Algolia: Cash Funding Hits $184 Million

October 15, 2019

Exalead was sucked into Dassault Systèmes. Then former Exaleaders abandoned ship. Algolia benefited from some Exalead experience. But unlike Exalead, Algolia embraced venture funding with cash provided by Accel, Point Nine Capital, Storm Ventures, and Y Combinator, among others.

DarkCyber noted “Algolia Finds $110M from Accel and Salesforce for Its Search-As-a-Service, Used by Slack, Twitch and 8K Others.” The write up reports that the company has “closed a Series C of $110 million, money that it plans to invest in R&D around its search technology, including doubling down on voice, and further global expansion in Europe, North America and Asia Pacific.”

The write up adds:

Having Salesforce as a strategic backer in this round is notable: the CRM giant currently does not have a native search product in its wide range of cloud-based services for enterprises, instead opting for endorsed integrations with third parties, such as Algolia competitor Coveo. The plan will be to further integrate with Salesforce although no products to speak of as of yet.

The challenge will be to go where few search and retrieval systems have gone before.

Some people have forgotten the disappointments and questionable financial tricks promising search vendors delivered to stakeholders and customers.

With venture firms looking for winners, returns of 20 percent will not deliver what the sources of the funds expect. The good old days of a 17X return may have cooled, but generating an 8X or 12X return may be a challenge.

Why?

In the course of our researching and writing the enterprise search report in 2003 to 2006 and out and our subsequent work, several “themes” or “learnings” surfaced:

  1. Good enough search is now the order of the day; that is, an organization-wide search system does not meet the needs of many operating units. Examples range from the legal department to research and development to engineering and the drawings plus data embedded in product manufacturing systems to information under security umbrellas with real time data and video content objects. Therefore, the “one solution” approach dissipates like morning fog.
  2. Utility search from outfits like Amazon are “good enough.” This means that a developer using Amazon blockchain services and workflow tools may use the search functions available from Amazon. Maybe Amazon will buy Algolia, but for the foreseeable future, search is a tag-along function, not a driver of the big money apps which Amazon is aiming toward.
  3. Search, regardless of vendor, must spend significant sums to enrich the functions of the system. Natural language processing, predictive analytics, entity extraction, and other desired functions are moving targets. Adding and tuning these capabilities becomes expensive. And it the experiences of Autonomy and Fast Search & Transfer are representative, the costs become difficult to control.

DarkCyber hopes that Algolia can adapt to these research factoids. If not, search and retrieval may be rushing toward a disconnect between revenues, sustainable profits, and investor expectations.

The wheel of fortune is spinning. Where will it stop? On a winner or a loser? This is a difficult question to answer, and one which Attivio, BA-Insight, Coveo, Elastic, IBM Watson, Lucidworks, Microsoft, Sinequa, Voyager Search, and others have been trying to answer with millions of dollars, thousands of engineering hours, and massive investments in marketing. I am not including the search vendors positioned as policeware and intelware; for example, BAE NetReveal, Diffeo, LookingGlass, Palantir Technologies, and Shadowdragon, among others.

Worth monitoring the trajectory of Algolia.

Stephen E Arnold, October 15, 2019

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