Investments

FinTech (And Compass’) Big Data Direction

Big data is the wave of the future and is big business.

International Data Corporation projects that the market for advanced and predictive analytics (APA) software will grow from $2.2B in 2013 to over $3.4B in 2018 – a compound annual growth rate (CAGR) of almost 10 percent. According to Wikibon’s Big Data Vendor Revenue and Market Forecast 2013-2017, by the end of 2017 Big Data will be a $50.1 billion market – up from $28.5 billion it was worth in 2014.

In a recent report, Venture Capital Funding for Big Data and Analytics Software, IDC characterized the feelings among investors in the Big Data space as a “mad rush to capitalize on a business opportunity that is likely to surface only once in several decades.”  

[bctt tweet=”IDC on Big Data Investing: A mad rush to capitalize on a business opportunity that is likely to surface only once in several decades. “]

And the evidence of that “mad rush” is apparent to anyone with a passing familiarity with Google news. As of the time this story was written, searching the phrase “big data venture capital investments” pulled up six separate firms that had secured venture funding for their big data startup within the last 48 hours – 5 out of 6 (80 percent) had received $10 million or more in funding. Total VC funding for Internet-related startups was up 67 percent in 2014, according to CB Insights, falling just shy of $20 billion. “Business intelligence, analytics, and performance management” also represented the leading sub-segment for investor interest, accounting for 10 percent or almost $2 billion of all Internet-related investments. In the last quarter of 2014 alone, Big Data funding was up 40 percent over the same time period last year.

It is a good time, it seems, to be a startup with the next best idea on how to turn analytics data into lucrative actions by consumers. And having a particularly good day in data as September 2015 hits the halfway mark was a New York-based startup called Compass, which announced a $50 million funding round – and a new just shy of unicorn status valuation of $800 million.  

Compass is a technology-driven real estate platform that says it is ready to compete with the established Web real estate players like Redfin, Zillow and Trulia. Why? Because its cutting-edge algorithms are simply better at building a comprehensive online profile for a listing than anyone else’s are. 

And co-founder Ori Allon knows how to write a good search algorithm. Before founding Compass (originally Urban Compass) in 2012, he sold several pieces of search technology to places like Google, Microsoft and Twitter back in his engineering days. After partnering with ex-banker Robert Reffkin, the original concept for the business was making it easier and more straightforward to rent an apartment in New York.

“New York is a, well a very special real estate market,” A Compass spokeswoman told PYMNTS. “And extremely challenging, especially if you are not already very familiar with New York.”

Compass initial and signature innovation, was to use data to give the listing better context for the viewer by creating information networks that could give real-time updated information on pricing, neighborhoods and local amenities.  

Compass plans to use its latest surge of funds to expand into more cities in the U.S., starting with Boston and expanding to include nine more cities within the next year. Among those target cities are Los Angeles, Chicago and Seattle.

“And our service really pitches a lot of our value in its relationship with our real estate agents, because actually our service much more suits their needs,” Compass noted. “We, through our variety of data channels, are able to bring to the surface a rich palette of details – which is what our agents need to make the sales.”

Compass is also changing how it builds that network of agents as it expands. Thus far, the company has grown beyond its roots in New York to Washington, D.C., and Miami.

For example, during that D.C. acquisition, instead of working from square one to build a network of agents, it instead acquired a local firm, Lindsay Reishman Real Estate, an already established player with 25 agents.

“After we went to D.C., by March we tripled our revenues after implementing our tools and technology,” Allon told TechCrunch in a recent interview. “That showed us that this is not just about New York City. This tech is scalable and works everywhere.”

In fact,  the confidence in the tech is strongly felt, so much so that Compass does not generate any revenue unless it works — as the firm monetizes the service derived. And going forward, via its cut of sales and rentals completed on its platform. The software itself is free – and will likely remain so for the time being.

“We could potentially license tech to markets where we might not go but I don’t want to do that yet. We still have places where we would like to go,” Allon noted.

Because, according to Compass officials, the business itself is always evolving. Though the platform was started to cater to the rental market, three years into the project the business is more focused on the more lucrative real estate sales.  

Compass is also looking to expand its geographical footprint with an expansion planned into  Boston, LA, Chicago, Seattle and Portland, among other new places.

That big expansion will be pushed by its recent $50 million round, which brings the firm’s total fundraising to $123 million. This latest round was led by previous investor Institutional Venture Partners (IVP), with other existing investors including Thrive Capital, Founders Fund, 406 Ventures, CEO of American Express Kenneth Chenault, and Marc Benioff, the founder and CEO of Salesforce.com.

“Compass has developed exceptional technology to improve the real estate experience and is led by a talented management team, whose vision and commitment to innovation has quickly established the company as a leader in the market,” said Todd Chaffee, General Partner at IVP. “We are excited about their long-term strategy and are proud to partner with Compass as it continues its rapid expansion.

Logistics Dominate the Investment Landscape in Week Ended Sept. 11

One huge deal, a few (much) smaller ones. That sums up the week that ended Sept. 11, and marks a strong change from the flurry of activity seen in the previous week. The biggest announcement came as XPO Logistics said it would buy trucking company Con-way in a $3 billion deal that would boost the logistics behemoth to a $15 billion revenue run rate. That deal, of course, props up the logistics sector, which year to date now stands at $6.2 billion. By buying Con-way, XPO now stands to benefit as one of the biggest logistics providers in the United States.

Much further down the totem pole in the week that was, was a security deal where Okta, an enterprise identity management company, garnered $75 million in new financing from a series of investors, among them Andreessen Horowitz and Greylock Partners. That funding takes the valuation of the company to as much as $1.2 billion, according to several reports, and places the company among the pantheon of “tech unicorns.”

Within financial technology, Fundbox got $50 million in an equity funding round led by Spark Capital Growth. The company automates advance payments to a clientele that includes small businesses. The company has said that it has been doubling its revenue growth across several quarters.

Below are the Top 5 investments/investees for the week that ended on Sept. 11.

For the month to date, the Con-way deal dominates the investment flow, and trailing a bit we can find the Good Technology deal from BlackBerry, which has been noted as a strategic deal to help the device maker compete in the enterprise space.

Smoothing out the lumpiness of the deal flow, within financial technology there was a relatively smooth weekly flow (excluding large deals) and then a bump up and now, at least most recently, we seem to be right back where we were just a few months ago, with a rolling average of around $200 million.

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