Data as Cash

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What is your data worth?  Do you know the worth of your data?  I bet if there were a privacy breach I bet you would find out at that moment.  Otherwise, what does the data actually do?  Information storage, for information’s sake, is a copy it is also hoarding.  Information assembled in an intelligent high, affinity fashion is worth a lot these days.  

i will say it is worth more than the software that makes it so.

By definition, what does that mean for the software that accesses that data?  Is it as important as the actions taken on the data?  Is it really about the application itself or the results of the information that the application creates across multiple data stores?

To take this a step further, I believe it is no longer about the data sets in situ but how multiple data sets can be fused together with context, geo-spatial and behavioral information.  It is no longer about the software but what the software does with the data – and lots of it.

Unless you live under a rock, you know that distributed map reduction systems are now the norm for any massive-scale compute data-intensive service.  However, there is a catch here.  Digital lifestyles are one massive data collection opportunity.   These digital breadcrumbs are the stuff of congressional hearings on privacy.  The problem is how we can place a recurring revenue stream on this data.  We inherently know it is the new cash.  Distributed data that describes itself is the DataSpace.  The DataSpace is the vault or vaults which create useful information.  This fluidity of data is a very important concept in the proper functioning of Data as a Service (DaaS).

Knowledge Fusion and Assumptions

Knowledge Fusion is a term that historically draws on many dataspace concepts and techniques developed in other areas such as artificial intelligence (AI), machine discovery, machine learning, search, knowledge representation, semantics, and statistics. It is starkly different from other decision-support technologies in as much as it is not purely retrospective in nature. For example, language-based ad hoc queries and reporting are used to analyze what has happened in the past, answering very specific business questions such as, ‘How many widgets did we sell last week?’ When using these tools, the user will already have a question or hypothesis that requires answering or validation. Knowledge Fusion is very different as it is forward-thinking and aims to predict future events and discover unknown patterns and subsequently build models – these models are then used to support predictive ‘what-if’ analysis, such as, ‘How many widgets are we likely to sell next week?’ based on the context and meaning of the data as it is utilized.  KF also allows this context and meaning to infer further linkages from the initial query.  How is this knowledge fusion processed and accessed?  Why is it needed?  Let’s start with some technical assumptions from the BOOM paper:

1. Distributed systems benefit substantially from a data-centric design style that focuses the programmer’s attention on carefully capturing all the critical state of the system as a family of collections (sets, relations, streams, etc.) Given such a model, the state of the system can be distributed naturally and flexibly across nodes via familiar mechanisms like partitioning and replication.

2. The key behaviors of such systems can be naturally implemented using declarative programming languages that manipulate these collections, abstracting the programmer from both the physical layout of the data and the fine-grained orchestration of data manipulation.

Based on these assumptions, I would like to add some  observations from my experiences:

3. The more data we have the easier the machine learning and data mining algorithms.

4. Clean Data is paramount.  85% of the time spent on creating value out of data is cleansing and creating views and modeling.

Another platform that I believe will greatly see adoption is the folks at Systap, LLC with BigData.  Check it out here. These guys are really looking at the future of fully distributed linked data and massive Resource Description Frameworks.  They are also taking into account concerns such as high availability, transactional processing, B+ trees, and sharding.  i hope to see this trend in the enterprise.

Revenue Models for DataSpaces

A caveat emptor at this juncture:  One of my biggest issues with semantic intelligence, knowledge fusion, knowledge discovery, machine learning and data mining is that people believe it is a MAKE IT SO button! Click here and all your dreams will come true. People believe it will give them business strategy answers or generate the next big thing.  Folks y’all still have to think.

While this is all well and good. What do we base the importance of data upon?

  • Revenue Per Employer (RPE)?
  • Keywords Per Transaction (KPT)?
  • Bulk Rate DataLoad (BRD)?
  • Business Lift Based Query (BLQ)?
  • Affinity Per URI (APU)
  • Insert your favorite monetization acronym here…

Securing The Query

An interesting trend is finally happening in the industry.  Folks are realizing that you must secure those mixed and mashed queries.  At the recent Semantic Technology 2010 Conference, there was a panel discussion on security in the semantic world that specifically dealt with dynamically applying access controls.  These technologies allow people to slice and dice the DataSpaces based on proper access control and the meaning of the data streams.  For a great white paper and overview, please visit this link.

