Snowflake Inc (NYSE:SNOW) launched its venture arm only eight months ago and has already garnered a number of sizable investments under its belt — all geared towards bolstering its vision of a Data Cloud, a single place where companies can organize all of their data assets to ensure they comply with emerging regulations.
Just as Facebook built its own ecosystem by acquiring Instagram and What’sApp, there's a real opportunity for Snowflake to create its own data ecosystem through its venture arm.
The company has made five other investments to date. Four months back, it announced a $22 million investment in Quantifind, a machine learning platform/software provider used by financial institutions and law enforcement to discover signals of risk, including fraud and money laundering. Snowflake also invested in Lacework, a security platform for the cloud generation of builders that provides compliance checks and automated threat defense and intrusion detection for cloud workloads and services on AWS, GCP, Azure, and Kubernetes. Rounding off Snowflake's security portfolio is Hunters XDR, which elevates security stacks to detect threats at greater depth and scope, transforming petabytes of organizational data into attack findings. On the AI service side, Snowflake has invested in DataRobot, Knoema, and now ThoughtSpot. This early portfolio demonstrates the products range across disciplines which only grow more important and influential in a world transitioning to cloud storage as the new standard.
What’s So Special About Snowflake?
As the enterprise shifts to digital, companies need to embrace transformation to stay competitive as consumers want all their experiences to be personal, simple and transparent. This will require an increase in personalization and a deeper perspective of the end user, a perspective only achieved through deeper-driven analysis of consumer behavior. Snowflake will play a critical role in deepening experience through their proprietary architecture. They have the ability to better support enterprises by driving their clients through faster, cleaner and more insightful data sets that can be analyzed in real time for unique insight. They do this by separating computing power from the storage capacity. This method archives greater elasticity and pricing. Just as other technology platforms have built their own ecosystem by acquiring start-ups to bootstrap their platform. There's a real opportunity for Snowflake to create its own data ecosystem through its venture arm.
One of the largest benefits of this software is it’s entirely cloud native built, which means it does not require a retrofit. It’s a software accelerator that allows users to architect both structured and unstructured data seamlessly, while affording consumers the ability to organize data across a multitude of disciplines from data science to application development. Essentially, it’s a turbocharged data warehouse product. SNOW is cloud-agnostic, meaning it works with all three cloud providers, not limited to one provider. This represents tremendous upside as various enterprises look to transform their data architectures, with SNOW looking to emerge as the biggest market disruptor.
Snowflake demonstrates its industry-changing value through unstructured data analysis like video, graphs and unique data sets like facstset for investment management. Traditional databases and warehouses struggle with this type of data set. Typically, some of this type of work is done in excel spreadsheets, like laying factset data over an investment model. Snowflake eliminates that tedious practice. If you are in money management and want to look at consumers’ behavior data sets when weighing different analyses like looking at earnings investment, Snowflake has the ability to use AI and machine learning to factset and market data to create a richer analysis.
There are Lots of Pros, We’ll Have to Learn Cons as We Go
With many of Snowflake’s relationships being new, there isn’t a wealth of data points to refer to when accessing the platform and service’s potential weaknesses. That doesn’t mean it’s flawless by any stretch of the imagination; in fact, some of its differentiating strengths may also be drawbacks because Snowflake isn’t native to competitor platforms. Amazon has Redshift, Microsoft has Sysnapse, and Google has Big Query, all of which ostensibly create a potentially more seamless user experience ecosystem. Onlookers could make the case there is more platform synergy because those products are all from the same vendor. In a similar way to having an all Apple ecosystem regarding seamless transition between apps and products as opposed to sharing information across Apple and Amazon apps and hardware in a home set up, users could favor having all their processes live in one platform.
In this case, Snowflake’s versatility may actually be a potential obstacle for some customers. In my estimation and experience, customers don’t currently feel this way, but only time will tell. Snowflake has no viable direct competitor in it’s unique dual-threat offering right now. They occupy the dominant marketplace position, as shown by rapid industry uptake. We’re seeing widespread adoption across all business verticals, and almost everyone of note in the financial services world has followed the trend. That said, Snowflake should be mindful to not price itself out of prospective customers with aggressive price points due to its prominent market position. In some cases Snowflake can be more expensive than it’s platform native competitors because it’s a stand alone product, whereas competitor cloud-based provider product costs are bundled into one flat fee.
Snowflake is clearing and seeding companies to expand their platform and ecosystem. Why? Because their product stacks neatly on top of any cloud environment. Whether customers use AWS, Azure, or Google, Snowflake is compatible; it’s cloud-agnostic. Snowflake also has an impressive platform called the “data exchange”. This allows all their clients to monetize and share data with other Snowflake customers. There is currently no platform in the marketplace able to build a community of high level clients to share and monetize data comparably to Snowflake, which explains why companies that have AWS for their infrastructure still stack Snowflake on top.
Data science is an emerging trend that’s here to stay, whether that’s for fashion wear or consumer buying habits for electric cars; data powers all those insights businesses crave, so having data in the right place, at the right time, and at high speeds is critical. Snowflake provides exactly these offerings in a way like no other, so their potential impact on the business world as a whole is substantial. It’s hard to deny Snowflake’s appeal, as evidenced by Warren Buffett and Salesforce Venture’s investment in Snowflake pre-IPO, which totals well over $1bn.
Snowflake’s Data exchange Marketplace allows customers to share secure enterprise data sets within accounts, effectively solving the siloed data problem within the enterprise as Snowflake enables companies to join all their data together into one single set which reduces data latency. Data Marketplace will allow users to access data in real time to make business decisions instantly. Snowflake's virtual data warehouse setup allows different workloads to share the same data while running independently so that customers can run smaller workloads which reduces cost. Companies across disciplines will value the a-la-cart style offering, enabling them to only have to pay for what they need.
Snowflake Must Continue Innovating To Fend Off Competitors
When it comes to legacy banks, their data is housed within legacy systems, meaning data is siloed in its databases (within RDS), and is unable to handle unstructured data. Snowflake is unique in its ability to separate storage from computing power. Typically, you’re toggling the bandwidth based on the task between the storage and the computer layer. Snowflake can segment data to create efficiencies, which is a major competitive separator. Depending on how each part of your business is using data, Snowflake segments everything into the corresponding pertinent areas. For example, if you are in data science you are going to look at data that is relevant to data science, same with development, data engineering, data lake, and warehouse, etc. Snowflake offers unique benefits including, speed and incredible efficiency architecture that can handle both structured and unstructured data.
Snowflake is in a pole position to do what Facebook did for social media when it acquired Instagram and WhatsApp to enhance its platform. Its value proposition is solid, and evergreen, allowing it the flexibility to be both product and provider. Snowflake Ventures signal the firm’s intent to establish itself as the preeminent force in Cloud Data for years to come. Naturally, Snowflake will continue to invest in startups that enhance their platform as they continue on a journey to create the most unique cloud based data solution in the market. Only time will tell if they’re investment strategy will create sustained growth that will outpace and out innovate its competitors' attempts to replicate Snowflake’s unique offerings as the market catches up.
Article by David Donovan, EVP Financial Services, Publicis Sapient