Big data, has been called by some to be the "new oil". While others challenge that association, it is abundantly clear that innovations that harness the power of big data have an incredible opportunity to build some of the most exciting technologies of tomorrow. OpenOcean VC is a European investor working to propel companies in this space by investing and supporting data-intensive software companies utilizing proprietary technologies. OpenOcean is headquartered in Helsinki and has offices in London and Amsterdam.
At Pioneers ‘19, I sat down with Patrik Backman, Managing Partner of OpenOcean VC and Niklas Rosenberg, OpenOcean’s COO to learn a bit more about their work, the opportunities for data companies in Europe and what is most exciting about big data right now. Prior to co-founding OpenOcean, Patrik was one of the founders of MariaDB, an open-source, community-developed and commercially supported database-- putting OpenOcean among the small number of European venture capital firms built by and for engineers.
An edited version of our conversation follows. You can listen to the full version on the Tech.eu Podcast, episode 123.
Hi Patrik and Niklas, thanks so much for agreeing to speak with Tech.eu. Can you tell us a little bit about some of the companies and verticals you are interested in investing in? Where does Europe have unique qualities that really stand out?
Patrik Backman: I think engineering-wise Europe is really strong. There’s a strong educational system supporting tech in Europe. Where we invest is data-intensive software. We’re looking for something innovative done around the data under the hood, with good architecture, structures and algorithms-- but then packaged in a way where you have an exciting product that scales really well and where it's easy to attract users, provide value and spread internationally. Then we want to help those companies commercialize on that opportunity and build a thriving company with a lot of revenue.
To your question of verticals. We are actually quite agnostic. We have a deep investment thesis and thoughts around a number of verticals, but we are quite open-minded when it comes to verticals.
Niklas Rosenberg: One of the interesting things of course with the development that has taken place in Europe is that the European startup ecosystem is much more mature at the moment compared to let's say, 10 or 15 years ago. Today, you can build a great software business almost in any kind of vertical. At OpenOcean, we are quite open to kind of any domain. We look at the enablers of disruption in this data-intensive new world.
Some of those enabling technologies are machine learning and artificial intelligence, but there are many others. For example, you have recommendation engines, automation and open source technologies [to name a few] that are really driving this massive change in how we are using data to make better predictions on analytics and customer experiences.
PB: We launched our first fund eight years ago. In the first fund, many of the founders were first-time founders, and it was a challenge to find experience in the teams. That has completely changed. Now, most of our recent investments are run by serial entrepreneurs who have done a few companies before. [When compared to first-time founders] they can instantly think bigger and more globally, and they have developed products that fit a much broader audience from the start. That's very impressive. And then when you want to recruit to these teams nowadays, there's a possibility to recruit key persons to the teams that have previously been a part of European success stories, or even from abroad. For Europeans in the U.S., you can even bring them home to Europe. Now you can find talent that will move, and teams can move so much faster than they could 10 years ago.
What signifiers make a company really stand out to you? What are the things make you think, this company and team would be a great fit for OpenOcean?
PB: Well, it's a combination of many things. First, of course, the team has to be exciting, and in their respective fields, should have some unique skill set and proven ability to do something new and extraordinary. Then, that's typically combined with a vision, that they have a view of, gradually, “This is what we will build. This is the dream. This is how we will change the world in this field”. And that is something that really stands out. When we see that, then we become interested to dig deeper. Then when we dig deeper, of course, it comes to the initial product, the initial product-market fit. [We ask] how is it distributed?
We typically try to refrain from going into enterprise sales, but [instead] try to find ways where the exciting data product can be distributed in an effective, scalable way. [Ideally], thousands or even millions of users can adopt the technology in some form to start using it.
NR: One additional thing to mention, is that as we are focusing on data-intensive business software companies, then naturally when we are looking deeper into companies and evaluating them, then in addition to the traditional things like product-market fit, size of the market and team-- one key element in our evaluation is to really look at the company from a data evaluation perspective. Does the company have a data strategy? How does the company collect data? What kind of infrastructure is there in place? How are they cleaning up their data? And then, thinking of how they are using data in the future to drive their business.
Are you investing all across Europe? Or are there specific geographies that you are focusing on?
PB: All across Europe. We even have a small pocket for outside of Europe, but it's for something that we find extraordinary and very different. But we generally focus on European B2B software companies.
NR: Across our portfolio, we have investments in nine different European countries.
PB: But now, half of them have significant business and traction in the U.S. That's still the dominant strategy to scale. Some are focusing also on Asia and China. There are some great opportunities there, increasing all the time.
Say a startup is listening to [or reading this] conversation today and they say, you know, I think I'd be a great fit for OpenOcean. How is the best way for them to get in touch with you?
PB: They can email me or Niklas. We look at cold emails. Of course it’s great to have an intro, we have contacts with most incubators and other VCS and investors in Europe, but of course you can cold contact us. We do look at all the cases we get.
In closing, what is the most exciting possibility in big data that you see on the horizon?
PB: It's a good question to try to identify just one thing that is coming up. For example, I think we haven't seen that much is kind of mobile-first B2B software. [For example] that you use on a mobile phone and brings in data from all operations in big companies-- [providing insights] in a tailored way to different employees, decision-makers and managers.
I think there will be some exciting tools coming up in the future because of the way more and more data has been gathered and can be utilized to find relationships and meaning. That's one thing that I see that should be coming. In 5 years, professional managers should be using mobile software for running their business in a whole different way than is happening today.
NR: The amount of data that we are gathering every day is just so, so, so massive at the moment. You can throw out so many different statistics it's almost mind-boggling. But data is still a massive untapped opportunity. We think that data will disrupt basically every industry on this planet. We want to be there looking at those software businesses that are really riding this opportunity. We want to be a part of supporting their journey in creating something data-intensive that really changes the way we do business and changes the way we live our lives.