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​Are Big Data Companies A Good Investment?

We are seeing increased funding across the board, but is it a good buy?

15Jan

2014 saw some of the largest Big Data companies not only raise billions in capital but some even managed to go public, creating a significant question: Are they worth investing in?

With the buzz around Big Data in recent years we have seen companies jump on the bandwagon, recruiting data scientists and paying millions to vendors to make sure they are getting the best products.

What this has shown is that there is demand for these services.

We have seen that Hadoop Vendors in particular, such as Hortonworks have seen their standings grow considerably. They were arguably one of the most successful companies from the Big Data bubble to have gone public last year.

They even increased their value within the first two days of trading, which is generally rare within technology companies.

They are not even the largest within that space. With a valuation at around $1 billion, they are some way of Cloudera’s value, thought to be around $4 billion. However, Cloudera are yet to go public.

However, simply basing the quality of investment on the amount of people who buy shares or the relatively arbitrary valuation is not always a guarantee that it is of good quality. Many times it comes down to the quality of the investors, those who have the knowledge to make money from their investments.

The veteran investors such as Warren Buffet.

Warren Buffet made the decision to buy 63.9 million shares in IBM on the back of their early Big Data successes. This is not simply an indictment of IBM as a company, but of the Big Data community as a whole. This is because the Omaha Oracle has famously been shy of making technology investments, meaning that his investment in IBM as they work through their Big Data program was considered when investing.

All of this comes from the back of MongoDB raising $80m in funding after looking for only around one third of that, simply because investors wanted to give them the money. It is a real indictment that the company’s $1.2 billion valuation is close to the mark.

In terms of small term profits, there are few companies who are truly impressing, but investments at this stage are indicative of this only being a short term problem and that in future they will be making billions in profit. 

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