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Denodo Technologies on Wednesday revealed that it received a $336 million equity investment from TPG Growth, funds the data management vendor plans to use to fuel R&D efforts and global expansion.
The equity round -- an investment in Denodo's series B preferred equity -- marks just the second time Denodo, which was founded in 1999, has publicly raised capital. In 2017, the vendor received a private equity investment from HGGC with financial terms not disclosed.
Based in Palo Alto, Calif., Denodo is a data management vendor with a platform specializing in data virtualization.
Data virtualization, like data mesh and data fabric, is an approach to data management that enables disparate types of data, including unstructured and structured data, to be combined without users having to manipulate the data. Its intent is to develop a single representation of an organization's data without requiring data engineers to copy or move the data.
Other data virtualization specialists include AtScale and Datameer, while data management vendors offering data virtualization as part of broader platforms include Informatica, IBM, Oracle, SAP and Tibco.
TPG Growth's $336 million investment is expected to close in early October following regulatory approval, according to Denodo.
Sign of respect
Before inflation spiked and fears of a recession rose in 2022, technology companies were able to raise capital with relative ease.
Databricks, a data management vendor that pioneered the data lakehouse architecture, raised $1 billion in a single venture capital funding round in February 2021. In addition, among data management and analytics vendors, Confluent raised $828 million, SambaNova raised $676 million, and Sigma Computing raised $300 million.
Beyond private investments, Snowflake executed the largest initial public stock offering ever for a technology vendor, raising more than $3 billion in September 2020.
In early 2022, however, tech stock values plummeted, and funding rounds and stock offerings all but stopped. Some data management and analytics vendors have raised funding since then, but vendors including Qlik, Pyramid Analytics and ThoughtSpot that were all openly working toward IPOs have remained private.
Wayne EckersonFounder and analyst, Eckerson Group
Now, Denodo joins the few data management and analytics vendors to have attracted outside investments over the past two years. It's a sign that the company has a strong balance sheet and is seen as stable compared with some newer vendors, according to Wayne Eckerson, founder and analyst at Eckerson Group.
"Denodo is a mature data fabric with a significant track record and some 3,000-plus customers, so for investors, it's a safe bet, unlike some [newer] firms," he said.
Eckerson added that as a data virtualization vendor, Denodo has significant growth potential given that data virtualization, data mesh and data fabric are gaining popularity as enterprises realize the need to connect and unify their data rather than keep it isolated.
Data stacks are becoming increasingly complex as organizations ingest data from more sources and store it in multiple clouds and different types of data repositories. Data virtualization reduces the need to move data, which can expose data to security risks, by enabling users to connect data across multiple environments.
"They're a hot commodity," Eckerson said.
Sanjeev Mohan, founder and principal of SanjMo, similarly noted that Denodo is the rare data management vendor able to attract significant outside investment in the current climate.
"If there is investment from [venture capitalists], it's all in the generative AI space," he said. "People's approach to data management is 'Been there, done that, so why bother.' So this investment is super unique."
Outside investors often invest in companies -- or industries -- because of the hype surrounding those companies and industries, Mohan added. TPG Growth, however, is a subsidiary of global asset management firm TPG, which is a Denodo customer.
Meanwhile, though data management might not have the same buzz surrounding it as generative AI, data management is crucial to successful generative AI outcomes because AI models are only as good as the data used to train them, he continued.
"Even if generative AI is the final outcome, it needs to have good data," Mohan said. "You need to manage data well. Denodo is doing the grunt work for generative AI to be successful."
Regarding how Denodo might use its new funding, Eckerson suggested that for a company with Denodo's relatively lengthy history, international expansion and marketing are likely targets.
And increased investments in both geographic expansion as well as marketing are indeed part of Denodo's plans, according to Angel Viña, the vendor's founder and CEO. So, too, are investments in R&D and Denodo's partner ecosystem.
"It's a way to help the next phase of transformational growth for the company," Viña said. "We will use it all over [the company]. It will strengthen our balance sheet and [feed] our go-to-market strategy. It's also a way to provide liquidity. There are lots of areas we need to emphasize for this new capital."
In particular, Denodo's growing customer success department will be an area of focus, he continued.
Regarding geographic expansion, Viña noted that Denodo already has a worldwide presence. Therefore, rather than expand into new markets, some of the $336 million the vendor will receive from TPG Growth will be earmarked toward securing Denodo's presence in areas such as South America, China and the Asia-Pacific region.
"Denodo is a global company with many needs in many territories, so there will be ... additional investments," Viña said. "Our presence in those markets is not just commercial. We also have a technical base to support local customers."
One further possible use for the new funding could be acquisitions, according to Mohan.
He noted that Databricks recently acquired MosaicML to help users develop their own generative AI capabilities, and Snowflake acquired Neeva to improve its generative AI tools. Denodo, which is now developing generative AI capabilities of its own, could follow suit.
"I would suspect they will do some acquisitions," Mohan said. "With this much of a war chest, I would imagine they could [acquire] some companies. Technology is moving really fast."
While adding support staff in emerging markets and improving its go-to-market strategy can potentially attract new customers, the key to Denodo's success remains its data virtualization platform.
Product development, as a result, is vital to remaining competitive with its peers to both attract new users as well as maintain its existing base. Denodo plans to remain focused on data virtualization and is firm in its belief that data virtualization is the best approach for enabling AI, machine learning and analytics in a multi-cloud environment, Viña said.
However, as with many data management and analytics vendors, generative AI is a prominent part of Denodo's roadmap, according to Ravi Shankar, the vendor's senior vice president and chief marketing officer.
In fact, as a part of a platform update unveiled on Wednesday, Denodo introduced generative AI capabilities that enable users to query data using natural language rather than code and receive subsequent responses in natural language.
The feature is similar to text-to-code translation capabilities introduced by Dremio and Monte Carlo, among others.
Another project in the works is developing a SaaS version of the vendor's platform to make its data virtualization capabilities available to midsize companies in addition to the large enterprises Denodo already targets, Shankar added.
Finally, he said data security is a significant concern for customers, so Denodo is focused on improving its data governance and security capabilities with features such as attribute-based access controls.
Mohan, meanwhile, said he'd like Denodo to invest more in data products.
He noted that the vendor already has a data catalog, a semantic layer and access control measures. Next, it could build domain-specific data products to enable analysis.
"I would like to see Denodo take more of a leadership role in the space of data products," Mohan said. "They have built the foundation. Now, they could move up the stack and move more into the business domain."
Eric Avidon is a senior news writer for TechTarget Editorial and a journalist with more than 25 years of experience. He covers analytics and data management.