Lexalytics buys Semantria, because you gotta be able to analyze text in the cloud

Lexalytics, an 11-year-old company that sells text-analytics software for companies’ on-premises data centers, has found a cloud option for itself, by buying a startup called Semantria.

The deal went down for less than $10 million, but it should result in some excellent outcomes for Lexalytics, the company’s chief executive, Jeff Catlin, said in an interview with VentureBeat. A year ago, small sales leads wanted a cloud-based tool Lexalytics to pick up sentiment, identify names, form summaries, and do other things with text, but in the past six or eight months, more than half of incoming leads have been seeking that, Catlin said.

“There were a lot of ways you could do it,” he said. But [Oleg Rogynskyy, Semantria’s founder and chief executive] had energy and drive to stand up a business that became one we would either build or buy. We already knew each other, we get along well, and our strengths were actually different. And they were an easy plug-in.”

The two companies are now integrating their technologies, adding support for more languages, and even cooking up a hybrid option that would let customers start processing text on premises and then move into the cloud when data input piles up.

The deal hints at the value of letting developers easily weave powerful tools into applications without having to worry about provisioning the right amount of computing power.

That’s especially the case as fast-growing companies like Airbnb, Pinterest, and Uber look to expand their operations internationally and work seamlessly in many languages.

Investors have seen the light and backed startups like AlchemyAPI, Babel Street, Clarabridge, Idibon, Narrative Science, and Synapsify.

Such investments suggest that open-source libraries and packages from programming languages like R and Python might not always do the trick, at least when it comes to running across huge quantities of servers or being highly accurate. That’s what Rogynskyy has observed, anyway.

But while demand has been picking up and Semantria has signed up customers like Eloqua, Stanford University, and Schwan’s, Rogynskyy doesn’t think a whole bunch of cloud-based natural-language-processing services can flourish.

“This market is kind of a winner-take-all market, the way I see it,” said Rogynskyy, who once worked with Lexalytics. He figures the market isn’t large enough to let more than one or two providers bring in more than $100 million in revenue per year.

But now Lexalytics, which is bootstrapped and has been profitable for the past three years, could be equipped to remain standing. Its customer list includes Bitly, DataSift, Hewlett-Packard, Microsoft, Microstrategy, and Oracle.

Semantria’s office will remain in Montreal. The startup had around 17 full-time employees and never took on venture funding.

Semantria’s cloud software supports nine languages and can conduct categorization, summarization, theme detection, sentiment analysis, and other tasks. It can also distinguish between references to the Windows operating system and the windows in a house.

The startup has previously created a plugin for Microsoft Excel and announced a partnership with computer-vision startup Diffbot.