Class of 2020 | msprin@sas.upenn.edu
Industry Overview
As the world becomes more interconnected through advances in technology, the creation of new data is growing at 60 percent a year. This growth is driven by a dramatic increase in transactions and a flurry of new devices which create additional sources of data. This explosion of data makes the storage of the world’s data, and the ability to analyze it more and more difficult. Companies are looking for solutions to match the volume of data they collect on all aspects of their business, and they also need new tools to improve the speed at which they can process and analyze streams of data.
The market for big data analysis companies that create solutions for this vital corporate challenge is skyrocketing, with big data startups receiving 11% of total tech VC investments in 2015. Further, IDC estimated that the big data analytics market is now valued at over $100 Billion. The leading analytics technologies are NoSQL Databases, MapReduce, and Hadoop, with Hadoop experiencing the most abundant growth. Forrester estimates that all large enterprises will adopt Hadoop services in the next two years for their big data analytics.
Emerging Leaders in Big Data
According to Big Data-Startup Knowledge, VC funding for big data startups grew from $4.9B across 2008-2012, to $3.6B in 2013 alone. They also predict that big data will drive $232B in IT spending through 2016. Among the leading private companies in the space, Palantir, a big data analytics solution has raised the most capital, at $556M. Other prominent firms such as mongoDB, a document oriented database and Cloudera, a leader in Hadoop software services have raised over $140M each.
In addition to certain big data firms raising huge VC rounds, some firms are looking to bolster their brands by securing investments in the most innovative big data analytics companies. Lightspeed Venture Partners and Sequoia Capital are among many big names in VC who are currently invested in over a dozen big data analytics companies across their funds, with many other leading funds allocating huge amounts of capital to this exponentially growing industry.
Future of Big Data
As data continues to grow at a tremendous rate, companies will demand more ways to store all of their incoming data, as well as the tools necessary to provide a comprehensive analysis of a large data set. Therefore, the big data analytics space will continue to be innovative, with big name players improving their product lines, and startups bringing creative solutions into the market for funding. According to Forrester, another key requirement for analytics products moving forward is the ability for companies to make real-time decisions based on data analysis, and this will lead to more and more products like Kafka and Spark hitting the market. In order to utilize these data sets to extract the most meaningful insights, and learn from big data, machine learning will likely play a larger role in analytics moving forward. Similarly, an increase in machine learning will also fuel the production of autonomous products such as robots, virtual personal assistants and robo advisors, all products that utilize algorithms to make decisions based on big data. However, one concern for the space moving forward is the issue of privacy, particularly when companies are accessing vast amounts of consumer data to make customer decisions. Therefore, firms will need to navigate this aspect of big data carefully, so as not to breach any privacy regulations.
All of these technological advancements will lead to companies monetizing the opportunities surrounding big data analytics. They will use new and more insightful tools to drive increases in sales, targeted marketing, and productivity. The International Institute for Analytics expects businesses using big data will see $430 billion in productivity benefits over competitors who do not adopt the same analytics tools by the end of 2020. There is no doubt that big data analytics will play a significant role in the future of business decision making, and that venture capital firms will continue to seek out products that address this rapidly growing market in innovative ways.
Figure 2: Top Big Data Venture Capital Firms - How Many Companies They Have Invested In