Flip, Dennis and I spent the past week at the Strata Conference hosted by O’Reilly in Santa Clara, CA. It was a “Woodstock of Data” as Geek Austin’s Lynn Bender tweeted. Data marketplaces were a hot topic and we were mentioned frequently, including here, here and here. We’re very grateful that our fans love us! Mike Olson, our advisor and CEO of Cloudera, said it best: “Betting on bytes is a pretty good bet.”
Factual is very ambitious and we share their desire to “liberate the world’s data”. That being said, they are building an open-source database and we are building a frictionless data marketplace. These are two different things, and don’t preclude us from working together towards our shared desire. If we are successful in disrupting the $100 billion data services market, maybe the first sentence below will some day contain names like Jacob Perkins, Joe Kelly, Dhruv Bansal, Flip Kromer, Hollyann Wood, Jesse Crouch, Kurt Bollacker, Michelle Greer, Dennis Yang, Chris Howe, Adam Seever, or heck, maybe even Nick Ducoff.
THE SERIES A TEAM: Factual Founder Builds (Data)Base Of Support
Gil Elbaz is a wealthy man. Gil Elbaz made a lot of money from Applied Semantics, but that didn’t keep him from devoting himself to a longheld dream - building an open-source database that would corral the world’s information and make it structured and accessible. Investors eagerly jumped aboard with a $25 million Series A.
He sold his first start-up, Applied Semantics Inc., to Google Inc. for $102 million in cash and stock in 2003—before the search giant went public. After that profitable exit and several years at Google, he wasn’t worried about money, or about establishing himself in tech circles. What he worried about was having unfinished business.
So, in 2007 he founded Factual Inc. to solve a problem that had been bothering him - finding a better way to liberate the world’s data.
What Elbaz envisioned was an open-source project that would serve as a data platform for web and mobile application developers. The idea was to structure information—pulled from a variety of sources, both public and private—into discrete data sets so software programs would be able to dig for information and people wouldn’t have to.
Much of the information, like points of interest and local business listings, was already available, but it wasn’t properly organized and it was tough to manipulate.
A trained engineer used to building large projects in small increments, Elbaz reached out to angels shortly after launching his company in 2009 to lay the groundwork for raising a Series A round.
“VCs tend not to like getting a call at the last minute that you’re raising money,” said Elbaz. “You want to have been part of their internal conversations for months if not a year.”
Elbaz acknowledges he didn’t actually need cash from VCs, however. He had invested $4 million of his own fortune to found the company in 2007 and admits he could bankroll the entire venture today if he chose to. What he did need was their connections, their advice and their endorsements to show his new venture was a real business, not just a rich man’s hobby.
Setting The Stage With Seed
Although Elbaz had casual conversations with Index Ventures’ Danny Rimer and other investors as early as 2008, his first formal pitch meeting was in 2009 with Marc Andreessen and Ben Horowitz, successful entrepreneurs who now run their own venture firm, Andreessen Horowitz.
Elbaz said he was nervous meeting the pair—he hadn’t pitched a VC in nine years. He had long admired Andreessen, the co-founder of Netscape, for his ability to reinvent himself, and he was a fan of Horowitz’s blog.
“I thought, ‘Why does it have to be my hero in the first [meeting]? Why couldn’t I have practiced on someone else first?’” Elbaz said.
Horowitz, an early employee at Netscape and the co-founder with Andreessen of Opsware Inc., was far from convinced he wanted to work with Elbaz.
“The thing that worried me the most was how much money Gil had made,” Horowitz said. “The problem with really rich people is they’re not hungry. Much of building a company is no fun. It’s disciplined, hard work, confrontations with employees…If you don’t have the financial component driving you, you might want to skip steps and you won’t do what it takes to beat the entrepreneur who is hungry.”
As Elbaz detailed data segmentation and delved deeper and deeper into engineering intricacies, Horowitz said he struggled to keep up.
“A lot of the meeting was just us trying to understand what he was saying,” said Horowitz. “It was clear he’d really thought through to an incredible amount of detail how the whole thing would work.”
Factual makes data sets available to developers and publishers, like Booyah Inc., Newsweek Inc. and Facebook Inc., who need accurate, complete and current information, but are not in the business of collecting that information.
For example, Newsweek used Factual’s data sets as a basis for a special report on the country’s best high schools, which required crunching all sorts of educational and demographic data.
The company seeks to structure and verify data in an endless number of verticals around the world and make it available to mobile and web app developers. As an open-source project, it will also benefit from end-source users adding to and refining the data—creating a sort of Wikipedia dynamic.
The company provides data sets on everything from CEO compensation and bottled beers to school rankings, sports teams and local business listings in 14 countries.
