General Catalyst, O’Reilly AlphaTech Ventures, Windcrest Partners, Tenaya Capital, and Next World Capital
Splunk 2003 $40 3 Ignition Partners, August Capital, JK&B, and Sevin Rosen Funds
DataStax 2010 $38.7 3 Meritech Capital, Lightspeed Venture Partners, Sequoia Capital, and Crosslink Capital
1010data 2000 $35 1 Norwest Venture Partners
Couchbase 2009 $31 3 Ignition Partners, Accel Partners, Mayfield Fund, and North Bridge Venture Partners
MapR 2009 $29 2 Redpoint Ventures, Lightspeed Venture Partners, and NEA
Tidemark 2011 $28 2 Andreesen Horowitz, Redpoint Ventures, and Greylock Partners
Factual 2007 $27 1 Andreesen Horowitz and Index Ventures
Platfora 2011 $25.7 2 Battery Ventures, Andreessen Horowitz, Sutter Hill Ventures, and In-Q-Tel
MetaMarkets 2010 $23 2 Khosla Ventures, IA Ventures, AOL Ventures, Neu Venture Capital, Joshua Stylman, Village Ventures, and True Ventures
Hopper 2007 $22 3 Atlas Venture, OMERS Ventures, and Brightspark Ventures
Lattice Engines 2006 $21.6 2 Battery Ventures and New Enterprise Associates
SumoLogic 2010 $20.5 2 Sutter Hill Ventures, Greylock Partners, and Shlomo Kramer
Hortonworks 2011 $20 1 Benchmark Capital, Yahoo, and Index Ventures
RainStor 2004 $19.2 3 Storm Ventures, Doughty Hanson Technology Ventures, Informatica, Rogers Venture Partners, and The Dow Company
DataXu 2009 $18.8 2 Menlo Ventures, Atlas Venture, and Flybridge Capital Partners
Datameer 2009 $17.8 3 Kleiner Perkins Caufield & Byers and Redpoint Ventures
Revolution Analytics 2007 $17.6 2 North Bridge Venture Partners and Intel Capital
Hadapt 2010 $16.2 1 Atlas Venture, Norwest Venture Partners, and Bessemer Venture Partners
Lucid Imagination 2007 $16 2 Shasta Ventures, Granite Ventures, In-Q-Tel, and Walden International
Continuity 2011 $12.5 2 Andreessen-Horowitz, Ignition Ventures, Battery Ventures, Data Collective, and Amplify Partners
Connotate 2000 $12.3 2 Castile Ventures, Prism VentureWorks, and .406 Ventures
ClearStory Data 2012 $12.25 1 Kleiner Perkins Caufield & Byers, Andreessen Horowitz, Google Ventures, and Khosla Ventures
Karmasphere 2005 $11 2 Presidio Ventures, Hummer Winblad, and US Venture Partners
Loggly 2009 $10 1 True Ventures, Trinity Ventures, and Matrix Partners
AgilOne 2012 $10 1 Mayfield Fund
Oragami Logic 2012 $8 1 Accel Partners
Alpine Data Labs 2010 $7.5 1 Sierra Ventures, Mission Ventures, Sumitomo Corporation Equity Asia, and Stanford University
SpaceCurve 2009 $7.5 1 Triage Ventures, Reed Elsevier Ventures, and Divergent Ventures
ParStream 2008 $5.6 1 Khosla Ventures, Baker Capital, Crunch Fund, Data Collective, and Tola Capital
SpaceCurve 2011 $5.2 2 Reed Elsevier, Divergent Ventures, and Triage Ventures
MemSQL 2011 $5 1 First Round Capital, SV Angel, Y Combinator, IA Ventures, and Ashton Kutcher
WibiData 2010 $5 1 New Enterprise Associates, SV Angel, Mike Olson, and Eric Schmidt
InsightSquared 2010 $4.5 1 Atlas Venture, Bessemer Venture Partners, NextView Ventures, and salesforce.com
Chartio 2010 $4.4 1 Avalon Ventures, Bullpen Capital, Y Combinator, Crosslink Capital, and Jeff Hammerbacher
Trifacta 2012 $4.3 1 Accel Partners, X/Seed Capital, Data Collective LLC, Dave Goldberg, Venky Harinarayan, and Anand Rajaraman
Digital Reasoning 2000 $4.2 2 In-Q-Tel and Silver Lake Sumeru
SiSense 2008 $4 1 Opus Capital, Genesis Partners, and Eli Farkash
Calpont 2000 $3.27 1 Austin Ventures and GF Private Equity
StackIQ 2006 $3 1 Anthem Venture Partners and Avalon Ventures
Zettaset 2009 $3 1 Draper Fisher Jurvetson and Epic Ventures
Bidgely Energy analytics platform 2012 $3 `1 Khosla Ventures
Ginger.io 2012 $6.5 million in series A 1 Khosla Ventures, True Ventures, and Romulus Capital
GridGain 2005 $2.5 1 RTP Ventures
NGDATA 2011 $2.5 1 ING, Sniper Investments, Plug and Play Ventures
Sqrrl 2012 $2 1 Atlas Venture
Feedzai 2008 $2 1 Espirito Santo Ventures and Novabase Capital
Nodeable 2011 $2 1 True Ventures and Matrix Partners
RelateIQ 2012 $1.25 1 Accel Partners, Morgenthaler and SV Angel
Zoomdata 2012 $1.1 1 Hemang Gadhia
AppEnsure 2011 $1 1 Citrix Accelerator, TiE, Ignition Partners
DataHero 2012 $1 1 Neu Venture Capital, The Foundry Group, David G. Cohen, and Tasso Argyros
Drawn to Scale 2009 $0.93 1 RTP Ventures, IA Ventures, and SK Ventures
Openerais a Canadian big data startup in the storage management Dec 2012 250K 1

Leave a Reply