Telstra Ventures backs US data engineering start-up in $76m raise

After 18 brutal months for venture capital funding, Coalesce, a firm focused on automating data engineering to train AI models, has attracted big-name investors.

Coalesce co-founders Armon Petrossian and Satish Jayanthi are humbled by the support in the Series B funding round.

A start-up backed by Telstra Ventures, focusing on automating labour-intensive data engineering, has raised almost $US50m ($75.6m), signalling growing support from investors for fledging tech companies after 18 brutal months.

Coalesce, based in San Francisco, helps ensure raw data is clean and consistent for companies to train artificial intelligence and large language models.

In the race to adopt AI-powered systems, Coalesce chief technology officer and co-founder Satish Jayanthi said many businesses were struggling to extract insights from “data lakes where they dumped all their data, effectively turning them into data swamps”.

“Without a doubt, AI is changing our industry, quickly — but it carries the ultimate risk of garbage in-garbage out as its outputs are unreliable and impossible to diagnose,” Mr Jayanthi said.

Coalesce aims to overcome this problem. It has developed what it says is the automated and scalable data transformation framework – the process of cleansing and structuring data into a usable format – for customers using the Snowflake Data Cloud.

This attracted Telstra Ventures to the company, which says it has quadrupled its annual recurring revenue in the year to January.

“The industry is moving from labour-intensive data engineering to automated, enterprise-grade solutions,” Telstra Ventures general partner Saad Siddiqui said.

“Coalesce leads this shift, offering comprehensive extensibility for complex ETL/ELT (extract, load, transform) scenarios and an easy-to-use interface for a wider, less technical audience.”

Caesars Entertainment Group, Denny’s and global investment bank Houlihan Lokey have adopted Coalesce’s data transformation solutions.

Coalesce launched in Australia and New Zealand in April last year and has 25 local customers, saying its growth matches Snowflake when it first entered the ANZ market.

Industry Ventures and Emergency Capital led the $US50m Series B raising, which takes Coalesce’s total funding to $US81m.

Snowflake Ventures, 11.2 Capital, former Snowflake chief executive Bob Muglia, DNX Ventures, GreatPoint Ventures, Hyperlink Ventures and Next Legacy Partners also participated.

Coalesce chief executive and co-founder Armon Petrossian said the raising signalled a vote of confidence in the company and a time when many start-ups have folded.

“During a challenging VC market period, we’ve successfully raised capital by demonstrating explosive growth and an innovative product that significantly enhances the efficiency of data teams,” he said.

“This achievement is a testament to our incredible team and valued customers, who are the pillars of our rising leadership in the industry.

“It’s also a strong statement about our staying power and an indicator of trust going forward, validating our work and illustrating the industry’s confidence in our future. We’ve seen many start-ups fold over the past 18 months, and we’re both proud and humbled to have closed this significant round during such a turbulent time.”

Fanni Fan, principal at Industry Ventures, said Coalesce had consistently outperformed targets. “Their customers regularly cite them as the most vital part of their data stack, and their mature partner ecosystem is impressive for their stage. Encouraged by this, we confidently led their Series B investment,” Ms Fan said.

Snowflake Ventures director Harsha Kapre said the firm invested in “ecosystem partners” to accelerate innovation.

“Coalesce is designed to complement the performance and scalability of Snowflake and is well positioned to harness the power of the Data Cloud,” Mr Kapre said.

“We see our customers embracing their intuitive interface to develop data pipelines efficiently, unlocking the true potential of their data without the usual engineering headaches.”

Telstra Ventures has been on an investment spree. Last month it participated in a $US41.5m Series B raise for Pandion, which is seeking to disrupt Amazon’s last mile delivery business via artificial intelligence.

Telstra Ventures also joined a group of investors, including Atlassian, last November to tip $US25m into Tabnine, an Israeli start-up that has developed an AI-powered assistant for software developers.