Deal Radar 2009: EnterpriseDB

Deal Radar kicks the week off with yet another open source company, but one with rather large aspirations. EnterpriseDB was formed in an attempt to disrupt the three-company (Oracle, IBM, and Microsoft) oligopoly that controls the enterprise database market, of which Oracle owns more than half. The company says that as a result of this oligopoly, the market was exhibiting characteristics such as artificially high prices, strong-arm sales practices and vendor lock-in. EnterpriseDB was formed to provide enterprises with an alternative solution.

EnterpriseDB is a provider of enterprise-class products and services based on PostgreSQL, an advanced-level open source database. Their flagship product, Postgres Plus Advanced Server, is a significantly enhanced version of PostgreSQL, with improvements that include increased performance and enterprise features, such as the ability to run many applications written for Oracle databases unchanged. The company also offers a suite of training and professional services and technical support programs to deliver the database solutions required by contemporary global enterprises, a standard commercial open source model where the product is offered for free, while the revenue model is based on training, support, and services. Postgres Plus Standard Server is a pre-configured and tested binary distribution of the PostgreSQL open source database, which is packaged in a cross-platform, one-click installer that includes several of the most popular companion open source projects.

EnterpriseDB was founded in 2004 and was publicly launched in May 2005. The company has 80 employees and is headquartered in Westford, Mass. with offices in Metuchen, N.J., Pune, India, London, and Tokyo. Ed Boyajian, CEO, joined EnterpriseDB in June 2008. Previously, Boyajian spent six years at Red Hat, the world’s leading open source solutions provider, most recently as vice president and general manager of North America. Prior to that, he was vice president of Red Hat’s global OEM business and was responsible for all partnerships, including those with HP, IBM, and Dell. He also held executive sales and marketing positions at ArsDigita, an early leader in open source software for building database-backed community websites (acquired by Red Hat), and ServiceSoft (now Kana). The company was founded by Denis Lussier and Andy Astor. Lussier, the CTO, was previously the CEO and chief architect at Fusion Technologies, a profitable, 200-employee technology services business he founded in 1994. Astor currently serves as an advisor to EnterpriseDB.

The company has raised $41 million so far: an $8.5 million Series A from Charles River Ventures, Valhalla Partners and Sony Online Entertainment in September 2005; a $16.5 million Series B by Fidelity Ventures, Charles River Ventures, and Valhalla Partners in August 2006; and a $16 million Series C by IBM, NTT, Sony Online Entertainment, Fidelity Ventures, Charles River Ventures, and Valhalla Partners in March 2008. 

Last year, Forrester Research reported that databases are a $19 billion market with a compounded annual growth rate (CAGR) of 9.6%. In that market, open source is the fastest-growing segment, with a CAGR of approximately 29%. EnterpriseDB estimates the open source segment was $800 million in 2007. The most popular open source database, MySQL, was widely deployed as a back end for web applications but was not well-suited to transaction-intensive workloads. EnterpriseDB says that as a more mature open source database, PostgreSQL is better suited to online transaction processing (OLTP) applications.

EnterpriseDB’s target customers include organizations that currently use Oracle and are seeking to reduce costs. Other customers include PostgreSQL users who require support, training, staff certification, and consulting services. Finally, companies in segments such as financial services, telecom, online/web 2.0, as well as the federal government, are also customers. 

EnterpriseDB got early traction by targeting existing Oracle accounts and demonstrating the cost savings and other benefits of switching from Oracle. In addition, EnterpriseDB worked to identify PostgreSQL users who were likely customers of commercial-grade services. They demonstrated how EnterpriseDB-powered database solutions could cost as little as 20% of Oracle-based alternatives. 

At present, EnterpriseDB is generating revenue but is not yet profitable. In 2008, the company grew its new customer accounts by over 50% and more than doubled revenues. The four key areas which drove business were software downloads, registrations, new opportunities and deals. 

EnterpriseDB’s growth strategy includes bringing high-quality, low-cost, enterprise-class database solutions to enterprises. The company plans to continue to focus on addressable workloads where incumbent proprietary vendor costs are least justifiable: new application development, non-mission-critical applications, and embedded database (OEM, SaaS). They also plan to create a more scalable, ultra-low-cost customer acquisition strategy from initial contact through software downloads through initial purchase to repeat purchase.

With no immediate plans for an exit, EnterpriseDB expects to leverage all appropriate mechanisms to bring capital into the company to accelerate growth and returns. Taking on Oracle, IBM and Microsoft is tall order for a little company, but someone has to do it!

Recommended Readings:
Deal Radar 2009: PlainBlack
Oracle Will Shop SaaS in 2009
Deal Radar 2009: xTuple

This segment is a part in the series : Deal Radar 2009