Foster Hinshaw Back in Command at Dataupia; News of Company’s Death Greatly Exaggerated, He Says
From all outward appearances, Cambridge, MA-based data warehousing appliance maker Dataupia and its founder Foster Hinshaw have both been through near-death experiences this year. Heart problems forced to Hinshaw to step down as CEO in January. Dataupia’s board brought in not just a new leader, Tony Sirianni, but a new strategy, concentrating on selling software rather than integrated hardware-software packages.
But the strategy didn’t seem to be enough to stave off the effects of the recession: by June, as we reported, the company had laid off the majority of its staff and was seeking new financing in order to stay alive. In August, reports surfaced that the company had been reduced to a skeleton crew and was selling off its assets. Many database industry observers put the company into the dead pool.
But appearances can be deceiving. Hinshaw is back as CEO, the company’s workforce has stabilized at about 30 (half the number from one year ago), and the startup’s difficult period is behind it, according to an announcement set to be released tomorrow. “After taking a hiatus following a medical surgery, [Hinshaw] is back to lead the Company into a high growth phase,” the announcement says.
That “hiatus” language is a bit of a gloss on the actual situation, which I understand much better after having spoken with Hinshaw himself at length today. Most importantly, Hinshaw—who is widely considered to be the father of the data warehousing appliance business—says that he has fully recovered from coronary artery bypass graft surgery. “I’m out hiking now and doing my normal stuff, which is beautiful,” he says. “It was a long recovery, but it’s amazing what they do.”
But Hinshaw also says that while the recession caused some bumps for the company, including the big wave of layoffs, the rumors about Dataupia’s troubles were far out of proportion to reality. “I don’t want to quote Mark Twain, but some folks on their way out may have said some things that were very hypey,” he says.
Like Hinshaw’s previous company, Netezza (which went public in 2007), Dataupia started out selling data warehousing appliances—very fast servers preloaded with the software needed to help companies such as wireless operators sort through terabytes of historical customer data to discern patterns and extract intelligence. And with Hinshaw back in the saddle, that is once again the company’s emphasis.
But under Sirianni’s leadership, Hinshaw explains, the company steered for a while toward selling the software designed for Dataupia’s hardware as a standalone product. The attraction of this strategy was that it necessitated much lower research and development costs, Hinshaw says.
“With an appliance, you can drop it into a customer site and literally within days you are up and running, which is a powerful story, but the R&D costs are fairly high,” he says. “So there is always the question of whether you want to spend on that R&D, or just take the software and let the customer do the integration” into their existing IT systems.
Whether or not the software strategy was justified, it didn’t boost sales in the way the company would have liked, Hinshaw says. A horrid economic climate was at least part of the problem. “I’m not saying that Tony or the board did a bad job. I interviewed Tony myself,” he says. “But the economy certainly didn’t help any of this stuff.”
While there’s ongoing debate within the industry over the “tools” versus “appliances” question, Hinshaw says he’s personally convinced that companies with “big data” to crunch do want integrated appliances. “I think that customers really like the idea of having a system that just works, like the iPhone. With my previous company [Netezza], we went with an appliance and I think the success speaks for itself.”
Hinshaw, who returned to work about six weeks ago, says he was able to line up some new financing for the company from its existing backers, though he isn’t saying how much. (As of January, Dataupia had collected about $40 million from Polaris Venture Partners, Valhalla Partners, and Fairhaven Capital.) He says the slimmed-down business is nearly cash-neutral, meaning it’s now burning through its venture funds very slowly. “I know what the burn rates are in the other companies in this niche, and I’m proud of the fact that we have a good enough customer base that we are financially very strong,” he says.
Hinshaw says he was “shocked—and that’s a polite word for it” at some of the rumors spreading about Dataupia as news of its steadily shrinking staff leaked out earlier this year. But he says the company itself, which never released much information about its financial condition (or about Hinshaw’s health condition, for that matter), is partly to blame. “Because of the lack of solid information, I think there were a number of surmises made by various people based on some scanty information,” he says.
He argues that Dataupia has weathered the recession more successfully than many of its peer companies. “We haven’t lost a single customer, and we have customers re-ordering stuff, so we are very healthy—we just haven’t been public about it.” And he pledges to be a bit more transparent in the future (though he does say that “it’s to our competitive advantage to limit a lot of what we say publicly”). Specifically, he says observers should expect some new product announcements shortly.
And finally, Hinshaw says he’s glad to be on the road again. “I think I have a good vision for where the industry is and where the customers are,” Hinshaw says. “I have fun going through that and watching as the industry matures and understanding how it’s maturing. That, to me, is the fun of it—to be a part of the journey.”