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DataRobot Research 8 months 3 days ago #35

  • dsamraj
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Description

DataRobot is a startup that uses Artificial Intelligence to develop and validate predictive and quantitative data models. High profile financial services clients of DataRobot includes US Bank and PNC. [1]. The startup is based in Boston and was found in 2012 by Jeremy Achin and Thomas DeGodoy. [2] Currently Achin leads as CEO. [3]

Market Potential and Demand

The market potential for this industry is limitless. Predictive models are used in almost every industry in a wide variety of applications. The demand for data scientists has seen 37% annual growth in recent years while the demand for artificial intelligence specialists has seen 74% annual growth in recent years. [4]. The first metric reveals that the need for analytical models and data analysis is growing while the second metric reveals that the artificial intelligence industry is booming as well. No doubt with COVID the demand for tech and software solutions has continued to accelerate.

Competitive Advantages

DataRobot currently realizes $100M annually in revenue. [5]. One of the specific reasons Data Robot performed well this year to a special feature of its software that relates to model drift. Model drift is the inaccuracy In model predictions due to the fact that new data doesn’t behave the same way as the model an original AI model was built off of.[5] For sake of illustration, a very basic model will be constructed. Suppose a linear model has two variables X, Y where X is the price of a product and Y is the demand. Let the two points used in the training data be (1, 3) and (2, 6). Clearly the model that would be regressed is Y = 3*X. Now suppose a recession occurs and a data point in the recession data set is (1, 1). However, the old model would predict a demand of 3 units given a price of $1. As you can see there is now an inaccuracy in the predicted model. Such an issue occurred with the COVID pandemic as data behaved differently than in previous quarters. [5] Thus, DataRobot’s AI service gained more clients who wanted to use their model drift software to update old models taking this new data into account. On top of this feature, DataRobot to date has 5 acquisitions: Paxata, ParallelM, Cursor, Nexosis, and Nutonian to gain more AI/data/software technology to disrupt the space faster than other startups in the market. [2]

Competitors

The AI startup scene is hot right now and as such DataRobot has many competitors including Domino Data Labs, Scale AI, DefinedCrowd, Noodle.ai, and Algorithmia. [3] With a business that built around the underlying software that each company offers, research and development is key to seeing which companies come out on top and which companies go bankrupt in coming years.

Funding

DataRobot has also gotten attention from investors. In December 2020, DataRobot led its most recent funding round raising $50M with a valuation at $2.8B. Interestingly the investors participating were not traditional venture capital firms or hedge funds but instead were the investment arms of tech companies namely Snowflake Ventures, Salesforce Ventures, and Hewlett Packard Enterprises. [2]  This was an extension of a funding round from November 2020 in which DataRobot had raised $270M with a valuation at $2.7B. [6] To date DataRobot has had a total cap raise of $750.6M. [2]DataRobot is at the center of an industry that is booming. DataRobot currently has a strong performance, and it’s future performance will be tied to its software and machine learning development efforts. As such the future of DataRobot is highly variable and as such makes it an interesting company to watch in the next few years.

 Articles for Further Reading (and used in part to create this post)

[1] (DataRobot): www.datarobot.com/
[2] (CrunchBase): www.crunchbase.com/organization/datarobot
[3] (Forbes): www.forbes.com/sites/jilliandonfro/2019/...ion/?sh=7eaa36e73e65
[4] (Ladders): www.theladders.com/career-advice/emerging-jobs-2020
[5] (WSJ): www.wsj.com/articles/enterprise-tech-sta...vc-deals-11610743277
[6] (VB): venturebeat.com/2020/12/09/datarobot-rai...erprise-ai-adoption/

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