What Happened at Basho Technologies, NoSQL Pioneer?

Introduction

Basho has been a very likeable company.

Named for a Japanese poet, the company has long had a great technical reputation and a strong sense of style and panache in this often too-nerdy industry.

basho-transparent-vertical-logo

Basho was founded in 2008 by a group of engineers and executives from Akamai Technologies with the goal of creating a new database platform that offers extreme high-availability, low latency, linear scalability and a decentralized architecture that would be easy to use and manage.

I wanted to preface this by saying I have no special or insider information about the company, and that this news analysis is largely conjecture based on available public information reported by The Register, on Wikipedia, on Linkedin and on Cruchbase.

Another caveat is that this piece contains logical conjecture about the operations of a privately held company.

I strongly encourage you to do your own research and draw your own conclusions, as mine may be wrong. I also want to say that I work for Hazelcast which also plays in the NoSQL market, although we would not consider Basho/Riak to be a direct competitor. Sure it’s possible to do some similar things with both products, but we have not encountered Basho/Riak as a commercial competitor in our business much, we mostly compete against Oracle Coherence, and Pivotal Gemfire, and to a lesser extent, Software AG Terracotta.

With these caveats in mind, please have a look at my analysis. I am very open to any evidence-based logical arguments that support or disprove any of my conjectures.

So what is happening at the company?

Today, The Register reported that the CEO, CTO and Chief Architect have either left or are planning to leave the company.

This is quite a lot of executive turnover.

So what is the underlying story of this? As a caveat the rest of this story is speculative. But it’s based on the evidence that I will provide here.

What is the history of Basho?

The history of Basho is easy to see for yoursef on Crunchbase.

basho-transparent-vertical-logo Screen Shot 2014-03-11 at 7.50.56 AM

 

First observation: these are somewhat unconventional venture capitalists in the deal.

Screen Shot 2014-03-11 at 7.52.57 AM

Chester Davenport led the latest round of series F which was the 11.5M deal deon in 2012.

The majority of the F round $6.1M of this  came out of Japan from IDC Frontier, a subsidiary of Yahoo Japan as reported in TechCrunch.

In 2011 the company raised 7.5M from Trifork. There are no Trifork board members. The board consists of Mr Davenport, Earl Galleher (founder),Robert L. Reisley Co-Founder and Managing Director of Evergreen Industries, LLC, Atsushi “Ash” Yamanaka General Manager, IDC Frontier Inc. and Anthony S. Thornley Director, Callaway Golf.

The board hired Donald Rippert as CEO in June 29th 2011. Mr Rippert is clearly an operational guy, having previously worked for Accenture as its CTO for seven years (Linkedin Profile Here).

Since Trifork came in in Feb of 2011, it seems clear that Trifork encouraged or sought the help of an operational CEO to build the Basho business.Screen Shot 2014-03-11 at 8.05.38 AM

Mr. Rippert was CEO of Basho for 1 year and four months until October 2012. He is currently employed at IBM.

Who was the new CEO of Basho after that?

The CEO hired in November of 2012 was Greg Collins.

If you look at the funding history of the company, a new CEO was again hired four months after a new round of funding, this round being led by Georgetown Partners and Mr Davenport.

Based on his job history, he is *NOT* an operating CEO. My conjecture is, that he was hired to sell the company. This is the kind of experience he demonstrated as a principal at Cape Fear Advisors and in previous roles (Linkedin Profile).

Screen Shot 2014-03-11 at 8.08.12 AM

So what happened?

This part is conjecture again. The rhythms of Mergers and Acquisitions are often complex and involve multi-party transactions.

Given the strategic and corporate development strength of Mr Collins, he most likely was working on such a multiparty transaction. The departure of such a CEO after 1 year and 3 months suggests that a large transaction promised to the board failed to materialize.

My personal comment is that none of this is any reflection on Mr Collins, deals of sufficiently large size often have a 50/50 chance of happening due to the probability of buyers doing due diligence on other options including buying other companies or even not buying any company.

So what is going to happen?

Linkedin shows 107 employees at Basho Technologies. If you assume a fully loaded cost per employee of $150k USD, this results in a burn rate of over $16M USD per year, not including the costs of facilities, marketing and other expenses.

This is a difficult piece to write, as I have been an admirer of the company and I personally wish all of these employees well, but if you do the math, they last raised 11.5M in 2012, and their burn rate must be in excess of $16M a year. The unknown variable is the total revenue from operations.

What does this mean for the NoSQL business?

