• 

  Abhay Jain

  Active Scaler: Active Scaler wants telecoms and other companies to try out its storage-load-balancing software. Rather than balance the load on network resources like a Citrix NetScaler, Active Scaler software works with storage to shorten latency by a factor of three to five and decrease the cost of storage per gigabyte by 60 percent, co-founder and CEO Abhay Jain said during his presentation. “The convergence of network and compute has happened before, but not network and storage,” he told me afterward.

• 

  Parin Dalal

  Xockets: Xockets is developing a computational memory fabric called a Ximm to “do with infrastructure what VMware did with compute,” CEO Parin Dalal said. The Ximm would process information (see graphic below) on a server’s memory, lowering the disparity in speed between compute and memory, said Stephen Belair, Xockets’ chief technology officer. He left Cisco after 14 years to start working full-time with Dalal earlier this week. “If we get it working — and we’re working on a prototype — something’s going to happen,” Belair said. “It could be a real game-changer.”

Whether or not its startups are destined for success, though, the trend away from consumer-facing investments and toward enterprise plays makes the Alchemist Accelerator look like a more valuable resource. Enterprise technology can be more difficult to get right and to later sell, so programs dedicated to helping startups build it could be a big help for entrepreneurs and investors alike.

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Sumo Logic is one of many systems management and analysis startups looking to disrupt their established fields by introducing a software-as-a-service approach to markets traditionally served by software software vendors. Sumo Logic’s core technology is a process, which it calls LogReduce, for detecting patterns among log files so systems administrators have a better idea where to start looking for problems when application begin behaving funkily. In early November, the company released a dashboard feature so users can track certain aspects in real time.

According to Chief Marketing Officer Sanjay Sarathy, one of Sumo Logic’s real values is in how easy it is to get started. Because it’s hosted in the Amazon Web Services cloud, users don’t have to worry about managing any servers or scaling physical infrastructure when traffic — and, therefore, data generation — spikes.  ”We don’t have any professional services people on staff,” Sarathy said. “We don’t need to.”

Although he said Sumo Logic competes mostly with Splunk and companies’ homegrown log-management tools, they’re not the only two companies around. Other cloud-based startups include Loggly (see disclosure) and LogLogic.

Sarathy said Sumo Logic has about 1,000 users of its free version, and another 40 paying customers, including Netflix. That’s a far cry from Splunk, which boasts thousands of users and has established itself as a player in the burgeoning big data space. But the market for products centered on deep analysis of log data is still young and companies of all sizes are getting comfortable with SaaS offerings for certain non-critical workloads.

Disclosure: Loggly is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, the founder of Giga Omni Media, is also a venture partner at True.

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Every venture capital firm has made some preliminary investments in big data companies, he said, but those companies will likely need some recognizable adoption or income in order to justify further funding on desirable terms. Even for a team of veteran entrepreneurs and technologists like Nodeable, which had built a platform that served as a front-end complement to Hadoop by analyzing streaming data, it can be challenging to get over that hump. We’ve written about this in our coverage of how challenging it can be for companies to get their Series B round of funding without having transcended to rockstar status.

Dave Rosenberg (left) speaking at Structure 2012.
(c)2012 Pinar Ozger pinar@pinarozger.com

Despite not making it past the first round, Rosenberg has learned a lot. Here’s what he thinks he’s learned about how the big data market is shaping up and pitfalls others startups should try to avoid.

1. If you’re doing big data, do it open source and on-premise.

Nodeable thought it was getting ahead of the curve by launching its stream-processing platform as a cloud service, but it probably was too far ahead. With rare exception, Rosenberg said, “Organic growth in big data right now is clearly with open source projects that are behind the firewall.”

Everyone agrees in theory that delivering big data tools as cloud services is the right way to go (myself included, for what it’s worth), but most companies aren’t there yet. Even with Amazon’s popular Elastic MapReduce service, he added, people are running a lot of jobs but not necessarily only exposing small amounts of their overall data sets to the cloud and then are pulling the results right back behind the firewall.

