 Live from Las Vegas, it's theCUBE, covering AWS re-invent 2017 presented by AWS, Intel and our ecosystem of partners. Welcome back everyone, live here in Las Vegas for AWS re-invent. Day one coverage of three days to theCUBE. I'm John Furrier, the host this week. We've got two sets, our fifth year covering re-invent. It's been great to watch. Every year we try to get in the VC panels. We just had Jerry Chen on from Greylock. We've got two more awesome friends of theCUBE in the community here. We've got Sunil Dallawal who is the founder of Amplify Ventures and Nick Sturria with Ignition Partners. Guys, great to see you. Great to see you, John. Boy, what a lineup it's been over the past three years, four years with Amazon. Just watching them tear. It's like, now it's all steamed ahead. Microsoft's totally gearing up. You can see them playing what they're doing, they're pedaling as fast as they can. Google playing the new guard. We're going to compete on TensorFlow and other little goodness, a lot more to go. We've got Alibaba Cloud, Intel behind us is making all more chips. Good market on paper, but we're transiting. Startups kind of get bought, not for what they wanted. Inco Public Sky High from Greylock. You see Barracuda going private. A lot of money being made. Maybe the investment thesis of $200 million fundings, that's over. Is it over? Get a little bit of cash and get the critical mass. Well, here's the question. Do you invest in these companies thinking everyone of them is going to go public? Or do you think that a good number of them are going to get acquired? And I think the investors that have done this for a while, and Nick's done this for what, like 45 years? I started when I was two. I've done this like two years less than you have, so I don't pretend I'm dramatically younger. But the reality is these companies get acquired. And pretending that you're going to pile into a company late and expect every single thing to go public, I think it's kind of crazy. And the people that are getting caught in that trap, I think they're going to be in for a rude awakening. But look, you get a billion six outcome for Barracuda, right? That was pretty damn good. And, you know, Scott High Number hasn't been printed, but it wasn't a small one. Like, those are good outcomes. There's good venture returns if you were smart about where you got in. So I would, slightly different perspective, which is the real issue is that so much money moved into the late stage. And these companies thought that growth would always be linear, even asymptotic. And so what happens is that their growth rate slows down and the cost of growth goes up. And suddenly, the company's not quite as hot as it was a year ago. And so now the options for what they do have shrunk dramatically. And so you get an exit like you just mentioned. And so part of the problem is that entrepreneurs and investors really have to have a sober view of what is a business model that's durable over time and which ones really are going to start to leak in their later phases. Well, it's kind of a planted question for you guys because you know, do you do early stages in Amplify? I've been following you guys, do a great job. You guys do a range of earlier and growth. Mostly early though. The days of just laying back and kicking your feet up and throwing cash at stuff is over. You actually got to do the work. It sounds like old school VCs, Greg Sands and I talk about this all the time. You got to go in and be venturing. You got to actually make it work. John, that sucks. I was told that I just put my feet up. I put some money in. And then this, I get a distribution check at the end of it. That's what everyone thinks you guys do. What do you guys do every day? Kick us through your day. It looks a lot like that except so easy to be a VC. All you do is, okay, yes, no, okay, that's good. We got a dartboard. What you got to do is bet on the good ones. Yeah, it's so easy. So there are what, 14,000 startups in the Bay Area. How many of them are worthwhile, you think? It's a lot of work. Well, old school, let's go back to the old school tactics because you're seeing a couple of things going on. You guys essentially pointing it out. You got to do the work and pick the winners. But now that the business models are changing, right? You're seeing Amazon just ignoring conventional wisdom and they're winning. The game is changing a bit in the business model side. How are you guys looking at that as you make investments? Obviously you get the classic venture, make betting a good team, do all that stuff. What do you guys look at now in the marketplace for fit, scale, longevity, durability? I mean, the stuff we care about the most is are you going after a big problem? Because I think a lot of stuff we see, even with your great teams and great technologies, but you step back and you actually think, you know, that isn't a company that's a product or that's not even a product, that's a feature. I think that's the natural outgrowth of what happens when you get 14,000 start-ups in the Bay Area is there aren't 14,000 products that are companies worth having. What you have is probably 12,000 features, 1500 company or products, and then like 500 real companies. And that's probably the biggest filter that you got to apply on the way in. And it's maybe the hardest one to solve for, which is roll this out seven years, nine years, because that's really what you're talking about when you're talking about building a public durable company is, what does this market look like way down the