 Hello everyone, welcome to this special Cube Conversation here in the Cube's Palo Alto studio. I'm John Furrier for a conversation around venture capital entrepreneurship, crypto currencies, blockchain, and more, Jonathan Ebner friend with BRV, formerly Blue Run Ventures with BRV for short. Sounds better. Welcome to the Cube. Thanks John, thanks for having me. Great to see you. We've known each other for a long time and you know, you've been a great investor. Your firm has done a lot of great stuff. Deals are really famous deals. But also you dig into the companies and you really stand by your portfolio companies. But you've also done a lot of work in China. Yes. So you have a good landscape of what's going on. What's the, what's going on in China? Well China is really expanding in ways which we had not foreseen when we first started investing in there almost 15 years ago. We were really active for five to 10 years investing in companies that initially were being considered copycat companies. You can't really use that term anymore. There in fact what's happening more and more you're seeing Chinese ideas coming to the United States. Businesses like WeChat are being copied as fast as they can. You're seeing Snapchat Messenger and so forth. They're quickly trying to amalgamate as many assets as they can within their viewership much like we're seeing in a lot of the Chinese analogs over there. So it's exciting to see really, it's very much of an arms race. And it's been interesting to watch. We were at the Alibaba Cloud Conference last year and then the last year. It's interesting the innovation and entrepreneurial thirst has really changed. We go back just 10 years ago when you guys were first getting in there. I remember with the conversations were you know what's going on in China it's very developmental but what is, what's going on in 10 years is that they are dominated the mobile space. Their mobile usage is really much different makeup and how they do startups, the apps. How much of that has influenced some of their success? Just the demand. Well always on location, always available. It opens up a whole new level of communication services. The idea of the larger screen format, people used to think in the United States these large devices coming out of Korea first and then China. We thought they would never play in the United States. Now Apple 10, larger screen size, it makes sense. It's mobile first right from the get go for now billion plus users. Okay so BRV, how many active portfolio companies you guys have and what's the profile that you're looking for for entrepreneurs? What are some of the kind of companies you have? Well we're about 45 active companies right now. We're putting about, putting money at about 10 new companies a year at this point. We have a very disciplined approach of investing in series A style companies. Series A of course means a lot of different things to people but generally you like to put three to five million dollars to work really on them and follow on. How much do you take for that? Just like the typical 30%? Typical in the 20, 25% range right. So there's a lot of companies out there that still fit that profile. Of course you're seeing some super sized series A's that happen, we don't play in those but for the additional software companies evaluations are really right in our sweet spot. How big is the fund now? Just what's the number in terms of? We're in fund six, we're just over 150 million. And you got to save some for follow on rounds. Talk about the changes in venture capital because what's interesting, I had a conversation with Greg Sands with Cost of No Adventure is another great investor formerly. I think the first employee at Netscape, I think he wrote the business plan. Great guy, he talked about the dynamics you don't need that much cash anymore because if you can get unit economic visibility into what the business is working you can do so much more with that. And I'm calling it the hourglass effect and get through that visibility you're in control, you're on destiny versus the old Silicon Valley model which seems to be fading away which is hey, what do you need? 40 million dollars or here's a hundred million dollars. That really limits your exit options and sometimes you can drown in your own capital. Talk about that dynamic. You're seeing the 40 million dollar rounds with businesses that are much more capital intensive and that's coming back in vogue now but for the most part I agree with what Greg's saying and this whole advent of these seed funds and supersede funds and angel funds and so forth has been really great for the traditional series A investor. A lot of that early fundamental and foundational work is being done and then when the series A comes it's really more about expansion. So we're effectively getting what was a series B type stage company, now we're investing in series A. So we're saying hey, this product works product market fit. Let's put dollars to work to really grow the market. So you're saying the series B was a proven, prove it, you kind of prove the business model shifted down to the A because the cost to get there is lower and hence that's opened up a seed round lower numbers. So it just shifts