Socrata is growing like crazy. The Seattle startup, which develops cloud-based offerings for open data governments, has grown from 75 employees in January to 140 in its Pioneer Square office today. It has also enjoyed 100 percent year-over-year revenue growth for the past three years.
Now, it has some serious venture capital backing.
We first reported Socrata’s $30 million round last week, and now the company is today officially announcing the funding. The Series C round was led by Sapphire Ventures (formerly SAP Ventures) with participation from existing investors like OpenView Venture Partners, Morgenthaler Ventures, and Frazier Technology Partners. Total funding for the eight-year-old company is now at $55 million.
Socrata is clearly having some serious success as of late. But much of this rapid growth may never had happened if it weren’t for a big pivot the startup made back in 2009 — a pivot that came about because of work done for a presidential candidate named Barack Obama.
We caught up with Socrata CEO and co-founder Kevin Merritt, who told us more about the open-data movement within government and the steps it took to get his company here today. Read on for an edited excerpt from our conversation.
GeekWire: Thanks for chatting, Kevin. First off — wow, a $30 million round. You guys must be doing something right.
Kevin Merritt: “The company is doing fantastic. We raised our Series B in June 2013 and with this Series C round 17 months later, we’ve really had fantastic progress over that time. We now have more than 200 of the top tier or largest governments around the world using our platform — New York, Los Angeles, Chicago, San Francisco, federal agencies, many counties, etc. The company is also growing nicely from a headcount perspective — we’re at 140 now and will probably grow to 220 in 2015.
We’re bullish about the opportunity as the whole concept of open data has largely gone mainstream. Every government has decided that this is the right thing to do; making data available and accessible for citizens, entrepreneurs, and journalists to incorporate in their services is the logical and rational thing to do. Now that they’ve figured out how to do that, fortunately most of them decided that Socrata was the most cost-effective way to do that.”
GeekWire: There seems to be a big push with governments opening up their data, and you guys are capitalizing on that movement. What’s going on here?
Merritt: “A number of things. One is the recognition that open data can help provide services better and more cost-effectively to citizens that governments want to reach. A really good example is that five years ago, most cities were developing their own mobile apps for bus schedules. Now, most cities put their transportation data online and rely on much better applications like OneBusAway and CityMapper to provide a much better experience around looking at transit schedules.
Two, what many governments are figuring out is that their data is a raw resource that can stimulate economic development. You’re seeing job creation and company creation on the back of the open data. Every government is interested in figuring out ways to create new jobs, new companies, and new industries so they see open data as fuel to do that.
Third, citizens today expect their government to operate pretty much like any business operations — 24/7 and online. Putting data online makes the government available 24/7. As an example, there is a small city in Spain that now puts the payment status for vendors awaiting payment online. As a vendor, you want to know when the city will pay you. With open data, you don’t have to wait for 9-to-5 and call an office. You can look it up online and figure out the status of your payment when convenient.
Many governments are recognizing that putting data online and allowing citizens to find it themselves or entrepreneurs to build services around it creates this 24/7 environment they want to offer.”
GeekWire: Let’s talk about your pivot. In 2007, after leaving Microsoft, you started as an online database company called Blist — which then turned into Socrata, right?
Merritt: “We originally created a cloud-based database for small-to-medium sized businesses. The idea was to get a database out of the closet down the hall and put it into a cloud and let someone manage it. Our original slogan was, ‘manage your data, not your database.’ It just so happens that one of the yearly adopters was the Obama campaign team, which used our platform to put campaign contribution data online. One thing led to another and we recognized this whole idea that government could put data online and more cost-effective platforms like cloud computing made a lot of sense. It initially promoted transparency and accountability; now, it’s about ecosystem creation and providing better services.”
GeekWire: Tell me more about the pivot. That’s not an easy decision, and one that can make or break a startup. How did you arrive at the decision to change your business?
Merritt: “It was a combination of factors. We took a fairly data-driven approach to analyze the market opportunity in front of us. It was late 2008, early 2009. We had 75,000 organizations using our initial database platform with Blist and when we mapped them out by industry and by area of problem they were trying to solve, it was all over the map. There was no concentration of organizations in one specific industry solving one specific problem.
On top of that, the economy was going through major gyrations at the time and nobody knew how long it would last. We didn’t know if it was going to be a 6-month minor correction or a 4-year major Depression. Most VC-backed companies were getting emails from investors suggesting that this was going to be a long economic downturn and we should do whatever we could to survive.
So, it was a combination of factors, along with the recognizing that one of our most prolific users was this new charismatic president-elect who had taken a position on transparency and accountability. We seemed to have the right technology at the right time to help government make their data available to a wide variety of audience with fairly varying tech backgrounds.
When we analyzed the data and looked at the economic circumstances, we said, let’s play to our strengths. It seems like what we’re pretty good at is helping organizations put data on the web, and this idea about open data is interesting. We became very passionate about open data and we decided that if this is the strength, let’s play to our strength. We didn’t know a whole lot about selling to the government, but hopefully we’d figure that out and see if we can make a business out of it. We didn’t know if this would be something that a handful of governments do or whether this would be widely adopted. Now, it seems clear this is going to be widely adopted. We were in the right spot at the right time.”
GeekWire: That is interesting. You guys clearly made a good decision. But did you expect this kind of success?
Merritt: “To be very candid, we thought one of two things would happen: Either this whole idea of open data would prove to be a fleeting trend that would go by the wayside, or it would go mainstream. Fortunately for us, it’s gone mainstream. What is really remarkable to me is that the size of governments now adopting open data is incredibly small. The City of Redmond (16 miles east of Seattle) has 50,000, 60,000 people and they are doing open data. Today they used one of our new products, a financial transparency suite, to put a budget online.
We weren’t quite sure if this would be slow and steady or whether it would take off. In 2009 and 2010, it was a slow hit-or-miss type deal. But in the middle of 2011, it really started to blossom. It’s the right thing to do for governments.”
GeekWire: Since you’ve had a successful pivot, any advice to entrepreneurs out there that are considering something similar?
Merritt: “First and foremost, remember that no matter how well you wrote your business plan, it was out of date the next day after you wrote it. Look at your data and analyze it; be as pragmatic and be objective as you can. For us, it was not an overnight decision. The process we went through was one I would encourage. We met with our Board of Directors and we were transparent. We said, ‘hey, we are getting mixed signals from the business community using our software but we do have this one unusual case, which is government. It seems like there is something there. We’d like to spend 90 days and go and evaluate this opportunity and see if it makes sense.’
We did that. We analyzed the market, we did best-case and worst-case analysis and came back and made a recommendation that given the capabilities of our platform and the early traction we had established with government, this seemed like a great place to be — especially given the economic climate out there.
We agreed to give ourselves a year and set very measurable goals. We called it the ‘Sweet 16.’ We wanted 16 governments using our platform to publish open data — four each from federal, state, county, and city agencies. This would demonstrate that there was diversity among the governments electing to participate in this open data movement. A year later we hit those goals so we decided to keep going. And here we are. There’s no doubt it has worked well and now we’re the leader in this space.”