December 19, 2014

Rainstor, Teradata, HortonWorks and the predator behaviour of a VC dominated overly hyped IT market

On the closing marks of 2014, Business Insider releases their predictions for 2015 in terms of hottest areas for tech investment. This article brings a list of areas where VC dollars are more likely to be channeled. And guess what? Big Data is at the top! You can throw in Internet of Things (IoT) for free in to the mix, although my recent experience with a sensor based startup, tells me this area still has a lot of ground to cover before it becomes mature. This prooves that Big Data is going from buzz to biz quite quick in comparison with other waves in the past of the IT market. But wasn't Big Data there all along? Are these startup companies really adding something new? Let's take a fairly recent company called: RainStor.

Somewhere in the UK, a bunch of engineers in early 2002, came up with a database technology used in the armed forces simulation exercises, to store big amounts of streaming data and even patenting its compression and deduplication. Fast forward to 2009 and the company once called Clearpace, moves its headquarters to SF and renames itself as RainStor. They specialize even further in data compression, and claim to have a ratio "in excess of 40 to 1" like the CTO at the time, Andy Ben Dyke explains in this video. And then came the Big Data buzz.

Big Data buzz meant in most cases offloading tons of data from Data Warehouses on to cheaper Hadoop clusters for archiving and compliance purposes, making it financially much more attractive. RainStor attacks this market, hand in hand with Teradata, EMC, Dell, HP and HortonWorks. Mark Cusak goes over in this video why RainStor is the missing link in this ILM puzzle encrypting data before is gets written in HDFS, adding data masking and SQL92 access.

Teradata saw in RainStor a way to fast-forward the gap filling of the blind spots of what they call Unified Data Management. It didn't took much time until Teradata figured out that SQL access to this UDM and that ILM capabilities where growing trends in the Hadoop circus. RainStor were acquired by Teradata and in this announcement we can clearly see that it was not because of their SQL engine, but precisely for the patented archiving features of RainStor. Could you consider RainStor a startup company? Would they be acquired if Big Data wasn't such a buzz?

In "real" startups land, HortonWorks always tried to keep the cool aura of a company that came from the wound of Yahoo, but somehow had to pull together with Teradata, an Enterprise value proposition based not only on open source, but on heavy utilization of services. Teradata services. It all worked fine and well until the Big Data buzz started to get out of control and hundreds of millions of dollars being thrown at companies screaming Big Data, suddenly created a burden and an extra pressure on the venture capitalists (VC) that backed HortonWorks. You know VCs salivate just with the thought of a successful tech company IPO, not giving much attention to the dynamics and lag times needed to fuel real innovation. VCs create several types of companies: Instragrams or Snapchats. The first never monetise their company and never proved their value in the ability to drive revenue. Snapchat is trying to go on a different route. Be profitable at a certain period in time (after a big organic growth), and then consider and entertain other financing options. In a nutshell: the way VCs finance and create companies like HortonWorks, is also what stops them from being acquired by the likes of Teradata, and helps create even bigger bubbles.

On the other hand, companies with an European public sector background in its root, when they want to grow, scale and monetise their patents, have to go to the Silicon Valley market looking for VC dollars, only to attract predator behavior, because an IPO is not in their plans (for a big number of reasons).

I don't want to make 2015 predictions for the IT market, let alone for Big Data, but the natural laws in which companies get financed are the real driving forces behind several tech bubbles. VC money goes in, IPO gets out, or an acquisition gets made. If you're into physics you might even create a law to predict the outcome of most of the freshly baked startups, but I think as the next two years unfold, we'll see a convergence light down the tunnel and then another bubble will have to emerge, because by then today's entrepreneurs will either be rich and bored, or just bored.



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