Another company, SimpleGEO Inc., offers a database for developers, but focuses on geo-located data for mobile apps. SimpleGeo is backed by First Round Capital, Foundry Group, Lowercase Capital and Redpoint Ventures. InfoChimps Inc., backed by DFJ Mercury, also operates a data marketplace.
Drawn to Elbaz’s big vision, Horowitz liked the idea and invested $100,000 in February 2010. Rimer, who had introduced the pair, contributed $100,000 of his personal funds, because Elbaz didn’t want firm investment yet. A long list of angel investors also came aboard for a round that hit $2 million.
Rimer said he invested because the first conversation he’d had with Elbaz nearly a year earlier was still resonating with him.
“I was blown away by what I was hearing,” said Rimer, noting Elbaz had explained very clearly something Index had been discussing internally as an investment theme. “I usually take 30 minutes with entrepreneurs. I spent 90 minutes with him.
“We invest in fairly disruptive plays,” Rimer said. “This was trying to spearhead a new era in automation.”
Refining the Business Plan
With seed funding in hand, it was time for Elbaz to refine the technology, as well as the business plan. Factual offers reduced prices, and even free access, to users who contribute back to the knowledge repository with more information. Although Factual’s pricing model is still being developed, the company aims to keep the data free for small users, charging only the high-traffic ones.
By fall 2010, the 30-person company had secured key partnerships and paying customers, with top players including Facebook Inc., which uses Factual’s local geo-location data for its Facebook Places service.
Said Rimer: “By the time Gil wanted to do a Series A, we wanted to participate as much as we could.”
Elbaz began a targeted road show in September, talking to a half-dozen potential investors he’d been in contact with for the past year.
One group Elbaz wanted to work with, but hadn’t, was Ron Conway’s SV Angel fund.
Managing Member David Lee, who met with Elbaz over coffee in 2009, was intrigued but initially passed on the angel round because he felt the company had advanced beyond the seed stage that was his fund’s focus.
Lee said the decision haunted him all year.
“Every time the name Factual came up I shook my head and said, ‘We were idiots.’ I was pretty remorseful,” said Lee, noting that companies with a proven founder at an early stage were “exactly” the types of companies SV Angel was supposed to back.
A chance meeting between Elbaz and Conway at the Web 2.0 conference in November sparked a conversation between the two men and provided the catalyst for Lee to email Elbaz.
“I reached out to him and said, ‘I don’t even need to know your progress I want to invest on whatever terms,’” said Lee, who was pleased to learn Factual was in the process of raising a Series A. “It was like asking a boyfriend or girlfriend to take you back. He was very gracious about it.”
Elbaz said picking the right investors was tough. He said he had “emotional attachments” to early investors and had to constantly remind himself to explore all his options for growing the company.
He evaluated multiple investment offers - several unsolicited - and had conversations with firms including Battery Ventures, Charles River and General Catalyst. Ultimately Elbaz went with who he knew, and liked, best.
In December, Andreessen Horowitz and Index Ventures co-led the $25 million round, with participation from Michael Ovitz, the SV Angel fund and GRP Partners.
Elbaz was initially looking to raise about $12 million, but agreed to increase it at the suggestion of Horowitz and Rimer. Both men wanted Elbaz to build big and fast, attacking multiple items on the to-do list simultaneously and proceeding with global rollouts now rather than staging them.
Said Horowitz: “He’s in a race for critical mass. Every customer he signs, the more data he generates.”
Now, with fund-raising taken care of - Elbaz said he expects the funds will last another three or four years - Factual is hiring staff to double its current 30-person team in Century City, Calif. and Shanghai.
“It’s a long road ahead,” said Elbaz. “What’s fun for me is anticipating an emerging category. We represent a new category that people are just now beginning to understand.”
Lizette Chapman
|02 February 2011
[BLOG POST LEAD-IN REVISED ON FEBRUARY 4, 2011]
Jan 19, 2011
Dear Pivotal Tracker User,
First, thank you for using Pivotal Tracker. We couldn’t be more grateful for all of the support and feedback we’ve received from all of you. We’re writing today to tell you that we’re introducing pricing for Tracker. All of the details, including price plans and transition information, are in this email. Over 180,000 users have used Tracker at no charge for the last 2 ½ years. The growth in usage has been phenomenal, and we think Tracker has helped to transform how the world builds software. Our investment in conceiving, and continuously advancing Tracker to where it is today has been substantial and we’re proud of the contribution that Pivotal Labs has been able to make to the agile community. Given the ever-increasing popularity, growing support costs, and the need for continuous product improvements, it is no longer feasible for us to offer Tracker at no charge. To ease the transition, however, Tracker will remain completely free for the next 6 months for all existing users, as well as for new users that sign up on or before February 18, 2011.