down a little bit. It really has, it really has and that's really placed into our sweet spot. We really like working on business models, distribution strategies, things like that. And what kind of startups do you want to invest in? What are some of the categories? We love financial services. We like health tech. We're doing education. We're really pretty omnivorous when it comes to the sector. What we're looking for is really businesses that are using data, real time data to disrupt it. So you're not sector driven, you're disruption oriented. That's right. Okay, so let's talk about disruption, my favorite trend. Obviously I love the China dynamic because it's, you know, you're not sure what it is but it's really doing well. So you can't ignore it but it's, you know and they're innovative and they're hustling hard and they got massive numbers. Blockchain, we're super excited about. We love crypto. We think it's the biggest wave coming out there. So, you know, a lot of them, my smart entrepreneurial friends are jumping on their surfboards, literally and jumping out on those waves. And there's a lot of action there. At the same time, people are saying, stay away from that all crypto thing as a scam. So you kind of a different perspective. What's your thoughts on that? Well, if you look at, separate the cryptocurrencies from blockchain, I think it comes a lot more clear. Blockchain is for real. Tracking provenance on transactions. Real estate transactions, multinational transactions makes a lot of sense. It dovetails nicely with security. So there's a real business there. You saw the announcement with IBM and Marisk the other day what they are taking enterprise level blockchain into their whole supply chain. I think that's really important. We have a company in the category called PayStand which is doing the same sort of thing with smaller size businesses. Just accelerating the whole process on the counter receivable, taking working capital. And they're doing blockchain for that. Yes, blockchain is an option for it. We're not forcing people on the blockchain. But the idea is, hey, let's give people more cost effective ways to transact, get rid of the paper checks, get rid of the invoicing and just join the modern world. Much like you use Venmo for you and I are going to exchange money. That's PayStand. That's one of your hot companies. Yeah, it is. Absolutely. So are they using blockchain or not? They are. Oh, they are, okay. Yeah. Because it's a physical asset. It's kind of a supply chain thing. Well, they used it to track the funds themselves. Unlike credit card, we have to pay a big fee or ACH, which you can't really get proof of funds with their blockchain technology. You can be sure that you have the funds available and you get it instantly. Awesome. Let's talk about use cases that you think out there. I'd like you to just weigh in on use cases for blockchain that a mainstream person that's not in the tech business would understand. Because when they say, ah, is it real or not? I agree, blockchain is the legit. What are some use cases that would highlight that? Well, I think if you've ever been involved in real estate, bought a home, things like that, just tracking title insurance. You're going all the way back here, if you live in California, you go all the way back to pre-statehood days. You want to get to track the provenance of that land all the way through. You're paying title insurance. Title insurance is a business you don't really need if you have accurate provenance tracking through blockchain. I think that's the one we can, most of us can understand. Obviously, bills of lading with things coming over on ships, it's natural. I mean, right now things get held up in port because people are trying to find a clipboard before you can sign off on who is this bill of lading actually clean. That stuff can all be done automatically with 2D barcodes, blockchain news and all that. And most things along, certainly if it's perishable goods too, we heard that with IBM's example. Okay, let's get to some of the hot companies you've got going on. Name some of the hot investments that you've done. Sure, well, I talked about Paystand a minute ago. We're really excited about them. Another one we really like is a company called Aerobotics. I know you're a fan of autonomous flying. What, if you think about drones and everyone knows DJI and they're a great company, that's one to one, one person flying one drone. That's not scalable, obviously. It scales at one to one. With autonomous flying, you can have a whole army of drones out doing your business, whether they're doing site exploration, checking for chemical spills, looking at traffic and so forth. The company is now operating in three continents. It's just a, if you think about what a drone is, it's effectively, it's a flying cell phone. It's a cell phone that goes around, takes pictures, transmits data back. We know something about cell phones at BRV. We've been investing in this category for a long time. So when we saw aerobotics come along, this is just a natural extension of real-time data, cellular technology, and location-based services. You guys don't get a lot of credit as much as you should, in my opinion, on that. You