Why VCs Will Continue To Invest In Big Data Startups For Many Years To Come

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This week, Splice Machine raised $4 million to develop its SQL Engine for big data apps. MongoHQ raised $6 million for its database as a service. A third startup, Bloomreach, announced $25 million in funding for its big data applications.

These three companies provide examples for why the investor community will continue to invest in big data startups for many years to come. All reflect a changing dynamic — the rise of the big data app and the need for a new data infrastructure. These two converging trends now drive funding for a widening number of startups that make data functional inside and outside the enterprise.

Data functionality, a term Gartner Research used in a report it published this week about how big data will drive $232 billion in IT spending through 2016, speaks to why investment will continue to flow into companies such as Splice Machine, MongoHQ and Bloomreach.

But data functionality is just part of the story. This week, Cloudscaling Founder Randy Bias wrote a post that more broadly reflects what these individual startups represent.  The market is going through a deep disruption. It’s a model “pioneered by the most massive Internet players (Google, Amazon, Facebook, Twitter).  This IT model starts with datacenters built with extreme power efficiencies (PUEs reaching 1.2 or less), extends to open hardware projects (like Open Compute), and reaches into the transformation to a scale-out software architecture model (epitomized by “big data” projects like Hadoop and Cassandra).”

It’s in this “manifest disruption,” that startups thrive. It means database infrastructures need to change in order to take advantage of scale out architectures. Splice Machine and MongoHQ represent the transformation of the database market. Bloomreach exemplifies how this new data infrastructure enables apps to take advantage of scale out systems and become the next big thing – beyond what traditional SaaS applications provide.

Splice Machine executives say the Splice SQL Engine is used to access data without having to rewrite existing SQL-based applications or Business Intelligence (BI) tools. It is designed to run across web, mobile and analytics applications. It is intended as a solution for those already invested in Hadoop, NoSQL or SQL tools.  The promise: customers don’t have to rewrite existing BI apps.

MongoHQ is a database as service for developers that provides ways to more easily scale big data apps. Tools for database management differentiate MongoHQ, primarily as a means to bring more efficiency to scaling databases, a huge issue for developers. MongoHQ’s tools provide a graphical user interface that has been lacking for developers with MongoDB, a NoSQL database.

Bloomreach mines data through techniques such as machine learning, web crawling and search technology to transform enterprise functions. The goal: drive marketing insights, new customer traffic and new revenue.

Accel Partners’ Ping Li manages the venture capital firm’s big data fund. He said in an interview this week that what you see in the market is a broad and varying need for different database architectures.

As noted in Database Journal, business intelligence applications, for instance, have started to transition from an OLAP data source in a relational database to a new type of service that connects different data sources from social networks, third-party apps and other sources.  NoSQL has emerged as a popular option for its scaling capability across cheap, commodity-based nodes. It’s far less expensive than scaling with vertically integrated systems that require attaching expensive storage arrays.

In other markets, similar scenarios have started to emerge. A new generation of big data applications have blossomed in this ecosystem, which in turn has put pressure on enterprise vendors to modify existing software suites.

Li says that over time, one or two databases will emerge  for horizontal applications with certain verticals having databases for their particular requirements.

In the meantime, venture capitalists will continue to invest in data infrastructure and big data apps that represent the manifest disruption in IT.

(Feature image courtesy of Kunal Anand, data visualizer and director of technology for the BBC)