Supernova Award Category

The Problem

Lexalytics is a privately-held company founded in 2003 and is the pioneer in the field of text and sentiment analytics. In 2008, Lexalytics, although the leader in the field, began experiencing a rough patch and a slowing of revenue growth with the onset of the Great Recession. In addition, Lexalytics started noticing more competitors entering the market and a growing interest among customers and prospects in Software-as-a-Service (SaaS) solutions -- solutions that could be licensed and accessed over the internet. At the time, Lexalytics’ only product offering was an on-premises solution. On-premises solutions are ones that are purchased upfront and managed internally, which typically requires companies large enough and with enough resources to be able to manage the server hardware and software, disaster recovery, network connectivity, etc. all internally. Lexalytics’ problems were therefore both a slowing revenue picture and a changing market dynamic.

The Solution

By 2008, the effects of the Great Recession were becoming evident to everyone, and Lexalytics could see the results in its bottom line. The budgets that existed before to invest a large sum of money upfront for an on-prem technology solution were dwindling. An industry-wide trend was also developing -- although still in the early stages -- where companies were beginning to invest in SaaS solutions. In 2009, Lexalytics hired a new head of sales who was able to focus on growing revenues and by 2011, he determined that the company needed a SaaS business. However, Lexalytics was a company with limited resources and was wary of losing focus on its core business to build an SaaS system in-house. The innovative solution Lexalytics came up with was to instead co-found a new company with an outside development organization, with its head of sales becoming CEO of this new company, Semantria. Lexalytics would provide marketing infrastructure support and software for its chunk of the company.

The results

By co-founding a new company that offered roughly the same technology (text and sentiment analysis), but through a different business model (SaaS vs. on-prem), Lexalytics was able to stay ahead of the coming shift to SaaS solutions, continue to innovate its core technology and features and gain access to a brand new set of customers that otherwise may not have invested in text and sentiment analytics tools were it not for the SaaS option. By late 2013 it was becoming apparent that Lexalytics needed to either buy Semantria to accelerate its growth as sales were shifting to a focus on SaaS or build its own SaaS solution and compete with Semantria. In 2014, Lexalytics fully acquired Semantria, and has pivoted neatly into a running SaaS system that is compatible with its on-premise software, while minimizing its risk. By keeping Semantria close to Lexalytics, Lexalytics was able to develop an entirely new business that has significantly increased the overall value of the company. From a features and technology perspective, Lexalytics has continued its dominance in the industry, which validates its decision to co-found Semantria and expand its business model. Whereas most competitors only had an on-prem product offering when Lexalytics co-founded Semantria, most now offer some type of SaaS product following its success. Further evidence of these results will be given in the “Metrics” section below.

Metrics

Lexalytics now has hundreds of F1000 customers and has grown the revenue of its SaaS business Semantria by well over 150%. Because of its assistance in building Semantria, Lexalytics is now the de-facto SaaS solution for social data processing, where it now counts over 70% of the social listening vendors as customers. In the summer of 2014, Semantria signed Sprinklr (the largest Social Listening vendor) to a long term contract, which solidified Semantria’s position in the marketplace. Whereas Lexalytics business was previously 100% derived from its on-premise solution, the company’s revenues are now 70% SaaS and 30% on-prem.

The Technology

Semantria is the world’s largest cloud-based text mining service which analyzes over eight billion documents per month (or over 100 billion a year) through its API service.

Disruptive Factor

One of the challenges Lexalytics had was that its head of sales was also now the CEO of Semantria. Lexalytics was pushing its existing products and helping Semantria grow in the SaaS business. For the most part, this worked well for both companies as Semantria grew well, but was continually beset by cash shortages which did limit its growth. Another challenge was that the rapid development of Semantria necessitated a refactoring of the codebase to improve stability and scale. In addition, the cultures of the companies were different, so ensuring that both were aware of the others’ values & vision, that each had measurable goals, and that senior leadership in both companies were on board was critical. 

Shining Moment

What we're most proud of at Lexalytics is that not only were we able to weather one of the most economically trying times since the Great Depression where many smaller tech companies failed, but that we were able to drive our industry leadership in an innovative way; and we were able to do it through 100 percent revenue-funding, which means we've relied on zero VC or public funding.