I've often written about startups taking on incumbents in a big market. Here is a story about a startup that is partnering with one -- Oracle.
About four years ago, I spoke with the CEO of a database maker run by a football star. In a recent interview, I learned that the company is growing quickly -- although its CEO declined to discuss a possibly IPO.
As CEO Billy Bosworth explained in a January 2014 interview, Santa Clara, Calif.-based DataStax, “is the company behind [open source database] Apache Cassandra. We deliver the always-on NoSQL [no Structured Query Language] database that allows you to have your data anywhere, everywhere, all the time -- scaling to previously unimaginable levels."
Bosworth is not the typical Silicon Valley CEO in that he is a football player from Pittsburgh who played on the University of Louisville football team while studying computer science, coached high school football for 13 years, worked in Dallas at Quest Systems as a developer, database administrator and then general manager, where he formed a partnership with DataStax.
In May 2011, he joined DataStax as CEO, when it had 19 people. His vision was "You cannot build today’s applications on 25-year-old technology from Oracle. We support an open source database, Cassandra, that has the scalability and availability that today’s applications require.”
He took over about a year after the company was founded. As he said in 2014, “DataStax was founded in April 2012, and I arrived 13 months later. I had partnered with DataStax, and after nine months they asked me to join as CEO. Matt Pfeil was the CEO, and he loved working with customers, while Jon Ellis was chief technology officer. Neither was interested in administrative and operational requirements, so I came in to provide that. And I am happy to say that we are now partners in running the company.”
DataStax has made considerable progress since then. As he explained in a November 16 interview, "When I joined DataStax, we had 20 people today we have 450 worldwide in 50 offices -- with only 70 at headquarters. Behind our growth is a new approach to databases -- we handle data that is widely distributed at scale with extreme performance. This means that people working in New York and Tokyo can work together with low latency. The old model is a giant hive, we are a swarm of bees."
DataStax is still growing but not cash flow positive. "In 2011 we had 20 customers and by 2014 we had over 300 including Netflix and eBay. We now have 400 customers with annual recurring revenue of over $100 million with over 75% gross margins. We have line of sight to becoming cash flow positive and a three-year compound annual growth rate of 40%. We have raised $190 million [from Comcast Ventures, Crosslink Capital, Lightspeed Venture Partners, Kleiner Perkins Caufield & Byers, and Meritech Capital]."
DataStax is growing because it helps big companies run their operations without interruptions -- even if their servers go down in a part of the world. Said Mr. Bosworth, “What we do is make sure that their service never goes down -- even if a Hurricane Sandy knocks out a company’s other data centers, we keep the service running with barely a blip, by shifting its operation to servers.”
Customers seem to like DataStax. For example, DataStax said that Cisco saves "$24 million in materials costs through automation of its interactions with partners and suppliers -- processing about 100,000 orders a quarter while reducing inventory by 45%."
The database market is growing at 8% annually and is expected to reach $63 billion by 2022. DataStax is not trying to compete in that market with Oracle directly. Instead it is partnering with Oracle by offering its DataStax Enterprise (DSE) on the Oracle Data Hub managed service environment.
As Bosworth said in a statement, "The world’s largest and most sophisticated enterprises rely on Oracle for all ranges of enterprise requirements today. And as cloud applications emerge with demanding real-time operational data requirements at scale, DSE is the ideal solution to help those enterprises meet the specific data platform requirements of the right-now economy."
DataStax raised its last funding round in 2014 and Bosworth declined to talk about how those investors will get a return. When I asked about whether DataStax would go public or be acquired, he laughed and said, "I grew up in a town that was dependent on a single industry -- steel. It was disrupted by competition and globalization and the result was not pretty. DataStax can infuse companies with data so they can not only survive the onslaught of disruptors but thrive."
Another database company, MongoDB, went public in October and its shares have declined about 4.6% since then. This values the $101 million (fiscal 2017 revenues) company's shares at $1.4 billion.
Back in September 2014 when DataStax last raised money ($106 million Series E), its pre-money valuation was $724 million. Were it to go public today, it looks like those investors would be above water.
