With an additional $30 million in funding, Socrata strategizes to spur open data usage with its new products and government-centric services -- its founder and CEO shares how in this Q&A.
Kevin Merritt was into open data before it was hip, before developers rushed to formulate the movement’s apps, before eyeballs in cities, states and counties saw it as the next default for transparency in government. Merritt, a forward thinker, saw data’s possibilities as CIO of Morgan Stanley, as the director of operations at Microsoft’s Exchange Hosted Services, and finally, as the head of Socrata in 2007, where he founded — all marketing hyperbole aside — one of the most pioneering open data companies to date. Its product lines vary from city and state performance dashboards, to open data portals, to financial data applications, and have put it on the open data movement's front lines.
The company hasn’t halted its aggressive growth, either, and on Dec. 2, announced an additional $30 million in series C financing from backers. Merritt credits the investment, sent by Sapphire Ventures to total $55 million in overall funding, to the company’s performance. In 2014 Socrata acquired about 100 new public-sector customers from city, county, state and federal jurisdictions — passing the 200 mark for its list of clients. In 2015, it aims to more than double this number. Likewise, Socrata forecasts annual revenues are on track to double by year’s end compared to 2013.
Open data’s coming of age and acceptance is probably the greatest accelerant to the company’s market success. The Obama administration’s executive order, issued in May of 2013, for federal agencies to make data and information digitally legible and available online is one source. Another is the May 9 passage of the Digital Accountability and Transparency Act (DATA Act), a bipartisan piece of legislation that mandates financial expenditures of all federal agencies to be published as open data by 2017. Beyond this, recent years have seen an upswell in open data policies popping up in cities, counties and states across the country. The value here is citizen transparency, but perhaps more so are internal efficiencies for government staff.
To add perspective on the company’s growth and its next steps, Merritt shared his thoughts with Government Technology in an interview about Socrata’s past and where it’s going.
Editor’s note: comments have been lightly edited for brevity and clarity.
Government Technology: Congratulations on the recent $55 million in total financing. What does the funding represent for Socrata? Will it be slated as general fund money or be channeled to develop other projects and initiatives?
Socrata Founder and CEO Kevin Merritt: No. I would say that we're going to use the proceeds in a number of areas. One is to accelerate our product development against the road map. So we're 100 percent focused on governments, helping them be data driven. We've got three products today: open data, a performance management solution and a Financial Transparency Suite. We'll continue to invest in those products and we also have a number of lightweight applications that we'll introduce into the market in 2015 — still focused on government — and then expanding an environment that we created earlier this year called the Open Data Network [a network collaboration of open data from private and public stakeholders]. And then, kind of more broadly, we'll invest in expansion in two directions. One is geographically, we've been having some good success in Europe, in Spain, and in Latin America and Australia and New Zealand. So we'll invest in covering those markets a little bit more heavily. And then here in the U.S., we'll invest in offering our services to smaller governments.
Today, most of our customers are large cities, large counties, bigger states, big federal agencies, and we think our software has application in small and midsize governments as well, so we think we can offer our services to those organizations.
GT: What types of services are most in demand for small government jurisdictions with respect to open data?
Merritt: I think what I would highlight is a new application suite that we introduced three or four months ago called the Socrata Financial Transparency Suite that currently has two applications, one focused on budgets, and the other on expenditures. But we'll ultimately have five or six applications for government to put online: their contracts, their payroll, their capital projects, those kinds of financial data sets. And these are a little bit intentionally more focused. Whereas our open data platform is designed for governments to put any kind of data online, these are designed more narrowly, specifically for governments to put their financial information online in formats that are really easy to understand and easy to use.
I would argue that in the last four months, this would be the fastest selling government product in history. We're adding customers to the Financial Transparency Suite at a really fast pace. And what's remarkable to me, is how small some of these governments are. I mean literally, some of these cities serve populations of 5,000 to 10,000 people that are adopting apps from our suite.
GT: Looking at apps from the state and federal level, would you say these kinds of financial applications are also most in demand?
Merritt: All governments at different levels — cities, counties, states, federal agencies — have financial data. So it's easy to see how that product is transferable across different levels of government. There are certain kinds of data sets that cities have that, for instance, counties don't have. Then there are certain data sets that counties have that cities don't have. Counties put online a lot of tax assessment data. Cities put online a lot of public safety data — and it's not that counties don't have them, but cities have police departments and they're putting that information online there. Federal agencies have budgets but they also have a lot of data related to the line of business. For example, our largest customer is the U.S. Department of Health and Human Services, so there is a whole variety of health-related data, health performance data, transactional data, claims data, that these health agencies are putting online.
GT: I know the DATA Act is another big push propelling open data and especially financial transparency. Is Socrata playing a part in the implementation of this act?
Merritt: The U.S. Department of the Treasury is a customer of ours and we have a little pilot with the Treasury right now to see if our financial transparency suite might be something that is cost effective for federal agencies to comply with the DATA Act. It's still early in that process, so we'll kind of see where it goes. But generally, we're helping the Treasury to become more data driven and helping the Treasury get its own data online. At the same time, we're exploring opportunities to see if our application suite can be helpful to other agencies as they go about implementing the DATA Act.
