MongoDB Now King of NYC Startups With $1.2 bln Valuation

MongoDB Inc., capitalizing on the popularity of its online database software, raised $150 million in a venture-funding round that would make it the most valuable Internet startup in New York.

The deal attracted new investors such as EMC Corp. (EMC) and Inc. (CRM), along with previous backers Red Hat Inc. (RHT), Intel Corp. (INTC), New Enterprise Associates and Sequoia Capital, according to MongoDB. The round values the company at $1.2 billion, said two people familiar with the matter, who asked not to be identified because the valuation isn’t public.

MongoDB has been quietly building a global database business — with its sales and headcount more than doubling each year, Chief Executive Officer Max Schireson said. The company is making inroads with its lower-cost software, aiming to threaten the dominance of Oracle Corp. (ORCL)’s relational databases, he said.

“We’re picking up an increasing share of the market and over time that could become a really significant share,” said Schireson, who declined to discuss MongoDB’s valuation. “The volume and type of data and the consumer and developer expectations are so radically different than they were when the relational database was invented.

Fidelity Investments led the round, with Altimeter Capital and T. Rowe Price also participating as first-time investors. MongoDB, which has its West Coast headquarters in Palo Alto, California, has now raised more than $231 million.

Lower Profile

The deal vaults MongoDB to the top of the heap among New York startups, despite having a lower profile than consumer Web companies such as Foursquare Labs Inc., Gilt Groupe Inc. and Etsy Inc. At $1.2 billion, the valuation would exceed the roughly $1 billion Yahoo! Inc. paid for Tumblr Inc. this year. Union Square Ventures, an investor in Twitter Inc., provided early funding for MongoDB.

MongoDB — whose name is a play on humongous — now has about 600 customers, including Goldman Sachs Group Inc. and MetLife Inc., Schireson said. The company markets its database software as easier to manipulate and scale up, making it better-suited to the Internet age.

Founders Dwight Merriman and Eliot Horowitz came up with the idea for MongoDB’s NoSQL database technology after getting frustrated at having to make specialized systems from scratch to handle their company’s needs. At the time, the two were working at DoubleClick, an advertising-technology business that was acquired by Google Inc. (GOOG) in 2008 for $3.1 billion.

“We spent too much time working to custom-build databases when we should have been working on the project we wanted to work on,” Horowitz said. “We wanted to go ahead and solve the database problem so we wouldn’t have to do it again and again.”

Subscription Model

MongoDB, formerly called 10Gen, sells its database technology as a subscription, charging about $5,000 per server per year — with support and training included. That differs from the multiyear, multimillion-dollar contracts traditionally used by software providers. The total database market is worth $30 billion, according to Forrester Research Inc.

The company also gives free lessons on how to use its database software. The more programmers that understand the technology, the more likely it is that companies will build applications for the platform, Schireson said. The software has been downloaded more than 5 million times.

Regional Growth

The free seminars also give the company a sense of where its software is catching on, said Joe Morrissey, head of MongoDB’s operations in Europe, the Middle East and Africa, or EMEA. The company drew more than 200 people to an event in Tel Aviv and 100 people to one in Cape Town, building on its strength in countries such as Germany and the U.K., he said.

“We’re growing at least 300 percent a year here in EMEA,” Morrissey said.

Some developers have complained about architectural issues with the product, which MongoDB plans to address with the funding round, said Harry Weller, a general partner at New Enterprise Associates.

“Mongo is becoming a general-purpose database and there are going to be scenarios where it’s not perfect,” Weller said. “That’s why this funding is being raised.”

The rise of big data is helping fuel MongoDB’s growth. Companies are seeking new ways to manage a flood of information on their customers and the markets they serve, aiming to use the data to make decisions in real time. The market for big-data technology and services will grow at 32 percent annually, research firm IDC predicts.

More Partners

With the new funding, MongoDB is looking to accelerate its global expansion and find more partners that can help customize its software for different industries. So far, it’s teamed up with 250 other companies, the biggest of which is International Business Machines Corp. (IBM) MongoDB has gotten some acquisition interest, but executives aren’t considering selling at this time, Weller said.

Schireson has recruited many of his executives from Oracle, where he used to work, and other corporate-software companies. His staff has increased to more than 300 this year, and he plans to double MongoDB’s headcount next year.

“We made a good living at Oracle managing teams that would do projects for customers for tens of millions of dollars to get big systems built,” he said. “Now what we’re trying to do is make it easy, so people can do it themselves in weeks.”

Source: Bloomberg