Recommind Raises $15M Series C From SAP Ventures

Article by Telis Demos and Lizette Chapman on September 18, 2013  – Recommind Inc, whose software analyzes massive piles of emails and other text data, has secured a $15 million funding round from SAP Ventures, the venture capital firm’s biggest-ever single investment.

The San Francisco-based company is gearing up for a potential initial public offering in the near future, and plans to use the capital to expand into new markets such as financial services and health care, according to Chief Executive Bob Tennant .

Unlike many big data firms, which focus on so-called “machine-generated” data that is stored as big tables of numbers, Recommind focuses on “unstructured data” like the text of lending agreements, medical records or instant messages that have to be mined for key patterns and concepts.

“The funding is basically to bring unstructured data analytics to a wide variety of markets,” said Mr. Tennant. “It’s a real expansion for us,” he said, adding that the company can install software on clients’ systems or let them access it remotely, via the “cloud.”

“Big data” is among the hotter businesses with venture capital investors, and unstructured data analytics is a growing niche. According to an IDC study in 2011, more than 90% of the data created in the next decade will be unstructured.

For example, Dataminr Inc., which scans Twitter to produce alerts about Tweets that could move the stock market, recently raised $30 million in private funds .

Recommind began with a focus on legal and corporate compliance, working with law firms to comb through vast email databases during the discovery process of lawsuits, and with companies on identifying critical emails and other records that must be kept for legal reasons.

Customers for its legal tools include Siemens AG , the U.S. Department of Energy and Raytheon Co ., according to the company’s website.

The company has also started a platform, called CORE, on which it hopes that other companies will build applications that use its analytical engine.

Revenue last year was $70.5 million, according to Mr. Tennant, up from roughly $46 million in 2011 and $23 million in 2010. Mr. Tennant said the company was profitable, and employed about 500 people in San Francisco; Bonn, Germany; Boston; and London. He said that the company’s valuation was “well north” of $250 million but “not quite yet” $1 billion.

Recommind’s first funding was from Mr. Tennant personally, who was previously an executive at Sun Microsystems Inc ., which acquired a firm he co-founded, Beduin Communications, in 1998. It has also raised $7.5 million from Kennet Partners , a venture capital firm, and $1.5 million from Silicon Valley Bank .

“We have our staff marching toward going public by year’s end, but we’re not committed to going public,” he said. “We’re not in any rush to get out the door. We don’t have a lot of VCs who have been around for a long time and are in a rush to get an exit.”

Mr. Tennant said that Recommind spoke to a number of venture firms, but chose SAP Ventures because the firm “brings more than just money to the table.” He added: “We wanted access to SAP’s relationships…and ecosystem.”

Gaurav Tewari, a managing director at SAP Ventures , which is affiliated with enterprise software company SAP AG , said that the firm agreed to take up all of Recommind’s Series C round, which made it the firm’s single biggest investment.

“‘Big data’ is a bit of a buzz word, but for me, is there a real business impact?” he said. “Unstructured data is an area our team has spent a tremendous amount of time investigating. We felt so compelled by the magnitude of the opportunity ahead of Recommind.”

SAP Ventures has backed companies including LinkedIn Corp ., Control4 Corp ., Marin Software Inc . and ExactTarget Inc ., each of which has gone public in the past two years.

Mr. Tewari will become a board member at Recommind, joining former Oracle Corp . CFO Jeff Epstein .