The NoSQL market is alive and kicking. It seems to me that given multiple CEOs each lasting less than a year and a half and each riding on new investor money, that this has been tough for the company. I think the lessons in this story, including conjectures, are more particular to this company than to the industry as a whole.

 

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Deflating the Hype Over In-Memory Databases: How Oracle 12c and SAP HANA got the Future Wrong

Deflating the Hype Over In-Memory Databases (via slashdot)

Moore’s law has doubled transistor density on both RAM memory and processors since the beginning of industrial computing. RAM doubling continues unabated, providing previously unheard-of supplies of main memory. However, we have reached the fundamental…


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Facebook Pays 0.085 Instagrams for Parse to become largest Mobile-Backend-as-a-Service (MBaaS) Provider

The leading vendors in the MBaaS space ordered by viability/stability just got shuffled.

parsebook

My previous post detailed a whole slew of Mobile-Backend-as-a-Service (MBaaS) Vendors who had all raised less than 1M in venture capital and predicted that those small MBaaS vendors would be caught in the “Series A Crunch” This post has turned out to (so far) accurately predict that none of these vendors would be able to raise any more money.

The small ones on my list included: Cloudmine,FatFractalApplicasa (500k)CloudyreciKnodeScottyAppQuickBlox and others

The vendors called out in the “Safe Zone” were  Kii (profitable),  Stackmob (7.5M)Kinvey (7.02M) and Parse (7M). My direct source in Silicon Valley reports that Parse was raising a significant round of Venture Capital when it decided, instead, to take the acquisition offer from FaceBook.

Given the burn rate, organizational size and growth of this space (as well as the validation of the exit potential of this space), the other “Safe Zone” vendors should have no trouble raising additional capital and we should expect to see several announcements of this sort coming soon. We expect those who raised around 7M should have burnt through most of it by now. Linkedin shows a Kinvey of about 20 people, and a Stackmob of about 29 people.

So the list now puts Parse at the top of the vendor viability equation in MBaaS… However, with the Facebook acquisition comes a lot of questions.

Here are the the data points we have collected from reputable sources:

* The rumored amount of the transaction was 85M
* Facebook rep was quoted as saying the sum was “Not Material” (they wont file an 8K with the SEC)
* Total amount of VC raised by Parse was about 7M
* 85M exit is consistent with the kind of returns VC would expect
* I spoke to a VC who was planning to invest in their large B round
* Obviously they didnt raise a round but chose to go with FB
* There must have been other bidders, hence the VC Exit level pricing
* Illiya said that they liked FB the best for executing their plans
* 85M equals 0.085 Instagrams for Facebook
* This price puts them into mixed territory–it’s not exactly an
acqui-hire but also not an instagram either
* Both parties claim that the service will continue uninterrupted
* We’ll see about this
* This is a very different business model from what FB is used to
* Linkedin shows the company to be about 12 people, maybe more

So what does this mean?

1) Validation for the MBaaS space: this will grease the skids for
Stackmob and Kinvey to raise big rounds or to exit at a neighborhood
multiple, say about 40-60M each

2) Further investment for smaller players: I think not. I think the
smaller players will continue to scratch in the desert–however,
smaller players *WILL* experience acqui-hire by bigger players

3) Facebook is probably not sure what’s going to happen, but it seems
sure that MOBILE is a huge deal, DEVELOPERS are also a huge deal and
they are aggressively trying to flip the company in that direction.

4) If Facebook doesn’t squash these entrepreneurs (at 85M in probably
mostly stock, it’s not above company politics) then it puts them in
direct competition with Amazon, Heroku, Google and Apple. Add in
FaceBook Home and also Instagram and it does put them in Google and
Apple Land.

In terms of consolidation: I expect that this will drive some of the big players to make acquisitions, but this was an unusual deal. I would expect some of the smaller vendors to be acqui-hired over the next six months by the likes of Google, Apple, Amazon, Heroku and other big cloud providers. An orthogonal app/platform provider with momentum might also do an all stock acqui-hire like maybe a Yahoo, Box.com or an Evernote.

The big message is that the MBaaS space is validated big time and we’ll see a lot more excitement in the upcoming year in the form of financing, M&A and other big announcements.

Disclosure: Miko works for Kii Corporation, one of the vendors mentioned in this article.

Update: This just in… FeedHenry (an MBaaS vendor that did not make my “safe” list nor my “small” list just raised $9M in venture capital. Feedhenry is squarely in the Enterprise market and is focused on HTML5 JavaScript CSS write once run anywhere code not unlike Appcelerator or Sencha. So it appears that the market is starting to segment into consumer facing and enterprise facing MBaaS.

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