How data-powered startups can scale in a saturated environment
Question: What do the world’s most successful modern companies have in common?
Answer: Heaps of data.
When we think about what makes Alphabet, Facebook, and other massive companies tick, the answer is that they have a lot of information. That includes information about their billions of users, as well as more general datasets scraped from the internet. They use this data to target services and advertising, as well as to build industry-leading automated tools.
Data-driven startups have to find a way to compete with these incumbents. They have to do so with smaller staffs, smaller user bases, and without petabytes of data.
In this panel, B Capital Group partner Rashmi Gopinath interviews the founders of portfolio companies FalconX, Pendo, and Innovaccer about their strategies for scaling their data-driven companies and succeeding with startup-size resources. Here are the founders’ top tips.
Get creative with your resources
Raghu Yarlagadda, co-founder and CEO of digital asset trading platform FalconX, said the startup has a three-pronged approach to quickly scaling his company’s access to high-value data.
1. Build a proprietary dataset
Yarlagadda recommends tracking customer interactions with your service or product meticulously, to build a valuable dataset unique to your company.
“There are a lot of customer engagements that go waste in a lot of traditional companies. How is the customer interacting with the mouse across different price feeds from FalconX? We captured every single mouse interaction since the beginning of time and blew up our database multiple times,” said Yarlagadda.
2. Collaborate with others in your space
Cryptocurrency trading isn’t quite mainstream, and companies that facilitate it tend to be relatively new startups without a long history of data collection. That’s why FalconX sought out other companies in its space that were willing to collaborate and share data. Yarlagadda compared this approach to Salesforce opening up its data marketplace Data Studio to non-Salesforce subscribers.
“There are enough players out there that are willing to collaborate because we don’t have enough data (as) individual companies,” he said.
3. Leverage public datasets
Working with cryptocurrency has its perks when it comes to open data. A lot of blockchain ledgers are public, which means FalconX can use those ledgers to train its software on anonymized data. But other industries also have open datasets that companies can use to supplement their other sources.
“Every major startup should have a data acquisition strategy going forward. Without a very complex data acquisition strategy, you do not have an edge against the incumbents who are going to collect more and more data,” said Yarlagadda.
Respect customer data
Todd Olson, co-founder and CEO of B2B software platform Pendo, says startups should learn from the pitfalls of larger competitors’ data collection practices. Google and Facebook are frequently accused of violating user privacy. Europe’s General Data Protection Regulation (GDPR) has inspired similar data privacy legislation across the globe.
Pendo differentiates itself by requiring explicit consent to collect data, and by providing clients with value in proportion to what they share. For example, a client that shares its company data can receive insights based on what other companies in their industry have voluntarily shared.
“We ask the companies, will you opt into sharing your data collectively? If you do, we will give you more value, you will have an opportunity to leverage it,” said Olson.
Client companies use Pendo’s platform to gain insights into how their customers engage with their apps. Those insights help the clients improve customer experience and boost adoption of their software products.
Make data smarter
Many industries have a long way to go toward being fully digitized. One such industry is healthcare, where a lot of practitioners are still writing things down on paper — a recipe for disorganization and information gaps.
“The doctor knows less about you than your retailer does,” said Abhinav Shashank, co-founder and CEO of healthcare data aggregator and analysis platform Innovaccer.
Major healthcare systems across the country, including Banner Health and Hartford Healthcare, use the platform.
Innovaccer makes it easier for doctors to record and access patient information. That core service sounds simple enough, but what matters is that Innovaccer actually helps doctors improve patient outcomes and makes healthcare more affordable and efficient.
Shashank says intelligent workflows — in other words, technology processes that improve client performance — will define the next generation of successful enterprise data tools, across industries. Picture Siri for everything.
Innovation is going to happen through intelligent workflows that make people drive better actions. If there was an intelligent (artificially intelligent) assistant on each of our sides, we will all be doing things better and faster. The future of Enterprise is a Siri for everything.
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