Dataminr CEO On Whether He Regrets That Giant Fidelity-Led Round

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On Friday, CEO Ted Bailey of Dataminr swung by our temporary studio set-up in Davos, where Bailey appeared to having a highly productive trip. As he told us then, he’d already met Facebook COO Sheryl Sandberg, enjoyed a one-on-one dinner with Cisco’s legendary former CEO John Chambers, and was on his way to meet for the first time with Microsoft CEO Satya Nadella.

While we had him, we asked Bailey for a little more detail about how his real-time information discovery platform works; whether he worries about Twitter, on which Dataminr is heavily reliant; and if he at all regrets letting Fidelity Management lead a $130 million investment in his company last March. (Last November, at the same time that it slashed the value of numerous other investments, Fidelity marked down the company’s value by 35 percent.)

You can see the entire interview below, or you can just read the lightly edited highlights here:

TC: Your business looks at social media to create a kind of sentiment analysis. Is that correct?

TB: We do look at social media, but we differentiate ourselves by being real time, so we identify early information when people tweet and other sources before the news wires. We’ve pioneered real-time information discovery, meaning discovering information before it’s a trend.

TC: What are you looking for?

TB: It runs the gamut. Our customers run from investment professionals, [including] hedge funds and investment banks, to 250 news organizations, to public safety professionals, like major cities, fire departments, offices of emergency management . . .

What Dataminr tries to do is enable our customers to know about things sooner. Last year for example, there was a big gas explosion in New York City, and when that happened, people around it — acting as a real-time sensor for what was going on — took photos and tweeted pictures, and there was a signal we found in that. And we sent an alert to the [NYFD], and they said, “Oh, wow, there’s a huge fire; we’re going to send out the fire trucks.” After that, they received the first 911 call.

TC: Is there more you can tell us about what you’re watching for? Does it include emotional sentiment? Are you mostly looking for numbers?

TB: It’s a different science than emotional analysis. We use many unique machine-learning models, and if you think about social media, it’s an archive of everything that’s ever happened and how the world reacted to it. Did [people] care? Who cared?

You look across that archive, see those events and which ones got various responses, then we actually have an algorithm that looks for the same pattern as the beginning of things that were significant. So it’s a different approach . . . a very unique proposition.

TC: It sounds like you’re very reliant on Twitter.

TB: Twitter has been incredibly pervasive on the real-time front. There are many companies, many social platforms, that have a lot of interesting information in them—

TC: But no one is racing to Facebook to say there’s a fire in Brooklyn.

TB: When it comes to real time, Twitter is dominant, and for me, I really view Twitter as one of the most revolutionary companies of the century. In the context of Davos and thinking about [its theme this year of] the fourth industrial fourth revolution and [which] companies are bringing about systemic worldwide shifts, Twitter has changed the worldwide information flow in real time.

TC: Twitter is phenomenal, but it’s also beleaguered, with people using it less and less. How does that impact your business. Is that a concern?

TB: For us, I’m very bullish on Twitter. I believe in that fundamental value. I think one of the things that’s lost in the mix of PR is that Twitter is still growing.

TC: Slowly, though.

TB: True, but we had enough information [to cull from Twitter as of] two years ago. I’m not saying I don’t want it to grow; I want nothing more than for it to continue to flourish. But it’s just getting bigger and better. So for us, it’s been adequate for a while to serve a real-time sensor network.

I also think its [woes] are overblown.

TC: You’ve raised quite a bit of money, most notably $130 million about a year ago, led by Fidelity, which seems like good news bad news. You get this blue-chip investor, [but] people realize, many months later, that it has to [report] the value of its illiquid investments [including marking] down your company 35 percent.

TB: Then they marked it up.

TC: How much?

TB: A few percent, but the point is it will go up; it will go down.

TC: Still, it must complicate your life, including [managing] employees who must feel more nervous. Did you have any idea when you signed the term sheet that [what happened in November] was a possibility?

TB: Quite honestly, I didn’t know when I signed the term sheet, but if I had to do it again, I’d pick Fidelity again. I think the investor who led our investment has been tremendously [valuable], and [Fidelity is] a very long-sighted investor.

Ironically, because they have to disclose short-term valuation, it leads people to believe they might be a short-term-oriented investor, but they’re extremely long term. They want to support you not only until the IPO but after the IPO.

For us, what I’ve focused on more than anything is not to be distracted by the marketplace. It’s cyclical, [and] like any publicly traded company, it will be a journey over the years. The interesting thing is there’s no marketplace for the valuation. We’re not raising. No one is selling. We have a tremendous amount of money. We don’t need to raise any more capital for years. So in some regards, it doesn’t impact anything, other than the fact that there’s a valuation that’s publicly displayed.

TC: I guess that’s what you’re telling your employees, as well?

TB: They aren’t concerned. It takes some messaging. This is a market where no one is going to sell and no one is going to buy. [We tell them] “Let’s build a business and it will be five times [its value today].” We can increase sales, we can drive innovation, we can drive revenue. Those are the things that are in our control.

And there are models that, we have no idea what they are based on, that value stocks based on public market comps that, we don’t know who they are.

TC: I think the SEC is interested in that, too, actually.

TB: It’s important for companies not to be distracted by it. There’s no impact to it other than that somebody knows.