DigiMine wants to turn data into gold

The algorithms and data-mining software created by Usama Fayyad have been used to find volcanoes on Venus and galaxies far, far away.

Now the former scientist at NASA’s Jet Propulsion Lab is using that same technology to create digiMine, a Kirkland start-up he says will revolutionize the way businesses manipulate reams and reams of data.

Founded in March by Fayyad and Microsoft veterans Nick Besbeas and Bassel Ojjeh, digiMine is attempting to bring the science of data mining to the masses.

So far, the company is off to a fast start.

With 60 employees, the company has already outgrown a cramped Kirkland headquarters. Money is flowing in as well. Next week the company plans to announce a $20.2 million second round of financing led by the Mayfield Fund, bringing total financing to about $27 million. Not bad for a company that didn’t exist a year ago.

“Data mining is usually fairly expensive and difficult to do,” said Robert Mirani, research director at The Yankee Group. “But if digiMine can pull it off for a reasonable monthly fee, there will be a large amount of companies that will flock to this.”

Much of the excitement surrounding digiMine revolves around Fayyad, the charismatic chief executive who led Microsoft’s Data Mining & Exploration Group from 1995 to March 2000.

Born in 1963 in what is now Tunisia, Fayyad’s giant hands match the frame of his 6-foot-5-inch body. Those hands float through the air as he speaks about the power of data mining, a technology that he has studied for 15 years.

“This technology that I am so passionate about really is useful to every (business), they just don’t realize it yet” he says.

Fayyad has been a highly sought after researcher and scientist for years. His doctoral thesis at the University of Michigan established him as an expert in the emerging field and brought multiple job offers from large corporations. But instead of joining the corporate ranks, he took a position at the government funded Jet Propulsion Lab in 1991. Using his skills in pulling knowledge out of data, Fayyad was able to glean differences between distant stars and galaxies, a question astronomers had been grappling with for years.

Solving that problem brought national attention from the scientific community. It also confirmed Fayyad’s belief that data mining technology could be used to solve extremely complex problems.

“The fact that I came up with a program that would find stuff in data that I as a human or even the smartest human could not uncover even with years of analysis, it was like a whole new frontier,” he said.

Microsoft lured him away from the Jet Propulsion Lab in 1995.

“I realized that scientists were trying to get something out of their data but most businesses were not,” he said. “So the opportunity was huge.”

Fayyad foresaw a time when corporations would be able to dig through their electronic records and tie together disparate elements. For example, a car manufacturer could use data mining to predict potential bottlenecks on an assembly line. An online retailer could use it to pinpoint buying patterns of customers.

Fayyad, who had two offices at Microsoft (one for his work in research, the other for product development) was responsible for embedding data mining technology into SQL Server.

He loved the work but soon got the itch to take data mining a step further. Despite an hour-and-a-half discussion with Microsoft CEO Steve Ballmer, Fayyad decided to leave the company and start digiMine.

“He came very close to changing my mind,” Fayyad said. “I had to take a day off and go cross- country skiing in the Cascades to make sure this is really what I wanted to do.”

While dozens of companies such as Accrue Software and WebTrends help businesses track Web site usage, Fayyad says digiMine provides more detailed and accurate analysis at a lower price. It does this by plugging into the computer network of its customers and running what is called a “data slurper” to collect information. It uses the data to generate reports that can help companies in a range of areas from targeted advertising programs to determining which questions on an online registration form discourage customers.

“IBM will give you a solution like (ours) but you have to pay up front over $1 million and then you have to operate it and that means investing in 10 people to run it for the next couple years,” he said. DigiMine plans to charge from $5,000 to $15,000 per month for the hosted service, a price Fayyad jokingly says is so low his investors are getting a little mad at him.

But truthfully, investors have been anything but upset. The company closed the $20.2 million venture capital round in less than two weeks, an amazing feat that surprised its law firm.

Sam Jadallah, a former Microsoft vice president who now runs Internet Capital Group’s Seattle office, recently told The Wall Street Journal that investing in digiMine “was one of the quickest decisions I have had to make.” Other investors such as former Microsoft Vice President Pete Higgins and Mayfield Fund’s Yogen Dalal also are helping to guide the young company. But Fayyad admits the most important thing will be satisfying customers. He has already won some converts there.

Scott Carreiro, IT manager at Seattle online content site AllRecipes.com, is one.

“They pretty much do an impossible task,” said Carreiro. “We operate a number of sites that generate huge log files and we have for years been trying to use tools to get information out of the files. They took over this task and took a lot of pressure off.”



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