Free until July 19, 2011 (6 months from now)
We’d like to recognize all of our valued users who have been a part of our community for so long, and make sure that there is plenty of time to evaluate options and avoid disruption to current projects. We’re keeping Tracker completely free for all existing users through July 19, 2011. In case you’ve been considering giving Tracker a try but haven’t yet, or would like to open a new account to start fresh, we’ll also keep it completely free through July 19 for all new users who sign up on or before February 19 (30 days after this announcement).
Free for public projects, non-profits, and educators
We’re making Tracker free for public projects: anyone can use Tracker for free (regardless of team size) if you keep your backlog publicly readable. If you’re an open source team, you’ve probably already been doing this anyway. Soon we’ll have a searchable directory of public projects, with a live activity feed, which we hope will get you more visibility and increase interest from potential contributors. We also have free or discounted plans for non-profit organizations and educators at academic institutions, by request.
Pricing starts at just $7 per month
Our goal is to make Tracker affordable for everyone, from bootstrapped startups to larger development teams within established organizations. Price plans begin at just $7 per month, for teams of up to 3 collaborators. (Discounts are available for annual billing, and there is an additional Special Offer as well. See below.) We have two plans designed for smaller teams and early stage startups: $7 per month for up to 3 collaborators across up to 2 private projects, with 1GB of storage for file attachments
$18 per month for up to 7 collaborators, up to 4 private projects, 3GB storage, and use of the Get Satisfaction, Lighthouse, and Bugzilla integrations
SSL encryption, Campfire and Twitter notifications, as well as API use is available for all plans. Community support, via http://community.pivotaltracker.com, will continue to be open for all users.
We also have plans for larger teams, with unlimited projects, integration with JIRA and Zendesk, and priority email support. Prices for these plans are $50 per month for up to 10 collaborators, $100 per month for up to 25, and $175 per month for up to 50. Please get in touch if you have a larger group, by email totracker@pivotallabs.com.
We also have options for on-premises installation of Tracker. Individual use will continue to be free, with no collaborators, up to 2 private projects, and up to 200MB of storage for file attachments.
Discount for Annual Billing and Special Offer If you’re confident that Tracker is the right tool for your team (and we hope so), you can save the price of two months of service by choosing annual billing. We also have an additional introductory discount available: Choose a plan with annual billing on or before February 19, 2011, and receive an additional 20% discount for the first year. That’s 18 months for the price of 8.
Background on Pivotal Tracker
Pivotal Labs started to develop Tracker about 5 years ago, and we designed it to embody our practices for rapid, iterative software development. We needed a tool for our teams that was overhead- and hassle-free, encouraged communication, and automated as much project management as possible. We built Tracker for our own use but shared it with our clients and other development shops in the Ruby on Rails community. About 2 ½ years ago, we opened up Tracker to the broader community, enabling teams around the world to take advantage of a tool proven to transform not just software projects, but entire companies. Over this period, we’ve received a huge amount of feedback, and we’ve invested in Tracker by adding new features, providing support, and supporting unlimited use by a variety of people and organizations, including open source developers, fast growing startups, software consultancies, and large, well known organizations.
Recent Changes
Today, there are over 180,000 users, in 158 countries around the world, collaborating on over 200,000 projects. Pivotal Tracker has become an essential service for many companies, from startups to public enterprises. To keep up with increasing growth, we’ve recently moved to a new hosting environment with dedicated hardware, expanded our dedicated Tracker development team, and invested in stronger operational capability. We will continue to invest in scaling and infrastructure and also increase our development efforts on Tracker. We intend to keep Tracker easy to use, and strongly believe simplicity is one of Tracker’s strengths, but we do have a long list of improvements we’d like to make, including features that many of our users have been asking for. We’d like to continue the design and usability improvements we’ve recently introduced, improve and add more external integrations, make Tracker work better for larger teams and projects as well as on mobile devices, allow for more flexible workflow, and so much more. At the end of the day, we’re establishing a paid model so that we can keep improving Pivotal Tracker aggressively based on your feedback, add operational capacity, and provide responsive support. We look forward to continuing to serve our large community of users in the years to come. If you have any questions or comments, please let us know by emailing tracker@pivotallabs.com.
I came across a recent Quora thread I thought I would share and comment on here: Q: Why the Current Obsession with Big Data? There are quite a few thoughtful responses from the data community including LinkedIn’s Peter Skomoroch and Cloudera’s Jeff Hammerbacher (formerly a Facebooker). Peter and Jeff think big data is interesting because we now have larger and more complete samples from which to work with and, thanks to declining storage costs, we’ll see the data go further back in time. Roger Ehrenberg who recently closed a new fund to invest in data startups, thinks that big data is only interesting with the ability to analyze and make actionable decisions from that data in a cost effective manner. This analysis is being made easier with open source technologies like Hadoop. We at Infochimps agree with Peter, Jeff and also Roger. Our marketplace exists to inform us where demand is, so that we can pre-compute or otherwise create data products from the massive amount of data we have and distribute them at a low cost to our customers. We believe the key to staying ahead of big data is understanding what questions are being asked of the data. When you know the questions you can figure out the answer. Otherwise, big data is just a liability and not an asset.