guys were very early on the mobile connectivity side and mobile footprint and device and software. That's playing well until the hottest trend that we see that's not the sexiest trend, that's IoT. The drones are certainly industrial IoT is a big one. For sure. Instrumenting physical plants, equipment, and IoT and generally edge of the network. What's your thoughts on IoT and how would you, how do you see that evolving? It's just more than just the network, edge of the network issue, it's bigger. It is, well, I mean, of course, the devices and sensors are important. I think that a lot of that's being commoditized. The business that we've been seeing developing, there's a lot of folks, they've moved from analytics from the web to analytics of IoT. So there's a lot of interesting companies coming in the analytics space. We're not playing in that as much. We tend to like to invest in companies that are big enough that you need to have analytics for them. We like companies that have proprietary control of analytics versus necessarily running analytics for company X. So you're not poo-pooing IoT per se, just from an investment thesis standpoint, it's not on a radar yet. It's either too capital intensive for us as a firm or you're basically managing someone else's data. I want to be in companies that we're managing our own data for proprietary advantage. That's really what I was going to get to next, the role of data driven. So we've lived in the Hadoop world. theCUBE started in 2010 in the offices of Cloudera actually and people don't know the history and it's been interesting. Hadoop was supposed to save the world, the data, but it really started the data trend, data driven trend. Michael Olson, Amra Wadal and the team over there really nailed it, but it didn't turn into be just Hadoop, it's everything. So we're seeing that now becoming a bumper sticker, data driven marketer. I'm a data driven executive, I'm a data driven interview. What does it actually mean? What does data driven mean to you? Well, data is there's big data and then there's actionable data. Obviously people talk about exhaust the data coming off but we really got started with, as you know, we were investors in ways. Off a lot of data coming out of your cell phone, extracting just the important pieces of it are really what's important. We're investors in a company called Cabbage, which looks at every transaction a small business makes to determine the credit worthiness. It's really, it's the science, people talk about data scientists, what do they actually do? What they're really doing is separating out the wheat from the chaff because it's just a crush of data. I know you saw your interview with Andy Jazzy the other day from AWS, the amount of data that's being stored is almost unfathomable, but the important people- They have a lot of data. They do. You'd like to invest in them now, right? Exactly. But that's really the thing, it's being separate the good data from the bad. Boy, if you look at Amazon, I was talking to Jazzy and he didn't really go there because he was kind of on message, but when I talked to Swamy who runs the AI group over there, we were talking about, I said to him, I'm straight up, I'm like, you know, you're running a lot of workloads on your cloud, I'm sure you have data on those workloads. I mean, just the impact of what they could do with that data, this is the virtuous cycle that their business model's made up, but it's changing the game for what they can become. So the thing that we're seeing in the data world is sometimes the outcome might not be what you think because if you can use the data effectively, it's a competitive advantage. Not a department. Right, right, and you have to really stay true to your commitment to data. What we've seen happen is when companies, if you've been around for 10 years or so, you start to trust your gut. Gut's important, but it can also not lead you to see obvious conclusions because the world changes. And also committing to data also means from a practitioner standpoint, investing in the tech, investing in things to be J to driven, not just to say it. Exactly. Okay, so what's the future for you guys? What are you looking at next year? What are some of the things you'd like to accomplish from an investment officer? I was getting a lot of deals. I mean, did Waze, that was an amazing deal. One of my favorite products. How did that go down? How many people passed on Waze? Well, I don't know how many people passed, but we were lucky. They wanted to bring us into the initial syndicate. They wanted to have some folks who understood. But it wasn't that obvious though at the beginning. What was the original pitch? Well, the initial pitch was that they were going to have folks have the dash devices. Remember the dash, the company, the product was sitting on your dashboard and they were going to be using it to map Eastern Europe because the Eastern Europe was just coming into the Western world and they didn't really have good roads and good maps. So we thought that's interesting, but they probably also don't have smartphones. So why don't we come across the Atlantic and let's make this thing work in the US. And then from there, the rest took off country