Wednesday, July 2

Powerset: An early exit for a promising startup

Back in May, I covered Powerset's launch of WikiSearch and expressed my skepticism. Today, it was formally announced that Microsoft is buying Powerset for undisclosed sum, but rumors put it around $100M. Microsoft VP Satya Nadella has more on the Live Search blog and Powerset announced it on their blog as well. Powerset writes:
With any startup, the challenge is to take the seeds of an idea and grow it into a viable company. At Powerset, we transformed our idea into a world-class semantic search platform, demonstrating the future of search with our Wikipedia search experience. But building a large-scale semantic search engine is expensive, requiring an engineering effort and computing resources beyond what most start-ups could ever imagine.
Unfortunately, it seems Powerset wasn't meant to be a viable long-term independent company.

To me, it sounds like investors weren't willing to pour the millions (or tens of millions) of dollars into the hardware and engineering infrastructure needed to scale Powerset's service. Considering the competition and current market conditions, it's not surprising that investors were unwilling to take such a big risk. For Microsoft, which already has large investments in data centers and an ad platform, it's an easier proposition. Don Dodge, Director of Biz Dev for Microsoft's Emerging Business Team, discusses the implications of Powerset's semantic text analysis technology and its potential applications for Microsoft.

My biggest concern about the acquisition is that could mean the end of Powerset's investment in open source infrastructure, namely the HBase project, which is an open-source version of Google's BigTable.

It's sad to see Powerset get folded into Microsoft at such a young age. Search is a tough business and considering the situation the deal seems like a good business decision for both parties. Congratulations to the Powerset team! I look forward to watching what you are able to do with the resources of Microsoft behind you.