Tagging technology provider Nstein announced today that they had raised an additional $10M ($Cdn) in debt financing.
While this will, no doubt, provide another year or two of life support for Nstein, for me it reaffirms my disappointment that the semantic tagging sector still has yet to take hold. Nstein announced revenues of $9M Canadian, with a net loss of ($6.7M) Cdn and an EBITDA loss of ($3.1M) Cdn. Reviewing Nstein's press releases for the past 6 months, only one was related to a sale; the others were simply marketing hype or biz dev deals with no customer involved.
More than five years after they burst onto the scene, the major players in the tagging and text analytics market have been unable to gain a strong foothold. Together, Inxight, ClearForest and Nstein have revenues of less than $30M and none are near profitable. And these three are among the survivors. Numerous other companies including Lexiquest, WhizBang! Labs and Lingomotors went belly up or were acquired at bargain basement prices.
Despite all the hype, the past five years have shown these technologies remain niche tools with their primary success in the publishing market (semi-automating manual tagging) and federal government (intelligence). Early adopters in the pharmaceutical, manufacturing and other markets have found the technology too complex with too limited an ROI.
I believe there is still an opportunity for this technology to take hold. However, none of the companies has the size nor stature to make it happen. While some larger players have gotten involved in this space (IBM, SAS, SPSS and others), they view unstructured data as tangential and their sales force will not focus on it. I think the necessary step towards success would be a roll-up of the remaining big three (Inxight, ClearForest and, perhaps, Nstein or Attensity). A $30M company with focused management could establish a presence in one or two key markets. Instead, today each Company ends up chasing too few sales opportunities and takes on projects which they are ill-suited for, just because it's too hard to say no to revenue at their current size.
Semantic tagging and text analytics still holds much promise. Hopefully, these companies will make the needed strategic decisions before they all run out of cash.
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