Big Data generates Big Returns, says VC Roger Ehrenberg
An interview with Roger Ehrenberg, founder of venture capital firm IA Ventures is a leading investor in startups solely around a big data theme. Ehrenberg talks about Big data, what he looks for in firms he invests, Wall Street, and whether consumer privacy is dead.
By Lauren Lyster, Yahoo Finance, Mar 10, 2013
"Big data" investment is accelerating in the world of venture capitalists and the tech startups they are funding. The big data theme has attracted nearly $5 billion of funding over the past five years, according to the VC database CB Insights; 2012 was the biggest year of deals so far, seeing 19.5% growth from the previous year.
Roger Ehrenberg ( @infoarbitrage ) founder of venture capital firm IA Ventures, has harnessed this admittedly "fruit of the day" moment by raising money to invest in startups solely around a big data theme. He has raised $155 million to back early-stage startups, partnering with entrepreneurs to help build their businesses from the beginning. He then takes a real hands-on approach in helping to develop the companies, something he says many VCs used to do and then got away from.
Ehrenberg sat down with Yahoo!Finance for a fireside chat at South by Southwest (SXSW) in Austin on Saturday. Here are some highlights.
... What does "big data" mean? (Ehrenberg has been quoted as saying the term has become so beloved by the media that it has gone from "hackneyed" to "worthless.")
I do think it's a stupid term. But I break it down as enabling technologies in platforms and applications that by themselves create unique defensible data assets...I would say an example would be a company like Simple, a retail bank optimized for your mobile device. They collect all kinds of interesting information from where and when you swipe your Simple card...They know so much about you that's not inferred, it's actual because people are doing real transactions, using a Simple card in lieu of a credit card.
(Disclosure: IA Ventures is an investor in Simple.)
What are the big-data trends on the horizon?
It's a difficult question. One area that's particularly interesting is reshaping manufacturing. Why would an IT-oriented invest firm want to get involved in that? A lot of the innovation that's happened has not filtered down to the shop floor. They have these proprietary systems that are disgustingly expensive, very inflexible, and that they're shackled to. Eventually that has to change because of the trend toward serialization. And you think of industries like bio-tech -- you screw up there, you kill people. That, to me, is a really interesting but difficult area.
Cyber[security] is scorching hot right now, especially with the infiltration of mobile. There are some great companies in that space, but a lot more innovation to happen.
... Meanwhile, Wall Street and also government have been using big data for awhile. What trends are you seeing there?
Wall Street, as with government, has been leveraging big data technologies for decades. However, the massive increase in the amount and complexity of data has rendered legacy Wall Street infrastructures outmoded and inadequate. For example, while Goldman has been working with private clouds for years and has long viewed their data asset as a source of competitive advantage, most other firms are well behind. And with the increasing stress on risk management and real-time information about exposures spanning the globe, Wall Street firms are going to have to take some big chances in re-shaping their technical architecture to support a holistic approach to data management and the extraction of real-time insights.
And for just the average person or consumer, is privacy essentially dead? And if so, is there any silver lining to make ordinary people feel better about that?
I believe consumer privacy is largely dead, and that there is an implicit pact between the consumer, retail providers and the government. It goes like this: "Give me the best experience possible on whatever device I'm using, where I only see contextually relevant recommendations and receive appropriate offers. Also, please keep me safe by hunting down the bad guys who are hacking into my service providers' databases that hold my confidential data." There is no easy answer, but I do believe that the privacy horse left the barn a long time ago.