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.

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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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