Minneapolis startup wants to take advantage of accelerated data needs since pandemic

The surge in demand for more artificial intelligence and data planning expertise is fueling projections of yearly growth of at least 40% for Minneapolis artificial-intelligence startup phData.

The company has built applications for several industries, including medical-technology companies that need to pool data sets to provide real-time information about how devices are performing both for customer service and patient outcomes.

"You can start to predict the reliability and what's going to happen with these devices," said Ryan Bosshart, phData's chief executive. "We've seen similar kinds of situations for tractors or [all-terrain vehicles] or anything that can be manufactured. More and more of those are being instrumented and monitored to help in those areas."

Companies now are beginning to drive strategy partly based on the data they generate.

"One of the big trends we see is guiding customers on strategy and implementation of how they're going to actually use data as a strategic asset and ultimately monetize it," Bosshart said.

The company set out to bring machine learning and data strategy to a pool of potential customers expanding as the cost of modern data technologies declined.

Co-founders Adam Fokken and brothers Mac and Brock Noland — along with Bosshart — had been building data platforms since they worked together in the early 2000s at Thomson Reuters. An original investor in the company when it launched in 2015, Bosshart joined the company's team in 2017 and became CEO in 2018.

The company expects a strong boost from its November acquisition of Tessellation, a Minneapolis analytics and business intelligence consulting startup and its digital learning platform, Data Coach.

Where phData builds platforms to take in data from various sources and prepare it for analysis, Tessellation helps companies understand their businesses through analytics, data visualizations and interactive dashboards. Tessellation's Data Coach uses video lessons and one-on-one coaching to enable companies to do that work themselves.

"With the addition of Tessellation and Data Coach, we're coming to market with a complete, end-to-end offering for analytics and machine learning," Bosshart said in a statement announcing the merger.

"Our customers are continuing to innovate, expand and demand value from their data and analytics tools and capabilities," Baxter Boe, a founding partner of Tessellation, said in the statement. Together, he said, the companies can offer the strategy and infrastructure to enable customers to achieve that value.

The companies began working together on customer projects last spring, eventually selling each other's services, said Boe, who founded Tessellation in 2018 with partners Luke Stanke and Alex Christensen.

"In three months, they added a million dollars to us and we added $700,000 or something to them," Boe said. "It was obvious that their customers wanted what we had, and our customers wanted what they had."

The partnership was a cultural fit, too, they said. The combined companies have close to 280 employees.

Tessellation's founders bootstrapped that company while phData got a $2.5 million investment from Arthur Ventures, a Minneapolis venture-capital firm, in 2018 on top of individual investments.

Both companies have seen sales rebound after a dip at the beginning of the pandemic, Boe and Bosshart said.

"The pandemic actually accelerated technological change in our market," Bosshart said. "More things had to move online. More people were working remotely. That's all producing more data and increases the need for automation and machine learning."

Tessellation was on track for $7.3 million in revenue last year before the acquisition, up from $3.5 million in 2020, Boe said.

Including the acquisition, phData expected 40% growth or greater last year, after generating more than $21 million in 2020 sales, Bosshart said.

Boe and Bosshart predict more than $45 million in sales for 2022, seeing at least 40% growth year over year for the next three years.

"The potential here is ridiculous," Boe said.

"We're at the beginning of a long-term trend," Bosshart said. "We're in this for the long term and building a long-term company here."

The global artificial intelligence market is projected to grow from $47.47 billion in 2021 to $360.36 billion in 2028, according to a Forbes Business Insights report published in September.

As an example of where phData may be going, Bosshart pointed to phData partner Snowflake Inc., a data-cloud platform company in Montana founded in 2012 that's projecting revenue of more than $1 billion in its 2022 fiscal year. Snowflake has recognized phData as an Elite Consulting Partner and 2021 System Integrator of the Year and Innovation Partner of the Year.

"They're a billion-dollar-a-year revenue company," Bosshart said. "They're growing at 100 percent year over year. Our market is really growing quickly, and so we want to be ambitious in how fast we can align to that."

Todd Nelson is a freelance writer in Lake Elmo. His e-mail is todd_nelson@mac.com.