LucidWorks: Another $100 Million

August 14, 2019

LucidWorks is an open source “search” play built on Solr. The company is fighting a battle with Elastic. Both companies are likely to face increased pressure from newcomers like Algolia and from the relentless Amazon AWS search system.

According to Crunchbase:

AI-powered search venture Lucidworks has raised $100 million from Francisco Partners and TPG Sixth Street Partners, the company announced today (first reported by Fortune’s Term Sheet).

What’s interesting is that Crunchbase did some math and stated:

The funding amounts to nearly as much (a combined $109 million) as the twelve-year-old company has raised since it was founded in 2007, according to Crunchbase data. Its last raise took place in May 2018 – a $50 million Series E led by Top Tier Capital Partners. So this round is precisely double its last raise.

A free profile of the LucidWorks system is available at www.xenky.com/vendor-profiles.

How different is today’s Lucid from the system available seven or eight years ago? The publicity and marketing collateral generated by the company suggests that artificial intelligence is the core of the “new” LucidWorks.

The question is, “What type of financial payoff is necessary to deliver an upside for those investors who have provided money to the company?”

With investors expecting a dump truck of money, LucidWorks will have to:

  • Grow its revenue well beyond “search successes” like Endeca to warrant a big buy out. But Endeca hit a wall at about $100 million in revenue before Oracle bought out the company for an alleged $1 billion. Where is Endeca now?
  • Go an an acquisition spree to increase revenues and groom itself for an Autonomy type deal. Autonomy’s $700 million in revenue fetched $11 billion when the well managed Hewlett Packard snapped up the company.
  • Revolutionize something, sign up partners, resellers, and licensees, and push for an initial public offering.

The odds are that LucidWorks, which was founded in 2007, has been laboring to achieve success for 12 years. That effort has now required $209 million.

Unlike Palantir, which is essentially a search and retrieval system, LucidWorks lacks the stealth, sparkle, and cachet of its Palo Alto neighbor. Search and retrieval remains a market niche with has a reputation for generating pivots, repositionings, and massive financial shocks. Will LucidWorks follow the Convera trajectory which carried Allen & Co. into a storm?

LucidWorks has to distinguish itself as more than a cash burning machine, and that is getting more difficult, not easier, carrying the color flag which says, “Artificial intelligence.” The AI parade is choked with similar banners. Maybe AI is the secret sauce that will jump start search vendors struggling for revenue and “smart money” investors?

Stephen E Arnold, August 14, 2019

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