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|
|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|
|NGDATA||2011||$2.5||1||ING, Sniper Investments, Plug and Play Ventures|
|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|
|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|