“From a user perspective,” Rosenberg said, “they want to download things.” That’s why, he added, “Even though Amazon [Web Services] is booming, it’s still websites.”

So, rather than hire an enterprise sales team to start pushing its product, Nodeable’s next move if it didn’t sell was to open source its technology so the large companies that expressed interest could begin experimenting with it on their own servers. That wouldn’t have guaranteed success, but it would have aligned with companies’ realities about where their data is stored and who has access to it.

2. Hadoop is not a license to print money.

Although some companies are making a lot of money selling Hadoop product, simply incorporating the technology into a product does not guarantee success. “Cracking into the Hadoop space is very difficult,” Rosenberg said.

Nodeable, for example, had close relationships with key members of the Hadoop community — including Cloudera CEO Mike Olson, who sat on the company’s board — anf it still wasn’t able to tap into that market like it had planned. Part of that ties into the previous point about being an on-premise solution, but another part has to do with technology choices that align with where others are pushing the platform. Whereas Nodeable relied heavily on Storm for real-time processing, the Hadoop platform vendors such as Cloudera and Hortonworks are putting their real-time energy behind HBase at the database layer.

3. Life is easier as an app.

In some ways, Rosenberg said, companies that sell applications might have an easier time succeeding time than those that sell infrastructure. The former come with their own use cases, while the latter are always searching for new use cases that let them find their way into new markets. In cloud computing, especially — where Rosenberg says people often expect free software — it’s probably easier to get them to pay for applications than for big data infrastructure. (Nodeable, I would say, fell somewhere in the middle.)

And when acquisition time comes, cloud companies such as Salesforce.com and Workday that have to make big data plays will probably be looking for applications rather than infrastructure tools, Rosenberg said. (Workday, for what it’s worth, just partnered with Hadoop BI startup Datameer on this front.) If you’re looking for the best-possible situation and don’t want to end up part of a company that will take your talent and bury your technology because it thinks it can build something better, having an army of loyal users is good leverage.

4. If you must sell, choose wisely.

Appcelerator wasn’t its only suitor when Nodeable decided to sell, Rosenberg said, but it was the best one. Rather than being an “acqui-hire” situation, where the hard work the team put into Nodeable’s StreamReduce technology would have been lost, the technology exists and will help build a real-time analytics engine into Appcelerator’s mobile-app development service. One reason he’s so confident about the decision is that Nodeable already knows the Appcelerator team and its plans — the two companies had been working together for months to improve Appcelerator’s infrastructure.

Feature image courtesy of Shutterstock user Rashevskyi Viacheslav.

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Organizationally, the firm has created a crowdsourced (or, if you will, parallel-processing) platform of sorts. There are two managing partners — veteran investors Zack Bogue and Matt Ocko — two other co-founders — Prismatic Founder and CEO Bradford Cross, and Metamarkets (see disclosure) Founder and CEO Mike Driscoll — and then about 35 equity partners presently employed with experience everywhere “from Akamai to Zynga.”

The equity partners actually share in the firm’s profits, but it’s not as if they’re involved in name only. According to Ocko, most have decades “in the trenches” building companies and big data infrastructure. They use that experience to help the firm identify the right companies and then help those companies grow during their early phases when Data Collective is most involved. If one has to drop off an investment for some reason, another will step into his or her place.

Data Collective has been working off a fund of around (but less than) $10 million and has alread made some very impressive investments — among its 46 portfolio companies are Kaggle, MemSQL, Continuuity, Parse, Keen.io, Meteor, MongoHQ, Citus Data, Apcera, Cloudability and Piston Cloud (see disclosure). Bogue characterizes the firm as a “source of hot companies [for larger VF firms]” that don’t usually get involved deep down in the technology while companies are still taking shape.

The firm is working on closing a much larger fund, although Ocko said it will still stick with seed- and first-round investments where he and Bogue have a track record of success. Either individually or as a pair, the two have previously made seed investments in XenSource, Cotendo, MetaWeb, FlashSoft and Square, among others. Ocko and Bogue think their investing savvy, along with their co-founders’ and equity partners’ deep entrepreneurial and technological experience in big data, will help Data Collective become an important part of the tech-investing scene.