The Access Economy
I acknowledge that I am in the minority of those who think we’re not in a bubble. I was reminded of this yesterday when AOL bought about.me 1 year and 16 days after the company was formed and 4 days after it was launched. Today I am sure I will catch more flak after the announcement that Twitter acquired Fluther. What is Fluther you might ask? Well, it is a Q&A site, though one admittedly I had not heard of. The similarity between about.me and Fluther is that both sites facilitate access to information. I think the theme for the next few years will be around access. This is the fundamental thesis of Infochimps. We help users find the information they are looking for and access it in a way that makes sense for them. Some folks want access through an API and others want to pull up a spreadsheet in Excel. Similarly, about.me makes it easy to find information about people (in whatever way, within bounds, that a person wants to make such information available), and Fluther makes it easy to find answers to questions (ask anything and someone will answer you). That’s my take on it, and I reaffirm my stance that we’re not in a bubble.
Following the recent buzz around the Google/Groupon rumor, the NY Times is shouting fire in a crowded theater but I agree with the SF Chronicle who says nish nish. Being based in Austin and spending a lot of time on both coasts, I feel like I’ve heard a fairly representative sample of opinions on this topic. The folks who think we’re in a tech bubble don’t get what’s going on with the distributed web.
Technologies like hadoop and cassandra will help get the enterprise to move their data to the cloud. Once it is there, that will open up an entirely new data economy, which won’t just benefit Infochimps, but will empower every web-enabled business to make informed BI decisions using actionable data.
Additionally, there is a huge opportunity in syncing devices and seamlessly sharing content. It has been a pipe dream until now to have your phone talk to your laptop which talks to your tv. Chrome OS is a big bet by Google that this gap is narrowing. Netbooks with Chrome OS will not have a hard drive. Read this article for what this means for the music industry.
AWS, Salesforce (+ Heroku) and other cloud platforms to share infrastructure make it easy and cheap to build a web startup. We run a big data stack on AWS for the cost of hiring a single DBA (which thanks to AWS we don’t need). This means that innovation at the early stages is going to occur at an unprecedented pace.
I’ve placed my bet…
DFJ CEO Summit
I brought home some hardware from this year’s DFJ CEO Summit in Half Moon Bay. Over 125 CEOs from all of the DFJ portfolios were in attendance, including our new friends at Loongstore from DFJ China who plan to give Hadoop a run for their money. The conference started with an impassioned speech by DFJ’s fearless leader, Tim Draper. He encouraged us to ask people stuff, don’t run out of money, eliminate human friction, focus, solve a big problem, have fun and partner whenever possible. Most importantly he reminded each of us in the room to remember that we are a meme and to lead by example. We also learned that “over time things move towards commoditization” from the Director of AWS, that “it’s all about the follow” from the VP Business and Corporate Development of Twitter, and that “there will be 53 zettabytes of data on the web by 2020” from the Director of New Business Development of Google. It was a first class event in every way and was another reminder of the value bringing in the right venture partner adds to a startup. Thanks DFJ!
Since our funding news broke today (so much for embargoes…) I thought I’d share a few best practices I learned about fundraising along the way.
1) Leverage your network. It is easy to get face time with VCs but hard to get mind share. The best intros typically come from execs of their portfolio companies and other VCs. Initially ask for advice not money.
2) Start local. The west coast is the best coast for raising capital, but you should start by seeding the local market. If you’re from Austin and you march down Sand Hill Road before getting interest from the local funds, you’ll be embarrassed when they ask you, “What does [AV] think?” It helped a lot being able to say, “Ask them.”
3) Appear bigger than you are. I’m hesitant to say “fake it till you make it” but you need to plausibly believe you’re the next Google. Highlight the metrics that put you in the best light. For us that was traffic, page views and downloads, not revenue.
4) Sell your stock, not your product. Having worked on a few public offerings, I learned that you draft the prospectus with a focus on selling stock, not product. Investors need to understand whatever you are selling and how you’ll make money, but it is more important to convince them that the opportunity is to invest in your company.
5) Get to the right partner at the right time. An associate who loves you can be your best champion but make sure you move the conversation up to the partnership before you need the money. When a decision needs to be made in a compressed timeframe, it is often a “no”.
You believed in us
Thank you thank you thank you please
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