by country. We were the number one navigation app in I think 150 countries at one point. What's the biggest thing that you've learned over the past few years in the industry that's different now? I mean, obviously there's some context that I'll share which is obviously the big cloud players are obviously becoming bigger. Scale's a big thing. You got Google, you got Microsoft and Amazon, you got the Facebook's out there as well. Then you get the political climate. I mean, we go to Washington DC and New York. I mean, Silicon Valley is not really talked highly about these days on the hill in Washington. Yet, GovCloud is completely changing the game of how the government's going to work with massive innovations and efficiencies literally overnight. So it's almost weird, right? I mean, what's... Well, you know, it is and it isn't. And if you look at it through a longer term horizon, Silicon Valley is again at the forefront. We're really the first ones with more transparency in the industry. All the different movements which are really important and all the conversations that are happening are important and they're happening here first. I think you're starting to see a ripple effect. You're seeing it going through entertainment. You're going to see it in the government. Industry after industry I think is going to start to have to be more open as Silicon Valley has led the way on that. That's a great point. Take a minute to describe what folks out here are watching that aren't from Silicon Valley. What is Silicon Valley about in your opinion? Well, Silicon Valley is, of course it's more than a mindset, but folks who are here are here on purpose. They come here intentionally. There are very few people that I know who were born and raised here. So they're coming here because they want to be part of a shared ethos around success, around shared values, around competition. So it's a really, it's a very healthy environment. I came, I used to live in Washington D.C. and I couldn't be happier to be 3,000 miles away. If you're a tech entrepreneur, this is all the sports and action is, as I always say to use the sport. We always love sports analogies. Okay, I got to ask you about the VC situation, obviously around ICOs. Initial coin offerings are being talked about as an alternative to fundraising. There's some security options on token sales as a utility. SEC is starting to put some guidelines down on what that looks like. But the general sentiment is it's a new way to raise money. And some people are doing private rounds with venture capital and doing token sales through ICOs. So you see some hybrids, but for the most part, the hardcore, I don't want to say right or left wing, is there a wing of political spectrum, but the hardcore ICO guys are like, this is all about disrupting the VC community and you're a VC. So you got to take that a little bit personal. But at the point is it's not necessarily, what did you, what did you think about that? I mean, is it, is that talked about? Well, I think that's good salesmanship. The VC industry, such as it is, you can fit every VC into one section of Stanford Stadium. There just aren't that many VCs to really go after. We're a small group of folks. I think that going after maybe disrupting the way folks are raising money through Kickstarter, things like that, that's all great. Like we're not going to stop it, we're going to embrace it. I think that there's plenty of different ways to raise capital. I'd have no compunction about- So do you think it's more of a democratization trend or a new asset class? So you don't see it disrupting the VCs per se, but I mean, if there's only a handful of VCs that could fit into Stanford Stadium, for instance, then certainly there's more options. There's a dilution. I think you look at it as just an alternative financing method. Do I take debt? Do I take equity? Do I take venture? Do I take friends and family? It's just one more arrow in the quiver of the entrepreneur. I think you have to be smart about it because thinking that you're going to get the same level of attention from an investor in your ICO that you are going to get from a series of investor who owns 20% of your company, those are two very different value propositions. So you see a lot of pitches and sometimes you have to say no a lot and that's the way the game is. A lot of times you want the best deals. But the founders side of the table, they're looking at the VC, I need money. So that's one of the options, but they really want as a value-added partner. So what's your current take on what that means these days? Sometimes it means a firm, sometimes it means the partner, sometimes it means the community. How are you guys looking at BRV as a value add versus the worst case scenario, which is value subtract, just you want to have that positive experience. That written about venture too. I know, some people experienced it. Well, I think it helps that we've been around now for almost 20 years, we got started in 98. So you have to look at our body of work and the continuum of investments and founders and CEOs and CTOs that we've invested and there's hundreds and hundreds of people who have taken money from BRV. And so that's the one of the real