average investment > Unveiling the Potential of Modern Data Infrastructure – An Insight into the Fundrise Innovation Fund’s Investment Strategy
Unveiling the Potential of Modern Data Infrastructure – An Insight into the Fundrise Innovation Fund’s Investment Strategy
In today’s digital age, the term “data” resonates ubiquitously, encompassing a myriad of contexts, from big data and data storage to data science and data analytics.
Yet, amidst this oft-repeated buzzword, a transformative revolution is quietly unfolding, giving rise to a new generation of promising startups and fundamentally reshaping the way businesses operate.
Data, once regarded as a peripheral facet of business, has taken center stage, propelling organizations toward innovative solutions and unearthing fresh opportunities.
This article delves into the undercurrents of this data-driven transformation and explores the burgeoning sector of modern data infrastructure.
The Intrinsic Significance of Data
Throughout history, data has played a crucial role, albeit somewhat concealed.
However, with the advent of cloud computing, businesses have started recognizing the immense potential embedded within the vast troves of data generated daily through their operations.
To grasp the significance of data in contemporary organizations, one can liken it to a manufacturing process.
Just as raw materials are processed, transformed, and refined to create finished products, data undergoes a similar journey within organizations.
Data Generation & Transformation
Data originates organically from various activities, encompassing financial transactions, social media interactions, GPS tracking, smart devices, and virtually every mobile application.
These digital footprints serve as raw data, analogous to raw materials in manufacturing.
To harness their potential, this data is extracted from diverse sources and aggregated into centralized repositories, akin to a manufacturing plant.
Once within these data warehouses, data must undergo a cleansing and structuring process to ensure it is amenable to analysis.
Herein lies the essential role of data professionals who layer meaning onto raw and unstructured datasets, transforming them into a structured and intelligible format.
This structured data forms the cornerstone for businesses to derive insights, solve problems, and make informed decisions, serving various stakeholders both internally and externally.
The Role of Data in Business Operations
In essence, data acts as the lifeblood of modern organizations.
It facilitates informed decision-making, enables strategic planning, and supports essential functions across diverse departments.
Be it accounting, finance, strategy, operations, analytics, marketing, product development, sales, or engineering, the fundamental activity of gathering, structuring, and labeling data underpins the core functions of these departments.
Data’s Evolution: A Driving Force
Data’s importance in business has evolved considerably over time, underpinned by two key innovations: mobile devices and the cloud.
These technological advancements have catalyzed a second explosion in the data landscape, amplifying its impact on businesses.
Mobile Devices: A Data Creation Catalyst
The proliferation of mobile devices, primarily smartphones, has led to an unprecedented surge in data generation.
Today, individuals worldwide constantly generate data through their mobile interactions, and it’s estimated that 90% of the world’s data was created in just the last two years.
This staggering growth shows no signs of abating, with projections indicating that by 2025, the world will generate approximately 465 exabytes of data daily, dwarfing the cumulative data created by humanity throughout history.
The Cloud: Data’s Accelerator
Cloud computing, specifically cloud storage, has significantly accelerated data’s potential.
By enabling companies to scale computing and storage independently, cloud storage providers like AWS have dramatically reduced costs, allowing businesses to pay only for their actual usage without incurring the expense of redundant capacity.
This cost-efficient scalability has paved the way for innovation, as smaller companies can now engage in data-intensive activities without substantial infrastructure investments.
Moreover, cloud computing has revolutionized the speed and scale of data analysis.
Improvements in massive parallel processing and computing speeds have drastically reduced querying times, making real-time analysis feasible.
This transformation has shifted the paradigm from “Extract, Transform, Load” (ETL) to “Extract, Load, Transform” (ELT) processes, enabling companies to handle extensive raw data and perform powerful transformations with unprecedented speed.
The Convergence of Data
The convergence of these macro and micro trends has set the stage for a monumental opportunity within the data infrastructure sector.
While large organizations have harnessed data extensively, the majority of small businesses remain untapped in terms of integrating data into their operations.
For example, the neighborhood convenience store, independent online retailer, or small lawn maintenance company—each representing one of the 32 million small businesses in the US—can leverage data to enhance their operations.
As these businesses transition to online platforms, embrace social media, and adopt cloud-based solutions, the logical next step is to harness their data wealth to improve their business outcomes.
This impending wave of data infrastructure adoption presents a lucrative opportunity for startups in this sector.
Startups in the data infrastructure space possess distinct advantages that contribute to their growth potential:
Low Startup Costs: Leveraging cloud infrastructure reduces startup and scaling costs significantly.
Startups can maintain higher profit margins typical of software businesses while remaining nimble in adapting and enhancing their products.
Accessibility: These startups focus on creating user-friendly tools that require minimal technical expertise to operate.
This democratizes access to data-driven insights, benefiting small businesses lacking in-house engineering and data science capabilities.
Integration Potential: Many small businesses have already adopted various software tools for payments, accounting, marketing, sales, etc., each generating data.
These tools can seamlessly integrate with modern data infrastructure systems, offering businesses valuable insights to optimize their operations.
Challenges and Risks
However, focusing on a specific sector and indexing into it does not guarantee universal success.
Challenges and competition are inherent. Not every company in the sector will thrive, and some may falter.
Moreover, existing data storage giants like AWS, Microsoft, Snowflake, and Databricks could pose competition or integration threats.
Furthermore, an excess of data can lead to information overload and hinder decision-making.
The phenomenon of “p-hacking,” where patterns are found to support various arguments, underscores the need for meaningful data analysis.
The data infrastructure sector presents a unique opportunity within the investment landscape.
As the adoption of data-driven solutions sweeps across small businesses, startups in this sector stand to benefit from macro and micro trends.
The convergence of cloud computing, mobile technology, and the data revolution propels this sector forward.
While challenges and risks persist, the broader industry’s trajectory and the unique advantages of startups in this space make the data infrastructure sector an enticing prospect for long-term investors.
As part of the Fundrise Innovation Fund’s investment strategy, this sector holds the potential to harness the power of data and unlock significant value in the coming years.