ThoughtSpot’s $200m Mode Analytics acquisition - step one to being ‘massive’ says CEO

Chris Middleton Profile picture for user cmiddleton June 27, 2023
Summary:
ThoughtSpot CEO’s Sudheesh Nair is bullish as he plans an end-to-end BI platform for every size of customer

Image of Sudheesh Nair ThoughtSpot CEO
(Image sourced via ThoughtSpot)

ThoughtSpot, the $4.2 billion Mountain View headquartered analytics company, has announced the acquisition of business intelligence platform Mode Analytics, in a cash and equity deal valued at $200 million.

On completion, Mode Analytics, whose customers include Bloomberg, Condé Naste, Shopify, VMware, Lyft, and Reddit, will become a wholly owned subsidiary of ThoughtSpot.

According to an announcement from the two companies, the combination of Mode and ThoughtSpot will enable data teams to use a code-first approach to deliver self-service business intelligence, the results of which can be queried using ThoughtSpot’s natural-language AI. Mode tools combine SQL, Python, R, and data visualization techniques.

With the acquisition, ThoughtSpot's estimated annual recurring revenue (ARR) will increase by 50% to $150 million, while – significantly – doubling its customer base. 

The deal is the latest event in a year of frenetic activity for ThoughtSpot as interest in enterprise AI grows. Last month, it launched natural-language data search tool ThoughtSpot Sage, a data modelling studio, liveboard collaborations, ThoughtSpot Monitor for Mobile, and integrations with common workplace productivity and office suites: evidence of the ongoing ‘platformization’ of the company

With the acquisition, ThoughtSpot CEO Sudheesh Nair has companies like Tableau and Looker in his sights – players that Mode itself has long been critical of.

Nair said:

For too long, data teams have been held back by the last generation of archaic data visualization tools like Tableau that forced them to endlessly tweak and update dashboards. 

With this acquisition, we’re giving both data teams and business users the tools they need to turn data efficiently and quickly into insights, and those insights into actions. Whether you want to be code-free for your business users or code-first for your analytics engineers, now is the time to rethink business intelligence.

Mode CEO Gaurav Rewari added:

Together, we are bridging the gap between data teams and business users in a unified, dependable, and governed platform that meets the evolving needs of the modern data landscape, where data teams are liberated from mundane tasks and business users are empowered to explore freely.

Generative AI is changing everything

But apart from buying new revenue streams and customers, what was the thinking behind a deal that seemed to come out of the blue? Speaking exclusively to diginomica as the acquisition was announced at 9am Pacific Time yesterday, ThoughtSpot’s Nair said:

The timing was compressed because of the Snowflake and Databricks summits [both of which began yesterday]. 

There are some key points. The first is that generative AI is changing everything in the analytics space. A lot of companies are trying to figure out how to fit generative AI into their existing product portfolios. In our space, for example, Tableau and Power BI are trying to release co-pilots, which means ‘I have a dashboard and I'm going to use AI to explain that dashboard’. 

We think that is a fundamentally broken idea, because AI should not be sprinkled, it's not something you garnish your dish with; it's a main ingredient in this new world. And the second point, obviously, is that if you are having to explain a dashboard it means the dashboard was too complex to begin with. 

Our thesis is that generative AI should be used for input, in the middle, and for output. What I mean is, how you ask a question, how you ask what you want to know from a BI product, should be via natural language. How we compute that answer is driven by AI and how we generate that output. So, we are ‘AI everywhere’.

But how did that vision lead to buying Mode specifically? Nair says: 

With this acquisition, we are enhancing that process for analysts. Analysts like their coding, but they don't want to sit there coding all the time. AI-driven BI, with analysts and business users coming together, is the fundamental reason this makes sense. That's number one.

Reason number two is cloud-native customers. Mode is used by lots of cloud-native customers, whereas ThoughtSpot is deployed by very large enterprise customers.

Those include Hilton, De Beers Group, Siemens, Daimler, ExxonMobil, JD, the UK’s Metropolitan Police, RBS, and Nationwide Building Society. He continues:

So, we want to make sure that ThoughtSpot’s idea of making AI-driven BI is accessible for everybody's needs: small customers, medium customers, large customers, and customers who are cloud native or not. Coming together, the customer overlap is so small that we believe that this makes ThoughtSpot accessible to everyone from a 25-person company to a 50,000 one.

But there is a third reason: the increasingly volatile and fragile global economy, he explains:

The economy is showing headwinds. So, this is the time where very large companies will try to acquire or push out innovators. And I fundamentally dislike that idea. I like the idea of innovative companies like ThoughtSpot and others coming together and building something so impressive that it challenges the status quo of the larger companies.

So, it's an opportunistic thing. But at the same time, I believe it requires courage and leadership to come together and think about long-term strategy rather than short-term gains. And that is going to create a huge challenge for large companies like Power BI and Tableau.

An advantage of velocity 

Over the past few months, massive players like Google and, especially, Microsoft with its relationship with, and investment in, OpenAI, have been moving in the direction of business intelligence, analytics, and using AI-powered search to query enterprise data – Power BI is one example, of course. So, how concerned is ThoughtSpot that, while it is parking its tank on smaller companies’ lawns, Big Tech might park a much bigger one on ThoughtSpot’s?

Nair seems to relish the challenge:

There are people who like a quiet beach or a walk in the park. I'm not one of those when it comes to business building. I like a crowd, because where there is a crowd there are opportunities. There is a reason why everyone is fishing here. 

Of course, larger companies have an advantage, size and they can push out others. But smaller companies have the advantage of velocity. ThoughtSpot is not small, but it’s not huge, which means we are just the right size to move fast and still throw a mean punch. 

So, I'm completely happy to take on anyone including Salesforce, Tableau, or Microsoft with Power BI – point to point, feature by feature. Microsoft has Azure, but we have Google and Amazon on our side now, delivering with the marketplace.

With AI, you cannot make it a side hustle. ThoughtSpot is built, front and center and from the beginning, as a search and AI company. We are willing and able to compete with any of these large vendors.

Does he see ThoughtSpot now as an expanding and more general business platform?

Yes. When the economy starts tightening, CFOs don't have time to buy ‘one more esoteric product’. I want to build a platform that challenges the status quo, on which you can deliver all sorts of BI. That means you can get rid of all the itsy-bitsy start-ups. We can get rid of all of this with a single platform.

This is what I meant by ‘the right size’. No matter how good a product is, in today's environment, people don't have the time to buy a curiosity product or a science project just because they like a small team. A product needs to deliver the entire organization's needs. That is why a comprehensive approach is necessary.

So, Nair sees ThoughtSpot as a Big Tech in waiting?

Yeah, my view is that if you want to build a good company, you’ve got to think of building a great company. And if you want to build a big company, you’ve got to think of building a massive company. If you set your sights short, it won't work. 

You’ve got to be ambitious, courageous, and think big. I'm not just thinking about acquisitions. But you should acquire other companies to get the right people inside the company. Keep building and good things will happen, but that requires investment. It requires great technology and a great team, and we have both.

My take

Bold words from a company whose unicorn valuation is – not including the yet-to-be-completed Mode purchase – 42 times its estimated SaaS revenue. But the same metrics could be applied to many a Big Tech player, at a time of falling revenues for many. In times of uncertainty, confidence plays well, but over-confidence perhaps less so. Even so, the momentum seems to be with ThoughtSpot for now.

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