Mining new markets: HG Data funding rises to $5.5M

TECHNOLOGY | Jan. 17-23, 2014

By Stephen Nellis
Staff Writer


HG Data CEO Craig Harris, front, surrounded by members of the Santa Barbara-based firm, which mines data about technology use and sells it to Fortune 500 companies. (Nik Blaskovich photo)

With a fresh round of venture capital, Santa Barbara-based business intelligence firm HG Data is hoping to track the technology in use at about 100,000 Asian companies to complement it huge database of North American firms.

HG Data uses a proprietary algorithm to sift through massive amounts of messy online data to create a database of which software and hardware products are in use at about 1 million U.S. companies. Fortune 500 technology companies buy the data and use it to boost their sales and marketing efforts. Earlier this month, the company raised $2 million in venture capital, bringing its total raised to date to $5.5 million.

HG Data has gone from tracking the technology at 600,000 U.S. businesses to about 1 million businesses. It tracks 50,000 Canadian companies and has turned its focus to Asia. It is now tracking firms in 14 Asian countries and hopes to follow 100,000 firms there. All told, the company aims to track technology deployments in 50 countries.

“We’ve been starting to do a lot of translation work so we can start working with unstructured data objects in other languages,” CEO Craig Harris told the Business Times in an interview. “We’re doing lots of translation from Cantonese and Mandarin. We’re running our algorithm in eight different languages.”

HG Data also plans to use the new funding to ramp up its sales efforts. It has signed a deal with Dun & Bradstreet, one of the biggest business-to-business information firms in the nation, to distribute its data to the company’s customers.

“We’re one of their first data partners,” Harris said. “It scales our reach without having to onboard hundreds of salespeople ourselves.”

Several of the members of the HG Data team came from Noza, a company that sifted online data to help nonprofits find potential donors. Noza was sold to publicly traded Blackbaud, a fundraising software firm, in 2010. HG Data’s founders then took several years to perfect its algorithm before raising the company’s first big funding round in 2013.

Harris said the company’s goal — the “Holy Grail” that HG stands for — is to make an algorithm that can scour the Web to find nearly anything that’s been made public. The algorithm trolls documents in natural language, essentially replicating the work of a huge human research team that would read documents, capture data points from them and then analyze it for meaning. “The machine here, the vision, is the platform we’ve developed,” Harris said. To that end, HG Data is already looking to other realms beyond computers. “Health care, agriculture and energy — we’re playing with those in our sandbox,” Harris said, noting that many of those industries were “captive markets” with large capital expenditures.

In the meantime, HG Data is finding new uses for its existing IT databases. Most of the company’s revenue has come from selling to sales teams and marketers. But it is finding that market researchers can use the data to determine which technology companies have captured market share. IT security experts can use the data to help detect fraud when traffic doesn’t match up with the kind of hardware the database says it should be coming from. And dealmakers can use the data to evaluate whether potential clients are up-to-snuff in terms of technology. “When you’re an investment banker and you’re trying to evaluate M&A targets, our data shows whether they’re earlier adopters or if they’re modernized,” Harris said.

In its core business of selling to marketers, though, HG Data is looking to provide more insight into when a company is ripe for switching to another vendor. If there are 1,000 companies looking to make the switch, HG Data wants to help clients find them.

“Today, we’re all about  identifying which customers use which products at which locations. Tomorrow, we endeavor to predict who’s going to buy what,” Harris said. “Traditionally, marketing is such that you have to send 1 million emails to reach that 1,000. We deliver a list of the 1,000 who are predisposed to switch.”

The funding round was the third tranche of HG Data’s Series A round. It was led by Santa Barbara-based Rincon Ventures and included several new angel investors. Rincon general partner and startup guru John Greathouse will join HG Data’s board. The funding round also included existing investor Epic Ventures and several existing angels, including Kevin O’Connor, founder of DoubleClick and current CEO of Summerland-based FindTheBest.

“FindTheBest is a data company, so I see a lot of data,” O’Connor said in an email interview. “I was really impressed with [HG Data’s] ability to derive incredibly valuable data from unlikely sources. I spoke with a few companies to test their accuracy, and in every case the companies were surprised.”