The State of Venture Capital Investments in BI

There is a lot of competition in the business intelligence (BI) space today. This is because BI, analytics, and dashboards have been a hot topic among CIO’s for the past decade. At the beginning, BI software was primarily used by enterprise-level companies, but there has been a push in recent years to bring BI technology to the small and mid-sized business space. This push has fueled self-service BI, and has made dashboards and analytics accessible to smaller businesses.

In the mid-2000’s BI companies that catered to small-to-mid-sized companies, such as Business Objects, Hyperion, and Cognos, were all purchased by much larger companies (e.g. SAP, Oracle, IBM). These acquisitions forced the BI vendors join larger sales organizations and to pursue larger deals with bigger clients, which then left the small-to-mid-sized market in a neglected state.

This market gap in the BI industry is why 5000fish launched Yurbi. We re-architected our software and released Yurbi into the small and mid-sized BI marketplace in 2009. Around this time, Tableau and Qlik also entered the small and mid-size market and saw tremendous success that led to them becoming publicly traded companies.

The Big Issue in the BI Industry Today

Fast forward to today and the market has once again shifted. Qlik’s growth stalled and eventually sold to a private equity company in 2015. Tableau is in the same position and rumors are swirling that the company is searching for a buyer. The leaders within the small-to-mid-sized market are changing, and there is once again a void.

However, there is a big issue in the market today that hasn’t existed before, which is the influx of venture capital (VC) investments in the space. The companies that would normally fall into and fill the small-to-mid market void are in a tough spot. These companies have taken on so much VC investment money that they feel the same high sales and high growth pressure as the larger, more established companies. The pressure for BI companies to hit high sales targets comes from the VC organizations that want a high return on their investments.

The VC Investment Impact

As smaller BI companies take in more VC funding dollars, they are addressing the high sales pressure with a few common tactics. First, these companies are pursuing larger deal sizes, which ultimately neglects the small-to-mid-sized companies yet again. Second, these companies are increasing prices in order to maintain growth. The impact on small and mid-sized companies is that the entry price to BI is much higher than it ever has been. We’ve had potential customers tell us that to get in the door at Sisense it’s $20,000 per year. We’ve also been told that BI solutions at DOMO that have the security and capabilities mid-sized businesses need, begin anywhere from $35,000 to $50,000 per year.

Not only are we seeing higher prices from VC-funded BI vendors, but very aggressive sales practices and less knowledgeable customer support organizations. These aggressive sales teams lead to rapidly growing BI companies, which then force the customer support organizations to grow equally as fast. This results in less-knowledgeable customer support staff and a poorer customer experience with the organization from the sales cycle and beyond.

There is another red flag popping up among highly-funded BI vendors. There is tremendous overspending on marketing. When we see massive booths at trade shows, come across tons of Facebook ads, hear multiple radio ads, and even catch a TV ad, it indicates that the BI vendor has taken on too much VC funding. This high cost of sales and marketing drives up the cost of the product itself, making BI software painful to purchase or completely out of reach for many small-to-mid-sized companies. While cost is not everything, it’s still a major deciding factor for the small-to-mid market because the investment in BI must cost less than the business problem it is solving.

The Bubble

The goal of VC investors that are investing in BI companies is to take these companies public in order to receive a 10x return on their investments. However, most of the companies being invested in will not go public. Therefore, the VC investments and high growth sales among BI vendors right now are creating a bubble. These companies will grow, grow, grow until they can’t grow anymore, and the bubble will pop.

When this happens, these companies can often survive by maintaining their revenue streams and by cutting costs – marketing, staff, and research and development. In the end, the bubble burst hurts customers because there is less research and development, decreased customer support and service, and a loss of innovation. Once these companies begin operating within their means, they will often start searching for a buyer and sell the company to a larger company.

List of VC Funded BI Companies

Below is a list of BI companies that are heavily funded by venture capital investments:

  1. DOMO: DOMO has raised over $689 million over 10 rounds of funding, with its last round occurring in April 2017.
  2. Sisense: Sisense has raised $94 million over four rounds of funding, with its last round occurring in January 2016.
  3. Logi Analytics: Logi Analytics has raised $48 million over five rounds of funding, with its last round occurring in October 2013.
  4. GoodData: GoodData has raised over $101 million over 9 rounds of funding, with its last round occurring in September 2014.
  5. Looker: Looker has raised over $177 million over five rounds of funding, with its last round occurring in March 2017.
  6. Chartio: Chartio has raised $6.77 million over four rounds of funding, with its last round occurring in January 2014.
  7. Mode Analytics: Mode Analytics has raised over $23 million over four rounds of funding, with its last round occurring in May 2017.
  8. Klipfolio: Klipfolio has raised over $16 million over three rounds of funding, with its last round occurring in January 2017.
  9. Periscope Data: Periscope Data has raised $34.5 million over four rounds of funding, with its last round occurring in November 2016.
  10. Palantir Technologies: Palantir Technologies has raised over $2 billion over 13 rounds of funding, with its last round occurring in this year in January.
  11. Grow: Grow has raised $12.5 million over 3 rounds of funding, with its last round occurring in July 2016.
  12. Board: Board has raised $25 million over 1 round of funding, occurring May 2016.
  13. Gecko: Gecko has raised $1.8 million over 2 rounds of funding, with its last round occurring in September 2012.

The Bottom Line

It’s important for consumers to understand the motivating factors driving these new, rapidly growing BI companies. Because of the VC investments, these companies must maintain high growth and revenue, which is leading to more aggressive sales cycles and higher costs of entry for small-to-mid-sized businesses.

Unfortunately, this growth cannot sustain itself, which means that the BI product growth and development will slow down tremendously or the company will be purchased by a larger company. All of this has a negative impact on the consumer because customer support dwindles, research and development slows, and often times the product dies after it’s purchased by a larger company.

Have additional questions about the state of VC in the BI industry or are we missing some VC transactions? Contact us and let us know!

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