“Along the way, [Bogue and I have] produced about 40 material exits for entrepreneurs and investors,” Ocko said. “We’re not claiming to be John Doerr or Mike Mortiz, but we have some reasonable idea what we’re doing.”

Feature image courtesy of Shutterstock user ARTSILENSEcom.

Disclosure: Piston and Metamarkets are backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

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Here’s what we do know about Bluebox: the company is targeting the security of enterprise data on mobile devices and was co-founded by Caleb Sima and Adam Ely. Sima comes from HP, which acquired SPI Dynamics — the company he co-founded along with investor Cohen — in 2007. Ely was previously CISO at Heroku and security head at TiVO.

“Enterprise security on mobile is an unsolved problem, and, frankly, is in need of innovation. Bluebox is developing a solution that will change the way enterprises think of how to successfully and seamlessly protect their data,” Bechtolsheim, who co-founded Sun Microsystems and Arista Networks, is quoted a saying in the Bluebox press release.

Here’s what else we know: Bluebox isn’t the only hotly anticipated startup with an impressive security pedigree targeting the mobile space. At our Structure conference on Wednesday, Xen creator and former Citrix virtualization CTO Simon Crosby will unveil the the technology behind Bromium, the startup he founded last year along with Xen co-creator Ian Pratt and and former Phoenix Technologies CTO and SVP Guarav Banga. In the meantime, my weekend profile of Crosby gives a few details of Bromium, and the company has a fantastic placeholder website.

Of course, the inherent security issues around bring-your-own-device (BYOD) workplaces have companies of all types worried about securing their data. I don’t think it’s going out on a limb to suggest Bluebox, Bromium and anyone else currently targeting the BYOD movement will have a lot more company in the years to come.

Feature image courtesy of Shutterstock user Denis Vrublevski.

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By any count, it appears that MongoDB is by far the most popular of the non-relational NoSQL class of databases. (This survey from BI vendor Jaspersoft is probably an accurate microcosm of NoSQL adoption overall.) 10gen has already reaped the rewards of its work on the technology, with its sales growing by about 50 percent each quarter and its headcount growing by 400 percent in the past 16 months.

“Business is fantastic,” 10gen President Max Schireson told me. “We keep outperforming every goal that we set for ourselves and the market just feels like it’s huge.” In fact, he said, new sales people pay for themselves almost immediately upon joining the company.

But MongoDB isn’t perfect, which is why 10gen is putting the new money toward R&D to help improve MongoDB and make it more accessible to broad world of users beyond its web roots. Among other things, it has been criticized for being rather difficult to manage at scale. This is somewhat ironic, as scalability, along with the flexibility that comes with being schemaless, is among the driving factors behind the NoSQL movement. One would expect the most-popular of the bunch to scale with ease.

However, Schireson explained, 10gen has invested heavily in ease of use and functionality early on rather than just speed and scalability. Because it’s so easy to use, MongoDB has attracted lots of web developers who don’t mind working around its scalability shortcomings, as well as a growing number of more-traditional (although not for a NoSQL database) uses such as operational intelligence, content management and even revenue reconciliation for Sarbanes-Oxley compliance. Many users, Schireson said, run single-server MongoDB deployments because it’s so much easier than even running an Oracle database at that scale.

When looking at the growth of the MongoDB community (Schireson says MongoDB has a four-to-one lead over the rest of the NoSQL world in terms of adoption and community size), it’s difficult to argue with 10gen’s development strategy up to this point. A product people want to use means a large community of developers, which means a self-feeding ecosystem. In the NoSQL world, MongoDB looks a lot like Hadoop in the big data world, with a growing number of partners and startups popping up around it to fill in technological gaps (e.g., analytics or search) or to add new value via hosted services. And then there are the investors looking to feed everyone involved, millions of dollars at a time.

Even under the broad NoSQL banner, the database world is diverse enough that MongoDB doesn’t have to be all things for all people, it just has to be a lot of things for a lot of people. It’s not perfect, but it doesn’t have to be. And 10gen’s latest $42 million could go a long way toward improving upon whatever flaws it has.

