Building an Analytics Company to $10M+ in Revenue: Mode Analytics CEO Derek Steer (Part 2)

Derek Steer: I worked in the analytics team under Pete who was an absolutely fantastic leader. He taught me a lot about businesses, how to operate within businesses, and think analytically about advancing businesses. He also ended up connecting me with the people who I eventually would start Mode with.

I founded my company with two other folks from the Yammer analytics team. The stuff that we were doing there has been popularized over the last few years partially through our roadwork and other market forces. The stuff that we were doing there has become the thing that the whole world is trying to do right now with data. I feel very lucky to have found myself in that place at that time. 

Sramana Mitra: What years were you at Yammer?

Derek Steer: I was at Yammer from 2011 to 2013 for 2 ½ to 3 years. 

Sramana Mitra: The next step is starting your company after Yammer?

Derek Steer: That’s right. August 26, 2013 was the day that we incorporated Mode. 

Sramana Mitra: What was the thinking or the analysis of the market in starting Mode? 

Derek Steer: It’s an important question. When I give advice to entrepreneurs, it starts with that question. What is happening in the market and what are you bringing to it that is unique? I have to confess. That is not how we thought about things when we started Mode. 

Sramana Mitra: It was because it was your first time doing that?

Derek Steer: It’s partially that. One of the forces that leads people to start companies is hubris. The statistics are that most businesses fail and so if you are going to start a company, especially in the venture startup world, you have to believe that you know something or have a special skill that other people don’t have.

By starting a company, you are implicitly saying that you fall in the top ladder. Everyone that starts a company thinks that is where they fall. Otherwise, they wouldn’t do it. They don’t explicitly say that, but it’s tough back there.

Part of that hubris was we felt that we struck gold already with some of the things that we were doing. We did less market diligence than we should have and this would be the thing that I would change if we were to do it again.

Every successful tale of entrepreneurship is part skill and part luck. This is the part where we got lucky- having been on Facebook and Yammer building the same tools internally to analyze data. Google, LinkedIn, Zynga, and Spotify were also building similar tools and spending a lot of money to do it.

We had a team of five to ten engineers working on internal analytical tools at Yammer, which is a seven-figure annual investment. That’s a lot of money. We figured that everyone probably wants to work like these people. These are the poster children for great data analysis. Everyone wants to work like Facebook and Google. If that’s the case, then we thought about making the toolset available to them. We know how to build it and we’ve done it not once but twice. The business intelligence market has always been saturated.

There are tons of companies like Oracle, Cosmos, MicroStrategy, or Looker that focus on the end-user who is not technical. They provide simple data analysis that is self-served for non technical audiences.

It makes sense because if you are doing that market analysis, that’s the biggest group out there. There are more of those people than there are analysts and data scientists.

When we started Mode, the question we got from investors was, “How many people actually write SQL? How many people are doing data analysis? Is there a market for the thing that you are doing?” We got that question from every single investor and I don’t think we had a good answer at that time. We were able to raise money anyway because we had a good reputation to have come from good companies.

That was the missing piece for us. I would advise anyone to have a good understanding of the market. All the technology that Facebook was using, they had expensive and proprietary databases and they were able to hire the best talent. Both of those were hard for most companies.

Since then, we’ve seen that database technology has become commoditized. We now have Amazon Redshift and Google BigQuery. Today as we are doing this interview, it is the day after the Snowflake IPO which is now tremendously successful and is a big deal for technology.

The Snowflake IPO is a huge validation of what has been happening in the industry. Technology is bringing the power that Facebook had down to a level where you can adopt it as a 20-person startup. This means that any company can now be effective in the way that they use data. This is the same story in the talent market.

If you look at LinkedIn’s annual report, the number of data scientists grows 40% year after year and is consistently one of the top ones over the last three years. We didn’t do a good job of sizing it or understanding it, but that’s what has really ended up driving Mode forward as much as anything else.

We made a product for that more technical audience. The audience is growing and the companies’ ability to adopt this working style is growing and Mode has been there for the ride. 

This segment is part 2 in the series : Building an Analytics Company to $10M+ in Revenue: Mode Analytics CEO Derek Steer
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