GT: I saw you had 36 new customers in the third quarter-- do you have a goal or projection for new public-sector customers in 2015?
Merritt: If you look at Socrata over the last three years, interestingly, each year we have added twice as many customers as the prior year. We just crossed through 200 customers. We've added 100 in 2014. We added 50 in 2013. We added 25 in 2012. Our plan in 2015 is to add somewhere between 300 to 400 new customers. So, it's a fairly brisk pace of adoption, especially for our Financial Transparency Suite, but also for our open data and performance management products.
GT: What’s the biggest factor, or factors, propelling all of this company growth?
Merritt: I would just say that open data has gone mainstream. In 2009 and 2010, some governments were kind of experimenting with this idea around transparency and accountability: "Should we put our data online, or should we not?" Now, virtually every government, whether you are Republican or Democrat led, motivations differing from city to city and county to county and state to state -- all are deciding that putting data online makes all sorts of sense around accountability and transparency, economic development, service delivery, there are all sorts of motivations for it.
So I would say the whole concept of open data has gone mainstream. And secondarily, they're realizing that the more data that's available online, the better they are able to actually deliver their own services. And this because they're able to start comparing and sharing and benchmarking data with each other. And so what we're seeing, for example, in Boston and Somerville and Cambridge, Mass., it that communities are now putting their data online so these cities kind of form the nucleus of a regional data hub. We see the same thing in Seattle, we see the same thing in the Bay Area, where you're starting to see regional data hubs emerge and more and more cities wanting to be a part of that network. This whole idea about open data has really blossomed from open for transparency and accountability's sake to just a more streamlined use of data for efficient data-driven government. That's what the bigger story is here. Open data is kind of opening the senses of government to think about their data in a completely different light than they have in the past. Now, they are really starting to utilize their data as a strategic asset in the delivery of core services.
GT: As you mentioned, a lot of open data’s value happens inside government. And while open data, of course, can help in numerous ways from stimulating economic growth, to driving business with services and products based on open data, judging from experience, would you say internal use is the current biggest value of open data?
Merritt: I would actually support that with two positions. One is that we run this as a cloud-based service. We run a multi-tenant service so basically anytime someone accesses data, it ultimately results in an Application Programming Interface call against a certain data set -- and we can measure where all of those API calls are coming from. Fifty percent of all the access calls are coming from inside government. So clearly they're seeing value in their own open data to break down, what historically has been known as these data silos. So now they're able to get at their own data better, as well as get data from other agencies than they have in the past.
The second point that I was going to make is part of what got investors excited about Socrata and what led to us to raise this recent $30 million investment [from Sapphire Ventures] is how we're able to expand the use of our platform after we sign an initial customer. Tthe way I like to describe it is often times a city or a county or a state initially adopts Socrata for a classic external open data use case, but then, what they recognize is that the platform has significant value in their internal data sharing scenarios, and so they start putting more and more data in the platform for use internally as well within the government organization.
GT: A lot has been said about a need to create open data standards so it works across different platforms, localities, departments, jurisdictions, etc. How is the Socrata Open Data Network (ODN) working to cultivate that?
Merritt: You're right. Data standards are a key part of sharing, comparing and benchmarking, and interoperability of applications. So what Socrata is doing with the Open Data Network is working pragmatically with industry partners to try to evolve and expand data standards so it meets the need of the industry players. For example, the first part of the open data network was housing data where we extended the house facts standard based on input from companies like Porch, Zillow, Trulia, Realtor, Move.com and so forth. The second piece of that is we basically made it easy for governments to transform their data — from whatever format that's easiest for them to publish in — into that [standardized] format.
We do that through two mechanisms. One is we've invested pretty heavily in machine learning and data science over the last year and a half so we're able to automatically categorize not only data sets, but we're actually able to categorize columns within the data sets to tie those to specific columns in the schema of the data standards. And then the second piece of that is building tools and wizards that make it easy for governments to transform their data from whatever their easiest-to-publish format is, into the standardized format.
GT: How is Socrata fostering open data app creation and incentivizing developers to build quality open data apps?
Merritt: We've formed a formal evangelism team headed up by a director of developer outreach and developer evangelism, [Chris Metcalf]. So he is basically charged with going out and building a community of civic developers who are using government data to build applications. His charter is to do whatever you need to do to make life easier for civic developers to build applications. The next piece of that — kind of related to the last question — is helping these developers port their applications across cities ... because, in the end, we think the long-term viability of the civic developer movement is going to be based on portability of applications. If so, we can expand the market for civic developers from the city they live in to any city that publishes their open data. We're going to help elevate the stature of that civic developer from a hobbyist to a professional — which in turn encourages them to invest in their application with future development and to build the support mechanisms around it. This ultimately allows that app to be sustained and maintained in many other cities [and continue the cycle].