Staples Hits the Easy Button in Big Data and Acquires RUNA

Runa.Small

Staples, the largest office product company in the world and the second largest e-tailer acquired Sierra-backed RUNA today.  I congratulate the team of brainiacs at RUNA, a company that Sierra funded just 2.5 years ago, on building a great customer base, on getting excellent traction and finally on selecting a great partner in Staples.  I’m sure they will change the face of ecommerce.

 

Who say’s it can’t be done!

I love ‘fearlessness’ in entrepreneurs.  Ashok Narasimhan walked into my office for the first time it was 2009.  “Simha” means Lion in Hindi and Ashok had lived his name his entire career as the founding CEO of Wipro, CMO of VeriFone and CEO of July Systems.  RUNA was his latest venture.

We talked about his vision on how Big Data could be applied to every session in ecommerce to make the machine your best sales person ‘all the time’.  He said, “Tim, imagine if you were using machine learning at scale to train your ecommerce sales guy to always gave the optimum discount to convert a visitor to a buyer.”  With no increase is web traffic needed and more conversion, that entire margin would fall right to the bottom line.

I was skeptical, but encouraged him to try the engine on a few customers and see if this really worked in the real-world.  With a steely look in his eye, he left, only to return 9 months later with 20 small ecommerce customers!  His engine was running in the cloud and showing an average “lift” of 23% across all those merchants.  I was hooked.

Salman Ullah, Managing Director at Merus Capital and I, representing Sierra Ventures, co-lead Series A in late 2010.  From a humble office in Mt View, we started building out the team, and took the product to market.

Circuitous road to success

Our initial vision was to scale our SMB business, as there were 1000’s of ecommerce companies that needed an automated engine that would raise their e-tail traffic conversion without additional discounting or buying more traffic.  Customers started to trickle in and our Gross Merchandise Value (GMV) under management began to rise and we soon expected the cash to start gushing in.  Boy, were we wrong.

 

Staples.Small

The challenge with the SMBs was that they did not believe the positive revenue lift RUNA created.  Conversions rose so magically, they did not trust the system.  Despite our building a fully auditable A/B testing infrastructure into our engine, it was an uphill task.  So, in mid-2011 we decided to switch from the SMB to Internet Retail top 100 companies, and found one company who saw the vision.

 

eBay finds gold in Big Data via RUNA

We had a great sponsor at eBay who believed in the technology and its power and decided to try it out for the holiday season in 2011.  He was not ready to give us the crown jewel of “discounting on price” as our first project.  But he asked us to use RUNA to optimize shipping offers, a program eBay launched called Fast’n’Free.  Amazon had shown that offering an online customer ‘free shipping’ makes them six times more likely to buy your product !.  The challenge is figuring out in real time using machine learning and geographic lookup, which customer to offer ‘free shipping’ to, such that eBay does not lose its shirt in shipping expenses.

eBay’s volumes were nothing like what RUNA had see before, and after a sleepless Dec 2011, the system went live at eBay, and by Q2 2012 the numbers were staggering.  Within months, Fast’n’free had exploded to:

  • 12.7m transactions.
  • 6.5m unique buyers
  • 140k average daily transactions
  • 10% of the items viewed are Fast’n’Free eligible – up from 1% items in Holiday 2011

eBay had found profits and RUNA a great customer at massive scale.

Big Data and Big Retail is a marriage made in heaven

With eBay as a success, RUNA scaled into the rest of 2012-13 and took many customers live.  The applicability of the algorithms and real-time scoring engine was packaged into three product lines:  PerfectOffer, PerfectShipping and PerfectBundling, and customers were across Automotive, Couponing, Publishing, Gaming and Big Box Retail.  Currently RUNA runs 700,000 algorithms, 3B behavioral events a day, and serves up recommendations in less than 1 ms.  That’s scale.  The Clojure based engine is the brain-child of CTO Amit Rathore, who’s got a great future ahead of him.  He literally wrote the book on it:  Clojure in Action.  Thanks Amit !

Vertical application of big data techniques is the future of big data. This is where real value will be created.  At Sierra, we have done and will continue to do “horizontal” big data investments like Teradata (NASDAQ:  TDC), Greenplum (Sold to EMC in 2010), Alpine Data (Predictive Analytics on Big Data) and Treasure Data (Next Generation Data Warehousing in the cloud).  But we are also very bullish on Big Data applications that transform verticals:  BINA (Big Data in the exploding genomic market) and RUNA (Big Data in Retail)

I salute the Staples Senior Management for working closely with RUNA as a customer, seeing the value RUNA was creating with their technology in the market, selling them on the combined vision of what RUNA could achieve with Staples, and welcoming them into the Staples family.  I salute Ashok for leading the team and building great product and value.

In an early marketing brainstorming session at RUNA, I asked Ashok, “BTW, how did you come up with the name RUNA.”  He answered, “It was a four letter word, and the URL was available.”  To which I said, “Not good enough…we need the acronym to represent our shared vision” and we came up with Revenue Ultimately Needs Algorithms.  I guess, Ashok, we were right