Big data startups are getting big money. According to CB Insights, which tracks venture capital investment in the U.S., big data startups have attracted nearly US$5 billion in investment over the last five years and 2012 was the biggest year yet, with 19.5 per cent year over year growth.

Roger Ehrenberg of venture capital firm IA Ventures has raised US$155 million to invest in early-stage companies focused on big data, and in a recent interview with Yahoo Finance he discussed big data and what he’s looking for in potential big data investment prospects.

Here’s Ehrenberg’s advice to entrepreneurs in this space looking to attract investors:

“As early as you can, engage with real customers, even if your product totally sucks. What I see, especially in this space, it tends to draw brainy people but [it’s] not necessarily the most people-oriented, so entrepreneurs develop something cool that not that many people want. But had they engaged with these uncomfortable discussions with customers early on and were open to sharing what they had built early on, and then incorporated their feedback into the product roadmap. It’s where a tech founder also has to be a product manager. Customer engagement as early as possible is the single biggest piece of advice. And have a co-founder. It’s unbelievably difficult to build a company, even in early days, on your own, where you don’t have a foil to get you outside of your head.”

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He also has a good answer to “what does big data mean,” agreeing that it has become a bit of a “stupid” term that has been rather diluted by the IT hype machine. He does have a good definition for it though, and while it’s not an entirely new concept – remember data analytics? – it’s undeniable that the space is hot and the technology has advanced to the point where it can drive business decisions in a much more real way.

Source: ‘Big Data’ Generates Big Returns: Q&A With VC Roger Ehrenberg

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