The ability to secure specific person-meaning queries in an of itself will usher in completely new monetization models for data.  I like to call this the Reeses Peanut Butter Cup model.  You have chocolate.  You have peanut butter.  Put them together, and you have something really good.  Remember, data does not have calories just consumes bandwidth, disc space, and compute resources  – depending on usage – your mileage may vary.

Until then,

Go Big Or Go Home!

Number 5: The Cat Is Out of The Bag and The Bags In The River!

Yep number 5 is in the bag.  We exited and finally closed.  Here is the press release:

BenefitFocus Acquires BeliefNetworks

I came into the office the day after the press release and the phone rang:

me: Hello?

speaker: Hi this is such and such with Morgan Stanley

me: hello.

speaker: How are you today?

me: good.  I suppose your calling about the release.

speaker: yes, you have had quite a run.

me: I suppose so.

speaker: well we just wanted to make sure your aware we are available for these type of liquidity events.

me: Yes I am aware and already have taken care in such areas, thank you good bye.

Honestly this time around it was lackluster.  I’m not jaded just tired of the chinese water torture that is prevalent due to the region.  So if anyone has been following what has been happening over the last couple of years we founded a company that created some pretty good software.  We won some awards, had some customers using the technology and to top it off it is some of the hottest technology being discussed.  When blood is in the water the sharks come.  The M&A folks at the following companies had very frank and positive discussions with us: Google, Facebook, Oracle, IBM, Microsoft, NewsCorp etc.  As noted a company called BenefitFocus acquired us.  Which brings me to the current issue at hand.  If anyone read my previous blog ( Amazing Moments Of The Past Year)  then you may remember this:

  • It’s not just Timbuktu, it’s beyond nowhere.

This was in response to location.  Lest anyone think that location does not matter.  It does.  Sandhill, Embarcadero, 1st Street Pioneer Square, Newbury St.  Having to get on a plane and leave requires time and time is money especially in disruptive software.    Geography makes a difference:  Menlo Park, Seattle,Cambridge, London, Bangalore, Israel.  You can make the argument all day about burn rate and easy access to talent but it is much easier to go where the money is to begin with and not have to compete at a disadvantage.

So here is where I want to make some very strong points:

(1) Location Location Location – Did I say Location?!

I seem to be able to time technology pretty good.  When to deploy, what is going to happen and how it will unfold.  When we were in the early stages of thinking about names, look and feel and all the really fund stuff of a startup we had a teleconference with some folks who I trust that have been around the block several times and have worn several hats.  When I told them I was going to found the company in Charleston, South Carolina they about jumped through the phone.  One of them said “Dude please do not waste these ideas in that area.”  Another said, “Look you wont get funding, if you do it will be a small amount, then the same companies that fund the institutional rounds also are the same companies that will buy the company or put their buddy Bob the CEO with a background of being a copier salesperson in place.”  Well me being me i said man we have enough contacts and background to make this happen.  The talent will be cheaper and we can get some guys to move from the valley due to cost of living.

Guess What?  I WAS WRONG!  Yep I said it: I WAS WRONG!

Along those lines everyone may also remember this: Deadly Sins of A StartUp by Bill Bagloglu ?  Read to about page 8.  Take your time I will wait.  OK? Finished? So amazingly enough he mentions the company that purchased BeliefNetworks! He also mentions this: “Geographically, BenefitFocus is in one of the most technology unfriendly places in America, South Carolina.They had no venture funding or top- tier capital investments behind them.”  It appeared my hubris had gotten the better of me.  Now BenefitFocus is amazingly successful.  I believe they are the Microsoft of the Health industry.  Yet they have been in business a L O N G time.