positives about this current state run is there's so much transparency. The fact that we are, I like to think we're good actors and have been for a long time, that comes out not through our words but through the words of the first generation. What would they say about you guys? What would your entrepreneurs say about BRV? Well, aside from using buzzwords like value add, they say they know their industry, they're not afraid to ask for help, they call, they try to call problems when they see it. Things like that. You stand by your companies? Absolutely, absolutely. Awesome. Well, what's your favorite trend that you're personally interested in? Well, I think you have to go after healthcare right now. It is just such a big market right now. People have been nibbling all different sides of it right now. There's been folks who are trying to expedite processing. There's actual innovations happening on the medical side. I think there's just, technology is just now starting to get into that. Technology's gotten into education. Tell us about the startup you guys funded that's related to the health care field. Yes, we're in a company called Hello Heart, which is taking in, it's really at the confluence of a number of trends. It starts off with, what Hello Heart is, is it's a personal blood pressure cuff for you as an employee of a big company. More and more companies are starting to self insure. If you're a big enough company, 10,000 plus employees or even less, even fewer you're going to want to self insure to save money. But also your employees get very much more comfortable with you as an employee. Like you care about my wellbeing. So it's a very virtuous cycle for the employees. So companies are self insuring their own employees. Absolutely. But they have to be super big. Is this company, Well, this is this one component of self insured business. You also, of course, you still have access to doctors and stuff, but I'm not making a pitch for being self insured as a company saying that. But that's a trend. It is, it's absolutely a trend. And you're seeing a lot of what I would call point solutions stepping in, whether it's psychiatric, whether it's opioid help, whether it's working at heart conditions. These are all different point solutions, which are being amalgamated together to help companies which are self insuring. So is Hello Heart for consumers or for business? It's sold to businesses, but individual employees have it so they keep track of their blood pressure. But I can't buy one if I want to one. Not today, not today. But I'll make sure I can get one to you. I need one. Get all our employees instrumented. Exactly. Drug tested, all that stuff going on. So people worry about the privacy. I mean, that's something that I would be concerned with. I mean, putting, you know. That's taken a really fast pendulum swing. A few years ago, the generation X was privacy. You know, there is no privacy. The default was location is always on. That's just flipped 180 degrees in the last few years. Well, John, thanks for coming into this Cube conversation. I want to ask you one final question. One of the things we're passionate about is women in tech and underserved minorities. Obviously Silicon Valley has to do a jet better job. It's out in the table and it's working. But we're still seeing a lot more work we've done. We're seeing title, titles not being at the right level, but pays getting there. Some places, but titles aren't. Some pays still below for women. Still a lot more to work. What's your, what are you guys doing for the women in tech trend? How are you guys looking at that? Certainly it's a sensitive topic these days. But more importantly, it's one that's super important to society. It is. Well, I think like a lot of things that have long-term value, it's really about your actions versus your words. And so our firm has two out of the five investment professionals are female. One of the last three CEOs we've founded is a female CEO. We have technologists. We have marketing people. We have CEOs that are females. So it's a very much of a cross-the-board sex race and so forth. We really try to. You guys are indiscriminate. Good deals are good deals. Exactly. Right. It's about making money. VCs are in the business of making money. That's people that don't understand. You guys have a job to do, but you do a good job. Well, you have to find a thing into, we're in the business of making money, but our investors for the most part are not for profits. Large universities, our biggest investor is the Red Cross. So when we do well, the Red Cross does well and the country does well. So you're mission driven at this point. Exactly. Is that by design? Or was that just your selection? Well, we're delighted with our LPs. We have a lot of things. It's important that we have synergies in terms of aside from just finances with our investors. That's super well. I appreciate you coming on. I think it's super great that you're tying society benefits into money making and entrepreneurship. Great stuff. John, I've been here on theCUBE. BRV, check them out. Great VC firm here in Silicon Valley. It's a CUBE conversation. Talking about startups and entrepreneurship. I'm John Furrier. Thanks for watching.