Lucidera Hysteria Misses The Point

It’s early yet and the whole story has not been told. But the flurry of Lucidera  “news” – mostly retweets and wild speculation – needs at least a brief response. It appears, in several stories from apparently reputable news outlets quoting thus-far unnamed sources,  that LucidEra, a SaaS BI startup, is shutting its operations down. The firm apparently ran out of money – its last round of funding was US$15.6 million in Series B venture capital funding in August 2007.

I wrote favorably in this blog about LucidEra a few weeks ago, and I confess that I did not see this coming. I am not a financial analyst and did not review their books. It’s a lesson to me and to us all – good stories, good technology, and even some good customers are not the whole story. I don’t and won’t pretend in my blog to be an authoritative source on the financial viability of anyone. Caveats all around to anyone who plans to do business with people I talk about – I neither believe nor hope that anyone takes my scribblings as sufficient ground for a purchase. Due diligence, always!

I’m concerned that some of the early commentary seems focused on whether the failure of one company calls the SaaS business model into question. In a word, No. Companies will fail – in traditional license models and in new ones. Most startups fail. That’s the real world, folks. Let’s take the time to see what really happened here before we all pull the Chicken Little hardhats out of the closet. The likelihood is that one of the oldest equations in business:

(cash+ revenue) – (runrate * time)  MUST NOT = 0

was violated. it’s that simple, and that complicated.

About Merv Adrian
Gartner Research VP, technology analyst and consultant, 30 years of industry experience, covering software mostly, hardware sometimes.

13 Responses to Lucidera Hysteria Misses The Point

  1. FKL says:

    Merv – thanks for being very honest. I had talked with LucidEra’s VP of Sales at a trade show six months ago. Told me there were 20 customers and a Salesforce.com channel partnership, which had them believing they could spend “Tech Bubble 1.0” money to ramp company awareness before the market was really there.

    youcalc took a much more stealthy approach (read: low cash burn), and is just now coming onto the scene with a much more compelling SaaS BI/CRM platform.

    We will soon see if LucidEra is an exception to an otherwise healthy new market space or not.

  2. Merv Adrian says:

    Thank YOU for the comment. It’s a difficult moment for some people I like and respect. But as I said, startups fail. It’s hardly news.

  3. Darren says:

    Good point Merv. SaaS / cloud-based BI is absolutely real and LucidEra was having a real impact on the sales performance of our customers. I’ll be happy to provide more you with more details in the coming weeks. Thanks for all of your support.

  4. Barbara says:

    Hi Merv,

    I agree that it’s a little early to think that the sky is falling on SaaS BI, and your sober commentary is refreshing.

    LucidEra was a great evangelist for the industry as a whole, though, and it’s hard to see an outspoken company fall. There are other firms out there, though, who are growing and proving that you can deliver on customer BI needs with an on-demand model.

    Brad Peters at Birst just did a post on what LucidEra did right, and the gaps that they missed: http://www.birst.com/blog/?p=197

  5. Merv Adrian says:

    Thanks, Barbara. I appreciate the kind words and look forward to getting a little more detail around what did go wrong for Lucidera. It felt to me as though they had found a specific, targetable business problem and were werll differentiated. Maybe it just took too long to get there; when I spoke to them the focus they had achieved was relatively new. I don’t spend as much time on burn rates and such as I might; it’s certainly something VCs need to be on top of in these times, isn’t it?

  6. I have a couple of view on why LucidEra failed, and what makes a crucial differentiator in on-demand analytics.

    Would love your comments: http://www.youcalc.com/blog/why-demand-analytics-sometimes-not-demand

  7. Merv Adrian says:

    Rasmus, I enjoyed reading your post and encourage others to do so. And I’d like a briefing! I want to know more about your products and customers.

  8. Wayne Morris says:

    Merv
    Thanks for the support for the SaaS model as it relates to BI. I firmly believe that SaaS combined with innovative technology has advantages, particulary for operational BI where data latency should be low. Interestingly, we are showing that SaaS is also suitable for gathering data from multiple companies such as in a supply chain or multi-tiered distribution channel.

  9. Matt Durham says:

    Merv–SaaS is great but there’s gotta be profitability…and most VC-backed startups are massively overfunded and, as a result, not worth the investment required to acquire. Many of them are killing their only viable exit strategy–unless there is a pending IPO boom I am not aware of….
    Matt

  10. Merv Adrian says:

    Thanks for the comment, Matt. From the analyst’s side of the desk I detect a slight shift in the message I hear from startups. It used to be about the prestige of the VCs they had backing them and how large the round was. Lately I hear a lot more assertions that they don’t need much capital and they are funding mostly from customer revenue. And then the kicker is “we have a round, and we’re going to spend it on [building sales force, ramping R&D, starting international operations, etc] Seems more measured and focused. Maybe I just ask better questions than I used to.

  11. Matt Durham says:

    A very smart VC told me to only buy VC-backed companies that don’t yet have sales people–seems to jibe with your experience.

  12. Jan says:

    FWIW, Good Data offered a safe harbour to all LucidEra customers. We’ve been working with Good Data for about a year now, and it’s certainly worth a look if you’re interested in cloud BI…

    Jan

  13. Merv Adrian says:

    Thanks. Several firms did so, and the company is working on ensuring everyone’s migrations, which is a nice show of responsible management on hte part of some folks who are no longer even employed by the firm. I have been talking with GoodData and no doubt will post about them as well before long.

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