1Mby1M Deal Radar 2015: DecisionNext, San Francisco, CA

The analytics market has been getting hotter and hotter over the last decade. However, there are very few analytics companies that build highly focused value-adding applications targeting specific industries. DecisionNext is one such company that builds predictive analytics solutions for the niche area of commodities-driven industries. Its main value proposition is that it provides comprehensive “what if” simulations that let you see the impact of changes across everything you buy and sell and identify the most profitable path forward.

Due to the complex and volatile nature of commodities, companies in these industries often need to rely on expensive external consultants and academics for analysis. The result is often an overly complicated spreadsheet that is difficult for internal employees to use and that goes rapidly out of date. Smaller companies may also have a di?cult time attracting top talent due to budget limitations. To address the needs of such companies, DecisionNext was founded in 2012 by CEO Mike Neal, EVP Technology Bob Pierce, and Graeme Stanway.

Throughout his 25-year career, Mike has focused on taking empirical approaches to decision-making and using innovative science to solve supply chain challenges. In 2004, he co-founded SignalDemand with Dr. Hau Lee of Stanford University. He also co-founded DemandTec, which is now part of IBM and also the largest provider of Consumer Demand Management (CDM) software for retail price and promotion optimization. Prior to DemandTec, Mike held executive positions at Evant (sold to Manhattan Associates) — a supply chain optimization software company. He held consulting positions at Deloitte Consulting and Accenture. Mike holds several patents and serves on multiple early-stage technology company boards.

Bob holds a PhD in Theoretical Physics from UC Berkeley and has made a career of designing the analytical models for analytics companies Khimetrics, SignalDemand, and DecisionNext. Graeme Stanway holds a PhD in Engineering from Imperial College, London. Another important addition to the team is John Crouch, who was brought on board in January 2015. John had earlier worked for them at DemandTec and had taken them from about $5 million in revenues to about $75 million and was the head of global sales who led the IPO process.

Industries that use DecisionNext include Agribusiness, Food, Fishing, Spice, Mining, Oil and Gas, and Forestry. People who use DecisionNext include Data Analysts, Supply Chain Professionals, Sourcing and Procurement Professionals, Purchasing Agents, Chief Information O?cers, and Category Managers. Mike says they are “elephant hunters” targeting massive deals with giant companies in agribusiness, mining, oil, gas, and forestry. Currently their top customer is JBS S.A., the world’s largest meat producer, ranked 766 in The Global 2000 list of the world’s biggest companies. It is responsible for 22% of the US beef supply and about 70% of its revenue comes from its US operation. Other customers include supermarkets like TOPS and Sprouts.

In the category of focused prescriptive analytics software companies, competitors include DemandTec (IBM) and SignalDemand (PROS), both of which Mike cofounded, along with Zilliant, PROS, ForecastHorizon, ProfitLogic (Oracle), Khimetrics (SAP), Revionics, and KSS.

DecisionNext charges a modest setup fee, and then a license fee going forward month- to- month. License fees are set to be no more than 5% of benefits and take the company size and complexity into account, in addition to the ROI. They tend to deliver benefits in the 20X range compared to their cost.

A typical deal is around $300,000 for core forecasting and simulation functionality, $100,000-$500,000 per “Decision Desk”, and around $250,000 for implementation services provided during the first six months.

DecisionNext started selling their product in 2013, and its revenue grew 220% to around $800,000 in 2014. Mike says they are currently selling into oligopolies where reputation is based on word-of-mouth and believes they will grow once they are established as the safe choice in these oligopolies. He anticipates 75% growth in the next five years. Like many startups, the company is currently loss making as it develops its products and tries to gain more customers.

Mike pegs TAM for the three target verticals of Food and Agriculture, Natural Resources, and Chemicals, Energy, Paper at $4.5 billion, assuming average annual recurring revenue (ARR) of $750,000 across all 6,000 target customers in these industries. DecisionNext segments the 6,000 target customers into quartiles by size. They assume ARR is $1,250K for the quartile with the largest customers, $1,000K for the quartile with the second largest customers, $500K for the third largest, and $250K for the quartile with the smallest. The four assumed ARR numbers are therefore $1,250K, $1,000K, $500K, and $250K, and the average of those four estimates is $750K.

DecisionNext is headquartered in San Francisco, California with offices in Paris, France and Perth, Australia. They have raised $2.7 million in seed funding from undisclosed angel investors in March 2015. They will likely raise another round towards the end of 2015.

At present, their top priority is to build a fast-growing, self-sustaining company. They are also aiming to nominally create liquidity for growth from an IPO, knowing that being prepared for this enables several other liquidity options as well. However, Mike says they don’t burn a lot of calories thinking about this. What is more important is bringing science to industries to completely change their leading companies’ performance for the better.

This segment is a part in the series : 1Mby1M Deal Radar 2015