Feature image courtesy of Shutterstock user fortuna777.

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Todd Hoff of High Scalability took up for today’s startups against Blank in a post on Monday detailing Pinterest’s phenomal growth and growing Amazon Web Services-based infrastructure. Here’s what he had to say to the naysayers:

While it’s true that both Pinterest and Instagram are not making great advances in science and technology, that is more indicator of the easy power of today’s commodity environments rather than a sign of Silicon Valley’s lack of innovation. The numbers are so huge and the valuations are so high we naturally want some sort of fundamental technological revolution to underlie their growth. The revolution is more subtle. It really is just that easy to attain such growth these days, if you can execute on the right idea. Get used to it.

What Hoff didn’t say by name, but surely meant, is that cloud computing has changed the name of the game. Yeah, there are a lot of Instagrams and Pinterests out there, but there are also companies such as DNAnexus and Bina Technologies that are using the cloud (combined with the advent of big data technologies) as a platform for revolutionizing genomic research.  It’s just an iPhone app, but Romanian startup SkinScan is trying to alert users to potentially cancerous moles. This trend is only getting started as cloud infrastructure gets more powerful and entrepreneurs begin to fully understand what’s possible if they take advantage of it.

Somewhere in between Pinterest and biotech, startups are using the cloud to make enterprise software available as a service and disrupt the business models of the very companies that helped build Silicon Valley.

Even if social media companies do dominate the startup landscape, they’re part of a fundamental change in the way mankind communicates with each other thanks to cloud-based computing resources and the ubiquity of powerful mobile devices. I would argue Facebook is a very big idea — and an engineering marvel in terms of its infrastructure — and surrounding startups are part of an evolving ecosystem. It’s not trying to cure cancer, but it’s still rather profound.

And if you’re trying to make money, who wouldn’t make a small bet on a business that can scale like crazy overnight in terms of both users and infrastructure? One might argue it’s smart investments in companies such as Pinterest and Instagram that help bankroll longer-term investments in the big-idea startups, which are still around, by the way.

We have startups such as Calxeda, SeaMicro (now part of AMD) and Tilera trying to revolutionize chips, and we have a bunch of so-called “phat startups” — especially in cleantech — undertaking the types of efforts Blank says are dwindling. I recently covered a startup called Skybox that raised $70 million to build and launch satellites, and will then analyze the the continuous stream of high-resolution images they send back.

We’ll talk a lot about infrastructure and platforms at our upcoming Structure conference, because it’s the underpinning for this new ecosystem of applications that resides on top of it. Those apps range from the mundane to the revolutionary, but there’s a whole lot of innovation to come as the world gets a better sense of what’s possible in an always-on and interconnected world. I wouldn’t call that a small idea.

Image courtesy of Shutterstock user Mishchenko Mikhail.

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For the San Francisco-based Metamarkets (see disclosure), the Series B round brings its total to $23.5 million, and represents some serious confidence in the company’s cloud-based analytics platform. Investors should be confident: the company has a handful of customers, but they’re rather large, and it has already spurned acquisition offers from some household names in the IT world, including Twitter.

ParAccel is in another league altogether, having now raised nearly $100 million over the past several years, and having just completed a first quarter that saw 500 percent year-over-year revenue growth. It’s one of the best-known independent analytic database providers around after Greenplum, Netezza and Vertica all got snatched up by large vendors in the past few years. Last summer, Amazon came on board as a strategic investor, a move rife with possibility considering persistent rumors of an Amazon Web Services analytic offering.

However, big data isn’t constrained to companies building the technology. Often times, as with DataPop, it’s the consumers of big data technologies that are the most interesting. At just under $9 million, it’s hardly the highest-backed user of big data, even in the marketing space, but the story is the same across the board. In theory, big data means more-accurate and dynamic ad targeting, which means more money for everyone.