(2) East coast VCs focus too much on the IPO:

Every single and I mean every single east coast VC talked to us about IPO.  I was direct our exit strategy was NOT IPO it was to get purchased by Google, Microsoft, Oracle, IBM, Cisco, Yahoo (you know the guys behind the firewall).  I dont even need to put a link in these guys.  Lo and Behold!  on TechCrunch a story about how IPOs are essentially a thing of the past for the very reasons I was stating almost 4 years ago now.  Further I said I wasnt founding the company for this particular company I was founding the company to exit so I could start a proper VC!

The Poor, Pilloried IPO

So I completely agree with this assessment.

(3) Too much time Business Model Engineering

Yet Another Thing I find interesting is the extreme business model focus.  Almost three years ago when we had real time (before spritzer APIS) twitter semantics with clustering people were looking at the stuff running and said, “Twitter is a fad, why focus on Twitter?”  I continually argued it was going to be one of the main data feeds for the world of Dataspaces moving forward and that the actual software wasnt that important.  Data as a Service (Daas).  Literally I thought people had gone catatonic on me.  Then the would ask: “Yes but where is the software?”

Thus I am ready to get on with this new show and hopefully help some of the hopeful few entrepneuers in the South East get the right thing accomplished and that is taking your idea to the bank!

Until then go big or go home!


Amazing Moments of The Past Year

Over the past year there have been some great moments in the history of the company that I co-founded.  For context this is my fifth endeavor into the world of start ups.  The other four had very nice outcomes and I have been involved with all sides of “The Process”:  Raising money, advisory boards, venture capital technical due diligence, acquisitions, acquiring (at large corporations) and making the tea (of which I just made a refreshing batch…).   I have seen and heard some amazing comments and have seen some amazing stunts.  I remember one VC who fed his wolf hybrid dog biscuits during pitches.  The time allotted to present was three dog biscuits and then at the end they would decide whether or not to move forward.  Very efficient no muss no fuss.  Do or Die.  The proverbial elevator pitch had better be novel, succinct and efficient.  Each VC has their own process.  One must adapt either apriori (if possible)  or in the moment to what particular moon phase or bio-phase is occurring with respect to the particular partner during the pitch or hopefully further due diligence.  Associates are always nice to deal with as they are usually excited to be talking to you either because 1) they dig the technology 2) they are trying to make an impact on the new ‘found’ company.  Hopefully you will make it past the associate, get a second meeting and get a couple of partners on the phone.

This past year we have met with no less than 75 potential funding partners.  That in and of itself has been amazing to me but given the global train wreck of the economy, it needs to be put in perspective.  Given this large footprint of meetings we have had to be extremely adaptive in the moment much like the software we are creating.  Here is a list of  the usual suspects of responses during an initial meeting or subsequent meetings:

  • Interesting, looks like it has legs
  • We are intrigued
  • Great! (multiple times)
  • How will you monetize?
  • Interesting (said with added emphasis)
  • What is the specific business model?
  • Are the engineers all FTEs and in the office?
  • What do you think your pre/post/exit valuations are?
  • How do you compare to XYZ company?
  • Hitherto, other and etc…..

OK so you say big deal been there done that got the t-shirt – swag city.   So here we were cruising along answering question after question in the relentless Chinese Water Torture of Due Diligence and Elevator Meetings – one after the other – after the other.  This is the process.  If your dealing with disruptive technology you need that money amplifier to succeed and get a jump on the competition as fast as possible  First one ships usually wins in this space.  Its the give and take of the game.  It is a great game.  As far as I am concerned it is the only game.

So as we are grinding along  and the following questions are the ones that still to this day have slack jawed me in amazement:

  • Is it done yet?

This was in response to “Are there any further questions?”.  The question was entirely reasonable with one exception:  This was ONE MONTH after we had opened doors.  I have been involved in some eureka software moments, as well as quick turning some builds – but nope – sorry to say I ain’t that good.  We went through the checklist, passed the checklist for their process and was told, “Well we can’t give you a reason why we are passing, we just aren’t going to invest.” Wow maybe I need to change my deodorant.

  • Where do your ideas come from?

