Tonic is betting that synthetic data is the new big data to solve scalability and security


This post is by Danny Crichton from Fundings & Exits – TechCrunch

Big data is a sham. For years now, we have been told that every company should save every last morsel of digital exhaust in some sort of database, lest management lose some competitive intelligence against … a competitor, or something.

There is just one problem with big data though: It’s honking huge.

Processing petabytes of data to generate business insights is expensive and time-consuming. Worse, all that data hanging around paints a big, bright red target on the back of the company for every hacker group in the world. Big data is expensive to maintain, expensive to protect and expensive to keep private. And the upshot might not be all that much in the end after all — oftentimes, well-curated and chosen data sets can provide faster and better insight than endless quantities of raw data.

What should a company do? Well, they need a Tonic to ameliorate their big data sins.

Tonic is a “synthetic data” platform that transforms raw data into more manageable and private data sets usable by software engineers and business analysts. Along the way, Tonic’s algorithms de-identify the original data and create statistically identical but synthetic data sets, which means that personal information isn’t shared insecurely.

For instance, an online shopping platform will have transaction history on its customers and what they purchased. Sharing that data with every engineer and analyst in the company is dangerous, since that purchase history could have personally identifying details to which no one without a need-to-know should have access. Tonic could take that original payments data and transform it into a new, smaller data set with exactly the same statistical properties, but not tied to original customers. That way, an engineer could test their app or an analyst could test their marketing campaign, all without triggering concerns about privacy.

Synthetic data and other ways to handle the privacy of large data sets has garnered massive attention from investors in recent months. We reported last week on Skyflow, which raised a round to use polymorphic encryption to ensure that employees only have access to the data they need and are blocked from accessing the rest. BigID takes a more overarching view of just tracking what data is where and who should have access to it (i.e. data governance) based on local privacy laws.

Tonic’s approach has the benefit of helping solve not just privacy issues, but also scalability challenges as data sets get larger and larger in size. That combination has attracted the attention of investors: This morning, the company announced that it has raised $8 million in a Series A led by Glenn Solomon and Oren Yunger of GGV, the latter of whom will join the company’s board.

The company was founded in 2018 by a quad of founders: CEO Ian Coe worked with COO Karl Hanson (they first met in middle school as well) and CTO Andrew Colombi while they were all working at Palantir, and Coe also formerly worked with the company’s head of engineering Adam Kamor while at Tableau. That training at some of the largest and most successful data infrastructure companies from the Valley forms part of the product DNA for Tonic.

Tonic’s team. Photo via Tonic.

Coe explained that Tonic is designed to prevent some of the most obvious security flaws that arise in modern software engineering. In addition to saving data pipelining time for engineering teams, Tonic “also means that they’re not worried about sensitive data going from production environments to lower environments that are always less secure than your production systems.”

He said that the idea for what would become Tonic originated while troubleshooting problems at a Palantir banking client. They needed data to solve a problem, but that data was super sensitive, and so the team ended up using synthetic data to bridge the difference. Coe wants to expand the utility of synthetic data to more people in a more rigorous way, particularly given the legal changes these days. “I think regulatory pressure is really pushing teams to change their practices” around data, he noted.

The key to Tonic’s technology is its subsetter, which evaluates raw data and starts to statistically define the relationships between all the records. Some of that analysis is automated depending on the data sources, and when it can’t be automated, Tonic’s UI can help a data scientist onboard data sets and define those relationships manually. In the end, Tonic generates these synthetic data sets usable by all the customers of that data inside a company.

With the new round of funding, Coe wants to continue doubling down on ease-of-use and onboarding and proselytizing the benefit of this model for his clients. “In a lot of ways, we’re creating a category, and that means that people have to understand and also get the value [and have] the early-adopter mindset,” he said.

In addition to lead investor GGV, Bloomberg Beta, Xfund, Heavybit and Silicon Valley CISO Investments participated in the round, as well as angels Assaf Wand and Anthony Goldbloom.

After Shopify’s huge quarter, BigCommerce raises its IPO price range


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

When BigCommerce, the Texas-based Shopify competitor, first announced an IPO price range, the numbers looked a little light.

With a range of just $18 to $20 per share, it appeared that the firm was targeting a valuation of around $1.18 billion to $1.31 billion. Given that BigCommerce had revenue of “between $35.5 million and $35.8 million” in Q2 2020, up a little over 30% from the year-ago period (and better margins than Shopify) its implied revenue multiple that its IPO price range indicated felt low.

At the time, TechCrunch wrote that “BigCommerce feels cheap at its current multiple,” and that if you added “recent market exuberance for cloud shares that we’ve see in other IPOs … it feels even more underpriced.”

Those feelings have been borne out. Today, BigCommerce announced a new, higher IPO price range. The firm now intends to price its IPO between $21 and $23 per share. Let’s calculate its new valuation, compare that to its preliminary Q2 results to get new multiples for the impending e-commerce software IPO, and figure how its most recent investors are set to fare in its impending debut.

Pricing

By moving its pricing up from $18 to $20 to $21 to $23, BigCommerce boosted its IPO range by 16.7% at its lower end and 15% at the upper end. At its new prices BigCommerce is worth between $1.38 billion and $1.51 billion.

