How Fivetran is building the next data juggernaut

The Big Story

The next data giant?

Last month, data integration startup Fivetran announced it was acquiring quasi-competitor HVR for $700 million. By enterprise technology standards, it was no blockbuster Salesforce-Slack deal.

But the acquisition could have significant implications for the industry and is bound to worry rival vendors like Informatica, Talend and IBM. The combined companies excel at two different — but equally important — data management tasks.

For Fivetran, the deal was massive.

• The price is well above the $565 million series D round it announced that same day. Overall, Fivetran has raised $730 million from backers including Andreessen Horowitz and General Catalyst.
• It's clear the move is a "make-or-break" one for the startup, given the size of the outlay. Luckily for Fivetran, the investment landscape for enterprise tech is as frothy as ever.
• "We could not have done this acquisition if not for the incredibly positive funding environment," CEO George Fraser told Protocol. "We wouldn't have even talked about it if not for that."

Fivetran provides an overlooked, but critical service for enterprises: It helps move data from siloed systems into one common repository.

• Prior to the rise of cloud computing, it was easier for companies to move their information between internal databases with tools from vendors like Informatica.
• Now that organizations are increasingly using web-based applications, many that gained prominence by creating walled gardens around their systems, that task is much more difficult. But for companies looking to embody the still elusive "data-driven" mindset, it's a necessary step.
• So instead of dumping everything into an Oracle database to sit until the end of time, enterprises want to take that data, combine it with information from other sources and put it all into a cloud-based platform like Snowflake to be analyzed.

That's where Fivetran comes in. While companies can build those connections themselves, it's very labor intensive — both to build the streams and then manage them. Given the tech skills shortage plaguing corporate America, that effort is an increasingly unattractive option for many organizations.

• Fivetran claims to automate all that work, getting companies up and running with streams that pull data from dozens of sources in minutes versus days or weeks.
• Streamlining that work is becoming increasingly important as the influx in regulations governing corporate data force enterprises to invest heavily in tools to help comply with the patchwork of rules — while still enabling information to move more freely across the business.
• Fivetran touts customers like DocuSign, Square, Urban Outfitters and Autodesk — though it's especially prevalent in the small-to-midsize market. Its sales and customer base doubled in 2020, per the company.

Now, the acquisition of HVR gives Fivetran access to a whole new part of the enterprise tech stack. While Fivetran is great at working with cloud-based applications, its products fall flat when trying to deal with legacy systems — or, as Fraser puts it, the "crown jewels" of a company's IT operations.

• HVR excels at "replicating these really big, really old enterprise databases that are just the hardest databases to sync," said Fraser. "The combined company really has it all now."
• That means a customer can use Fivetran to link both an Oracle or SAP database and a modern SaaS application like Salesforce.
• There's another big advantage of the merger, per Fraser: speed. HVR is able to "move data faster and at lower latencies than Fivetran can today," he said.

But combining the two products will be a major challenge for Fivetran. With HVR, organizations can route data from one location to many different end repositories. Fivetran can take data from many applications, but can only route them to one location.

• "You actually often want to do both," said Fraser. And "integrating those capabilities is a little more complicated. That's the heart of HVR and the heart of Fivetran, and we have to take the two hearts and look at them closely and figure out how to put them together."

A combined Fivetran-HVR is, in some ways, a throwback to the systems that helped establish vendors like Informatica nearly three decades ago.

• There are two major types of data transfers that enterprises routinely rely on: moving small bits of data at fast speeds and replicating huge data sets at a slower speed.
• Historically, vendors like Informatica and IBM would manage both. But over the past several years, as cloud adoption rose, those services began to splinter off. The market became bifurcated between newer entrants that excelled at one or the other.
• Zapier, for example, is great at moving small data sets around. Conversely, Fivetran gained prominence by helping enterprises transport larger sets.
• "One is more operational, the other is more analytical," said Fraser.

It's clear that the market opportunity for Fivetran is immense. But there are a huge number of rivals that are also tackling the same problem.

• In 2015, for example, Informatica underwent a massive transformation to change from an on-premises provider to a cloud-based vendor. As a result, its subscription revenue grew from $118 million in 2016 to $594 million in 2020, per a recent S-1 filing.

Ultimately, the acquisition gives Fivetran a much bigger opportunity in the enterprise market. That's bound to put it in closer competition with vendors like Informatica and MuleSoft.

• But if the company succeeds, it'll be a force to be reckoned with in the increasingly high-stakes world of data management.

A MESSAGE FROM ZOOM

Zoom — the communications platform that has become synonymous with streaming video calls — experienced an even greater increase in that same time period. In June 2020, close to 3 million consults took place through Zoom's 100 top EPIC integrations. With its simple, reliable interface that patients — and health care workers — already knew, Zoom became the go-to for health care offices everywhere.

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