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Adam has worked for a variety of Enterprise Software vendors in pre-sales for the last 8 years, including FileNet, IBM, edge IPK (now Temenos), and MarkLogic. Prior to this he led a development team at a University and has worked in development for ISVs. Current interests include the paperless office, information security, business process management, and NoSQL. Adam is a DZone MVB and is not an employee of DZone and has posted 13 posts at DZone. You can read more from them at their website. View Full User Profile

How to Interpret NoSQL Funding Rounds

01.14.2014
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How to interpret NoSQL funding rounds. Read on…

It’s all very tempting to gloat about the amount of money your company has raised in a funding round. Many commentators use the size of an investment to determine the likely value of the company.

I believe that approach is too simplistic though. Let’s not forget these are all privately held companies. They could be selling nothing and we’d never know. Is there another explanation other than success? I believe there could be.

If you think about it, if you’re raking in billions of pounds a year like Oracle then you don’t need private equity firms. So another explanation for needing over $150 million could be that a company is making so little money that it needs to bolster it’s ailing finances until it gets some real customers.

Looking solely at money raised it it is tempting to conclude that MongoDB is the most successful NoSQL vendor out there… It simply isn’t though. It’s a services company mostly, and one that doesn’t make much in software license. They’re simply louder than the rest.

Now consider this quote from a recent report:-

MarkLogic is the largest pure-play Big Data vendor in terms of revenue, and it has not slowed down its push for innovation in the industry, as its new semantic system illustrates.

MarkLogic is the biggest NoSQL vendor, yet we didn’t raise a huge amount of money from the market this year.

Why? Because we’re making a shed load of money from license sales! Why would we want to saddle ourselves with hundreds of millions of dollars of debt? Or massively dilute our share pile? It wouldn’t be sustainable. We’re predominantly self funding these days. Our last funding round was purely to build out the sales force – thus further reducing the need for large future outside investment.

MarkLogic doesn’t need to invest gazillions of dollars updating a product – because we’re 5 years ahead of the competition! Other vendors say they’re spending their money over the next three years so they can have the same features we’ve had for years… Of course by then we’ll still be three years ahead of them!!!

And what of the investors? Surely they’re savvy enough to spot a bad deal? Well, history shows that when companies hit a certain point on the hype cycle the normal rules of careful investment go out of the window. Remember the dot-com bubble? Just look at the number of investors who are investing in multiple NoSQL companies. They’re hedging their bets because they’re not sure themselves which businesses will survive.

In summary, caveat emptor – buyer beware. Beware those who would foolishly claim a large amount of investor debt is a sole measure of success. Personally I prefer looking for mission critical clients (not just big clients that use software in a single office in their sprawling empire).

Customers investing money in software, not services, is my preferred way of measuring success. They’re very, very careful with their money. They only spend money with a successful, sustainable vendor. Which makes MarkLogic very successful indeed.

Published at DZone with permission of Adam Fowler, author and DZone MVB. (source)

(Note: Opinions expressed in this article and its replies are the opinions of their respective authors and not those of DZone, Inc.)