BigCommerce files to go public


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

As expected, BigCommerce has filed to go public. The Austin, Texas, based e-commerce company raised over $200 million while private. The company’s IPO filing lists a $100 million placeholder figure for its IPO raise, giving us directional indication that this IPO will be in the lower, and not upper, nine-figure range.

BigCommerce, similar to public market darling Shopify, provides e-commerce services to merchants. Given how enamored public investors are with its Canadian rival, the timing of BigCommerce’s debut is utterly unsurprising and is prima facie intelligent.

Of course, we’ll know more when it prices. Today, however, the timing appears fortuitous.

The numbers

BigCommerce is a SaaS business, meaning that it sells a digital service for a recurring payment. For more on how it derives revenue from customers, head here. For our purposes what matters is that public investors will classify it along with a very popular — today’s trading notwithstanding — market segment.

Starting with broad strokes, here’s how the company performed in 2019 compared to 2018, and Q1 2020 in contrast to Q1 2019:

  • In 2019, BigCommerce’s revenue grew to $112.1 million, a gain of around 22% from its 2018 result of $91.9 million.
  • In Q1 2020, BigCommerce’s revenue grew to $33.2 million, up around 30% from its Q1 2019 result of $25.6 million.

BigCommerce didn’t grow too quickly in 2019, but its Q1 2020 expansion pace is much better. BigCommerce will file an S-1/A with more information in Q2 2020, we expect; it can’t go public without sharing more about its recent financial performance.

If the company’s revenue growth acceleration continues in the most recent period — bearing in mind that e-commerce as a segment has proven attractive to many businesses during the COVID-19 pandemic — BigCommerce’s IPO timing would appear even more intelligent than it did at first blush. Investors love growth acceleration.

Moving from revenue growth to revenue quality, BigCommerce’s Q1 2020 gross margins came in at 77.5%, a solid SaaS result. In Q1 2019 its gross margin was 76.8%, a slightly worse figure. Still, improving gross margins are popular as they indicate that future cash flows will grow at a faster clip than revenues, all else held equal.

In 2018 BigCommerce lost $38.9 million on a GAAP basis. Its net loss expanded modestly to $42.6 million in 2020, a larger dollar figure in gross terms, but a slimmer percent of its yearly top line. You can read those results however you’d like. In Q1 2020, however, things got better, as the company’s GAAP net loss fell to $4 million from its year-ago Q1 result of $10.5 million.

The BigCommerce big commerce business is growing more slowly than I had anticipated, but its overall operational health is better than I expected.

A few other notes, before we tear deeper into its S-1 filing tomorrow morning. BigCommerce’s adjusted EBITDA, a metric that gives a distorted, partial view of a company’s profitability, improved along similar lines to its net income, falling from -$9.2 million in Q1 2019 to -$5.7 million in Q1 2020.

The company’s cash flow is, akin to its adjusted EBITDA, worse than its net loss figures would have you guess. BigCommerce’s operating activities consumed $10 million in Q1 2020, an improvement from its Q1 2019 operating cash burn of $11.1 million.

The company is further in debt than many SaaS companies, but not so far as to be a problem. BigCommerce’s long-term debt, net of its current portion, was just over $69 million at the end of Q1 2020. It’s not a nice figure, per se, but it is one small enough that a good IPO haul could sharply reduce while still providing good amounts of working capital for the business.

Investors listed in its IPO document include Revolution, General Catalyst, GGV Capital, and SoftBank.

As stocks recover, private investors aren’t buying the hype


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Today we need to talk about what we’re hearing from the private markets and the public markets, and how different their messages seem to be.

The public markets through yesterday were on the bounce, rising sharply from recent lows, driven by negative news concerning COVID-19 and its ensuing economic damage. As TechCrunch noted yesterday, major American indices had seen their value sharply recover from lows recorded earlier in the year. This was odd, as the news from COVID-19 is far from good — America is still the country with the highest rate of new, confirmed infections and related deaths by some margin — and the economic damage stemming from the nation’s belated efforts to stem the pandemic at home piles up.

You can easily read optimism in the stock market: that the COVID-19 infection footprint at home isn’t as bad as some models indicated, that social distancing is working, and that the economy will quickly rebound from this bother. Ask around the private markets, however, and you’ll hear a very different narrative.

Yesterday while kicking over the business-focused modern software market (enterprise SaaS, if you prefer) with Shasta VenturesJason Pressman, we discussed the state of affairs for private companies that he’s seeing from his perch inside the startup machine. Taking his notes into account, along with those of other investors that we’ve spoken to recently, it’s hard to understand the level of optimism that public markets are signaling.

Not that Pressman is a pessimist, it would be difficult to be a net-gloomy venture capitalist on the whole, given the risk profile of the investments they make. But some VCs who have invested through prior downturns are comfortable being candid about what they are seeing from private companies, those inside their portfolios and out.

This morning let’s explore the public-private optimism gap for the second time. The last time we undertook this particular theme, public investors were being pessimists and private investors appeared unseasonably bullish. It’s unlikely that there is room for both views to be correct.

Smiles, frowns