Terascala plays in an entirely different field — the high-performance computing field — where the speed of big data systems becomes critical. Terascala and companies of its ilk don’t analyzing anything, rather they feed enormous scientific (and other) data sets to high-performance processors without creating a bottleneck. That means their research, government, media and financial services users can do existing analyses much faster, and can even do entirely new types of analysis that used to be slowed by a lack of performance and a lack of analytic tools (e.g., Hadoop).

When buzzwords reach a certain level of ubiquity, they start to mean both everything and nothing, which is arguably the case for big data right now. But I don’t see it as too big a problem. I see it as a new understanding of the power of data, which — harnessed correctly — is immense. For investors, it’s not a question of whether to put money behind big data, but of figuring out which of the dozens pitching themselves as big data companies are actually doing it right.

Image courtesy of Flickr user kaibara87.

Disclosure: Metamarkets is a portfolio company of True Ventures, which is also an investor in GigaOM. Om Malik is also a venture partner at True.

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The challenges in IaaS are pretty clear: it’s expensive to buy and operate the necessary gear, it’s difficult to build a differentiated platform and, perhaps most importantly, there’s the little challenge of standing out against IaaS heavyweights. AWS, Rackspace, Terremark,  and VMware. These are not small companies, and AWS, in particular, maintains a commanding lead in market share and mindshare.

But according to Dave Tabors, a partner at Battery and now member of the SingleHop board, IaaS “is as much an execution game as it is a technology,” and SingleHop has been executing. (Not that SingleHop’s technology is bad. It actually resembles SoftLayer — another up-and-coming IaaS provider that’s making a name for itself with some big-name customers — because of its single, automated platform that delivers both dedicated and cloud servers.) Tabors told me Battery spent the better part of four years researching the IaaS space before deciding that SingleHop presented the best investment opportunity around.

SingleHop now manages 10,000 servers across two Chicago data centers, with a third to come in Phoenix. Inc. Magazine named SingleHop the No. 25 fastest-growing U.S. company in 2011. And, most importantly, it’s making customers happy thanks to features such as its Customer Bill of Rights. With Battery’s backing, Tabors thinks SingleHop can scale its business to the next level.

It’s worth watching to see whether other VCs also still have an appetite for IaaS, and where they’ll decide to invest if they do. Thought leaders Joyent and Virtustream have raised piles of money in the past couple years (to the tune of $107 million and $50.4 $75 million, respectively), but IaaS investment has otherwise been rather slow. Promising startups are difficult to come by, and some more-established privately held providers might not be seeking venture financing.

Maybe the topic will come up during the VC panel at our Structure conference in June, during which leading investors will talk about what has them excited in the cloud. The cloud keeps evolving, but its IaaS foundation will always be important. The question is how much opportunity investors see to get a piece of IaaS providers that can actually deliver a big return.

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The engineering, programming and math skills necessary to do big data analytics are in hot demand but short supply, which is what makes companies like Mu Sigma so appealing. All customers have to do is bring their data and their money, and the analytics experts go to work figuring out the best strategies for getting insights, and then run the big data workloads. Whereas using cloud-based resources eliminates the capital expense of big data projects, outsourcing eliminates the human resources expense, too.

It’s a fine business to be in. Mu Sigma’s funding comes on the heels of Opera Solutions’ $84 million equity investment in September for its similarly positioned service. Both companies claim to be profitable already, and Opera actually is doing more than $100 million a year in revenue. Both also claim dozens of Fortune 500 customers.

But you have to have the right personnel. Mu Sigma Founder and CEO Dhiraj Rajaram told me recently that the ideal employees possess a mix of technology and business skills that enable them to apply their advanced math skills in real-world scenarios. With data-analysis techniques and computer science methods advancing so quickly, Rajaram said, it’s tough for companies not deeply connected with the academic community to keep up.

That’s why they turn to companies like Mu Sigma. Not only does it hire the cream of the crop, but it also trains them via its Mu Sigma University program to keep their skills up to date. Rajaram says the company has grown to more than 1,000 employees and should nearly double by the middle of 2012. As of September, the aforementioned Opera Solutions, employed about 150 workers with Ph.D.s or equivalent degrees.

General Atlantic led this equity-financing round for Mu Sigma, along with existing investor Sequoia Capital.

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