This was a during technical due diligence.  So we are going through ‘The Process”.   I was a little taken back that the tech due diligence team wanted to look at our code during a series A raise.  yet the good folks at this institution assured me that if the tech due diligence team gave us a thumbs up they would proceed to a term sheet as they only do deep tech due diligence to close.  Here is our build process,  here is  our code, here are our specifications, provisional etc.  Then they asked, “Where do your ideas come from?”   I thought this person was kidding then I realized this was FOR REAL.  Oh yea we forgot tell you about our process,  the idea fairies come and leave the answers to the grand unified field theory on my chair every night so I can write up the architecture and specifications.  We ended up passing the tech due diligence with flying colors, yet no term sheet materialized.  Maybe the idea fairies took it and left being that I haven’t seem them around.

  • This is a Flash Demo right?

Well no it is not, in fact it is running software.  As I was demo-ing our real time software and explaining what was occurring,  one of the partners said, “This is a Flash Demo right?”.  This was after an hour of discussion of what we had up running.  I was standing in front of the 60″ HDTV with the current date and time showing from the results of our software, I then hit enter again and again the current date and time changed to the appropriate current data and time.  The discussion then centered around if the current date showing was the actual date.  Why yes it was and no this isn’t a Flash demo thank you very much.

  • What about Google, Microsoft, IBM, Oracle Apple etc.?

I always love this one.    I do not consider “thoughting” to be working on or competitive to your current endeavor.    “Thoughting” is what happens at many companies.  Have you worked on that?  Oh yea we THOUGHT about that a decade ago.  These companies are concerned about huge issues like Net-Neutrality, data privacy, anti-trust concerns, identity and cyber-security.  Of course you need to consider what (insert large software company here) is doing in the current tech your involved with creating, but that does not mean you shouldn’t go out and work on the “Next Big Thing”.  Is that what this country is built upon?  I cannot stand people who play to failure.  I try to be extremely self critical and one of my faults that I try to work on is solipsism.  I generally believe people will strive to win at adversity and I end up placing my ethics and value system upon them.  Case in point when we were starting our current endeavor, we were told by a large software company engineering executive, “It would not matter if you were making pencils.  You and your team will make great pencils.   We are investing heavily in (current tech).  Go off write come code, file some provisionals and we will probably buy you.  We are buying everything in (current tech) not nailed down.”.  So yes what about the “guys inside the firewall” as I like to call them.  Go do something don’t just sit there and be scared.  You have speed and agility on your side (and no rules).

  • It’s not just Timbuktu, it’s beyond nowhere.

This was in response to location.  Lest anyone think that location does not matter.  It does.  Sandhill, Embarcadero, 1st Street Pioneer Square, Newbury St.  Having to get on a plane and leave requires time and time is money especially in disruptive software.    Geography makes a difference:  Menlo Park, Seattle,Cambridge, London, Bangalore, Israel.  You can make the argument all day about burn rate and easy access to talent but it is much easier to go where the money is to begin with and not have to compete at a disadvantage.

  • Will this Angel Round get you to profitability?

As entrepreneurs, we strive to be optimistic in all endeavors.  Yet somehow, this inquiry is even a stretch for me.  Yes, it would be great if you could just put in some angel funding and the next thing you know out pops a Microsoft, Google or (Insert Large Publicly Traded Entity Here).  Times have changed. World markets have changed.  There is a conflict with the requirements of experience and basic needs of becoming more experienced.  What is wanted is the 15 year experienced multiple company, multiple exit founder or initial team with little or no salary or living requirements much like say a new college graduate.   It is also interesting in light of the recent market that large VCs are now looking at angel type investments due to lower valuation and better values due to market pressures which put pressure on traditional angels because 1) the large VCs can afford the risk 2) it will probably squash down the angels on the series A raise.  So many angels are trying to posture as though they are institutional investors and asking conflicting questions in the same instance,  “Can you go off and be self sustaining so we make unbelievable gains, higher than 10x on an exit in the near term” and “We do not want to get crammed down on the valuations during an institutional round.”  A couple of weeks ago I had an interesting discussion with a C-level executive of a large software corporation concerning our company which they had already pushed down to corporate M&A.  I asked them how it was coming along and they said they are trying but we aren’t expensive enough, go raise some more money.

Aint that always the truth.