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Coalesce raises $50M to expand data transformation platform

The startup's new funding is a vote of confidence from investors given how difficult it has been for technology vendors to secure financing over the past two years. on Thursday closed on $50 million in venture capital funding that the vendor plans to use to further develop its data transformation platform.

Industry Ventures and Emergence Capital led the Series B round, which brings the vendor's total funding to $81 million.

Based in San Francisco, Coalesce is a startup that provides data transformation capabilities for customers of the Snowflake Data Cloud. Specifically, the vendor's tools enable Snowflake users to cleanse, model and document data to ensure data quality and prepare data for exploration and analysis.

That tight alignment with Snowflake, meanwhile, has shown to be a good strategy for a vendor still in its early stages, according to Donald Farmer, founder and principal of TreeHive Strategy. Snowflake continues to grow at a significant rate, reflecting both the addition of new customers and expanded use by existing customers, which subsequently increases Coalesce's potential growth.

"Their focus on streamlining data transformations specifically for Snowflake's platform seems well-aligned with Snowflake's growth, so long as that continues," Farmer said. "And the fact that they've been able to win major enterprise customers and raise significant funding suggests the company is gaining traction and that their approach is resonating with the market."

Beyond Coalesce, DBT Labs focuses tightly on data transformation. In addition, vendors such as Informatica, Matillion and Trifacta provide data transformation tools.

Funding as validation

Once flowing freely, funding for data management and analytics startups is no longer easy to secure.

In 2021 alone, Databricks raised $1 billion in venture capital funding and Reltio, Sigma Computing and ThoughtSpot all secured $100 million. In addition, Confluent raised $828 million in an IPO and in late 2020 Snowflake's IPO set a record for the tech industry by raising $3.4 billion.

In early 2022, however, financing came to a virtual stop for data management and analytics vendors. But for the right company with the right technology, funding is available, according to Sanjeev Mohan, founder and principal of SanjMo.

For example, Databricks has continued to attract significant investments. And there have been other rare funding rounds since, such as Denodo raising $336 million in equity funding in 2023 and SingleStore securing $146 million in 2022. But raising funding has, for the most part, been reserved for a select few.

As a result, Coalesce's funding signifies that investors think the vendor's data transformation tools are an important part of the data management process and that the vendor has significant growth potential, according to Mohan.

"This is a clear recognition of how important the data management space is in spite of all the attention being focused on AI," he said.

In particular, management of previously untapped unstructured data is gaining relevance given its ties to generative AI, Mohan continued.

Business intelligence has historically been based on structured data such as financial records and transactions. But s enterprises build and train generative AI models that understand their business, they need to use as much relevant data as possible to reduce the likelihood of AI hallucinations when they ask questions of their data.

With unstructured data such as text, images and audio files representing perhaps more than 80% of all data, being able to operationalize that previously untapped data is critical and represents significant growth opportunities for vendors such as Coalesce that specialize in data transformation.

"We are only scratching the surface [of data management]," Mohan said. "So far, we have only been focused on structured data. Now, we are going have massive amounts of unstructured data. The volume of what we are going to be faced with is going to go up tremendously."

The pros and cons of data transformation.
With $50 million in new funding, Coalesce plans to improve and expand its data transformation capabilities.

In addition, there is potential to grow given the rising emphasis on real-time data movement and analysis, Mohan continued. By supporting both data at rest and data in motion, vendors such as Coalesce can attract more workloads.

"Vendors have nailed data at rest," Mohan said. "Data in motion is the new thing, and you need that because you don't want to run a generative AI use case on stale data."

Despite Coalesce's funding, which comes the same day database vendor Aerospike secured $114 million in equity funding and about three weeks after data platform vendor Ocient raised $49.4 million, capital investments in data vendors remains tight, according to Farmer.

The funding rounds are, however, encouraging signs that select vendors offering critical capabilities can attract investors.

"I wouldn't say that VC funding is suddenly loosening up broadly for data management and analytics startups," Farmer said. "Late-stage investors are being very selective in the current environment, so these raises likely reflect company-specific factors like strong fundamentals. It's too early to call it a turning point, but it's a positive sign for the health of the ecosystem."

Mohan likewise noted that while encouraging, it's too soon to call the recent funding by Aerospike, Coalesce and Ocient a trend.

"A company has to be doing something special," he said. "Just because a few companies are getting funding does not mean the purse strings are being opened up. They're being loosened, but time will tell if these are one-offs or if we will see companies getting funded at a significant rate."

Regarding the right technology at the right time, Armon Petrossian, Coalesce's co-founder and CEO, said that the vendor actually benefitted from getting its start during the COVID-19 pandemic.

Coalesce was founded in 2020 but didn't launch its first product until 2022. During those two years when many companies were scrambling simply to survive rather than expand, Coalesce had secured its initial funding and was able to concentrate on developing a platform targeted to an audience of Fortune 500 companies.

Since 2022, Coalesce's data transformation capabilities have proven their merit enough that Emergence Capital and Industry Ventures, who were part of the vendor's past funding rounds, continue to back Coalesce.

"The round is a testament to our product, team and vision," Petrossian said. "It's also a … statement about our staying power and an indicator of trust going forward."

Regarding how Coalesce plans to use the funding, Petrossian added that the vendor's main goal is to improve analytics by making enterprise-scale data transformations as simple and efficient as possible.

Toward that end, Coalesce will invest in improving customer satisfaction by boosting scalability and performance, introduce new AI-driven features as well as tools designed for a more widespread audience, and increase marketing efforts to make more Snowflake users aware of Coalesce's capabilities.

Meanwhile, research and development, new go-to-market strategies and product expansion are appropriate areas of investment for a vendor of Coalesce's size that more than doubled its funding, according to Farmer.

"Specifically, it can enable them to significantly grow their engineering team to accelerate the product roadmap, scale up their sales and marketing efforts to drive broader enterprise adoption and expand to new verticals and use cases," he said.

It could even be used to fuel merger and acquisition activity, Farmer added.

Next steps

Beyond traditional investments in expanded R&D, marketing and product development, Coalesce's funding provides more opportunities as the vendor plots its roadmap, according to Farmer.

This is a clear recognition of how important the data management space is in spite of all the attention being focused on AI.
Sanjeev MohanFounder and principal, SanjMo

One area in which Coalesce has an opportunity to expand is automation, helping data teams become more efficient. In addition, there's the potential to develop a community and set of best practices to position Coalesce as a thought leader among data transformation vendors.

Finally, Coalesce now has the funding to broaden its reach beyond users of just Snowflake and form new integrations and partnerships.

Mohan likewise said the new funding gives Coalesce a chance to grow beyond Snowflake users.

DBT Labs, perhaps Coalesce's closest competitor, while closely aligned with Databricks, is somewhat more vendor neutral and has integrated with such vendors as Alation and Starburst.

"Coalesce should use that money to expand its footprint," Mohan said. "Currently, Snowflake is Coalesce's bread and butter. DBT is always looming and is going through an expansion of its use cases. So it's very important for Coalesce to be the data transformation vendor across other cloud data warehouses and lakehouses."

Eric Avidon is a senior news writer for TechTarget Editorial and a journalist with more than 25 years of experience. He covers analytics and data management.

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