When I first met with the team at , CEO of Splunk. He told me that they had “figured it out” and that we should meet up. I was certainly game to hear what they had figured out and we got together again a short time later.
A short time after investing in Splunk, I was meeting with a group of managers from one of August Capital’s biggest Limited Partners (the folks who invest in our fund). I was describing for them what Splunk was planning to build and they asked me “so what’s the market size for that?” I quickly answered as best I could — “I have no idea.” Needless to say, this was not the most satisfying answer they had ever received and they stared back at me with a look that suggested perhaps I should come up with a better answer. But the reality was that I didn’t have a better answer. Not because it was unclear if there was any market for what Splunk was building. But, more importantly, because once Splunk had built their search engine, it was unclear what market they would go after. I explained to my investors that Splunk had a number of multi-billion dollar markets in which they might play (management, compliance, BI, security, capacity planning, development, etc.) and the only question was which ones they would choose to go after first.
That conversation with my Limited Partners was over two and a half years ago. And since that time, the Splunk team has built precisely what they promised — a large-scale, high-speed search technology for your data center. But despite the fact that Splunk’s software has been by over 100,000 users and despite the fact that there are now more than 350 paying enterprise customers (including 21st Century Insurance, BEA, British Telecom, Catholic Healthcare West, Chicago Mercantile Exchange, Comcast, Dow Jones, FedEx, Fiserv, GE Consumer Finance, LinkedIn, Mantech, Mozilla.org, NASA, Shopzilla, Telstra, U.S. Department of Energy, U.S. Department of Justice, U.S. Department of State, Vodafone and Yahoo!), I would still have a tough time answering the question posed by my Limited Partner.
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