Ex-Microsoft exec digiMines for gold

Sporting a gleaming bald head, wire-rimmed spectacles, and a 6-foot-5-inch frame, Usama Fayyad is a striking figure. With his newly funded startup, DigiMine, Mr. Fayyad hopes to be just as imposing in the emerging market for outsourced data mining.

He’s off to an auspicious start. Mr. Fayyad says that it took just two weeks to raise $20 million for his five-month-old startup. DigiMine on Monday will announce the funding, $15 million of which came from The Mayfield Fund and the rest from angel investors. To date the company has raised $25 million.

But the cocky Mr. Fayyad has his critics, some of whom say there is little demand for the hosted service that digiMine offers. “Little guys come and go all the time,” sniffs Brad Wilson, director of marketing for competitor E.piphany.


Mr. Fayyad claims that when he had his initial meeting with VCs, he expected to meet with just two – but no one informed him in advance that eight more wanted to hear his pitch. The CEO says Intel (Nasdaq: INTC) was among the investors that he snubbed.

Mr. Fayyad says he’s in the early stages of seeking an additional $30 million to $50 million in order to make his dreams of a data-mining empire a reality. He hope to launch an IPO within one and a half years.

DigiMine is not a traditional data mining or data-warehousing company. It doesn’t sell a platform or applications, as do major players such as SAP and Oracle. Instead, it sells its data mining service to e-commerce companies for $5,000 to $100,000 per year, depending on a customer’s usage.

For now, Mr. Fayyad is targeting midsize to large e-tailers and has signed on 20 customers, among them streaming media startups, telephony companies, and content portals. Among digiMine’s customers are Dialpad and Allrecipes.com. Mr. Fayyad declines to reveal sales figures.


The attraction to customers, other than the low cost, is that digiMine operates the whole service; customers don’t have to worry about installing or monitoring complex software. Mr. Fayyad claims he can get a client operational within three days.

DigiMine’s solution is straightforward. DigiMine engineers install one piece of software, called the Data Slurper, at the customer’s base of operations, while the rest of the process is hosted through digiMine’s headquarters in Kirkland, Washington. DigiMine uses the highest encryption standards available to the public, called 128-bit keys, to protect content.

Although digiMine isn’t the first to tackle this market, Mr. Fayyad says he has a big edge: his solutions cost thousands of dollars vs. the millions charged by his competitors, which he says include IBM (NYSE: IBM) and E.piphany.

Competitors don’t appear to be too worried about digiMine. E.piphany’s Mr. Wilson says, “It look like an okay technology, but I don’t see any demand for an ASP (application service provider) for data warehousing or personalization.”

Mr. Wilson asserts that customers that would be drawn to an ASP model such as digiMine’s are “low-end, cash-strapped companies.”



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