road? And is that a thing that can stand alone? And that's really, I think, the difference between the companies and the investors that do really well and the ones that can kind of squeeze by knocking out a couple of interesting outcomes. My favorite thing is that when you say we just picked the winners, is that nobody knows who the winner is a priority. If you knew that, that market would be gone already. And most successful companies that you read about, they talk about the pressure investors that were in it early, that's all BS. It's a million good things happening along the way, serendipity, a ton of hard work on the management team and the employees. So this idea that things are preordained is just silly. And I would tell you that you look at most really successful companies today, their business model is completely different than the one that the venture person backed. I mean it's always the classic case, remember when I first started an entrepreneur in the 90s, it was like the question was, what's your exit strategy? It was a legitimate question at the time and it was kind of a peg mark, okay, want to build a growing company and have an exit. Now the exits are, as you mentioned buyers, that's not necessarily a bad thing. If Microsoft had a race to fill in their white spaces, man, I would crop up and get the crops growing, right? So you can say, okay, Microsoft, so you guys got to kind of do a little bit of homework there, do some relationship work, and you guys are close to Microsoft. So I mean, is that kind of the new playbook? I mean, how should entrepreneurs posture to this? I mean, obviously they got to try to build a durable venture, but they don't want to be zigzagging too much or pivoting. I mean, Nick made the point earlier, which I think is absolutely the one to focus on, which is when you raise it's on a capital, your options start to shrink. You know, the more you money you raise at the higher and higher price, there's somebody you got to serve who's thinking about the even bigger pot of gold at the end of the rainbow. And honestly, when we look at, I'll take one company in our portfolio, for example, and then I think the Splunk story is right up there with it. If you look at Datadoc, Datadoc's huge here at this show, right? It's purple shirts everywhere in a massive booth, and they've been here for five years running, four years running. That business has barely touched the last round of capital they raised, let alone the round of capital before that. The capital efficiency of that business, not only does it make it a great, it's going to make it a great outcome, but it's going to give them tons of options of things that they can do, and they'll get to make every single decision they make, whether it's going to a new product or whatever, position of strength. And not a lot of companies do that. So Splunk started in 2004, guess how much total the company raised before it went public? How much? 40 million. Guess how much it spent up to the time it went public? How much? 25. I mean, very capital efficient. Think about that. I said it's worth nine billion now, and so you had several hundred millionaires created out of Splunk, and I would submit to you if Splunk was started today, and the investor community would have killed it. Why? Because 18 brings trucks, would have backed up and dumped a billion dollars on top of it and buried it in too much money without allowing the company to get the time to become a fully viable system. So the too much cash can create toxicity for the startup? Money rarely makes the company. Money rarely makes the company. All right, so Lucerne was on earlier, founder of New Relic, another capital efficient company, went public all time high, loved that guy, he's such a strong, writes code, wrote some code last week. He said, if you can help your partners be successful in referring to Amazon, then you can be a great ecosystem partner. So the question now is, it's not a bad deal for a company to jump into the cloud game and be a really good partner and build a kick ass product. And look like a feature maybe on paper and then sequence to an opportunity. Thoughts on that? Certainly lucrative as you can get the flywheel going, right? So if you, you don't want to build a company whose basic thesis is helping Amazon or Azure or Google, that is a dead company. If however, you pull revenue for one of those three in a way that's interesting to them, they will support you all day long. We have two companies in particular, ICERDIS and Kensai, that are pulling a lot of revenue for Azure right now and Microsoft gives them extraordinary support. And so it works when it works. That's the nuance right there. That's the nuance, pulling revenue value creation. Well they've created Amazon and Microsoft and Google it to a two degree as they get going. They've created a really interesting model which is unlike your traditional ecosystem, hub and spoke model where someone's going to capture the bunch of ad control, the sale, et cetera, et cetera. The smart thing that Amazon's done is they say you use whatever you want. We're going to bill you for the primitives till the cows come home. And as long as you're not standing in the way in between Amazon and their primitives revenue, you're going to do great. All right, final question for you guys. First of all, great conversation on the capital markets. Certainly it's crazy. I've always tried to cover it but here's the thought exercise. Last night we're at the analyst summit. We're talking to some analysts and the question was, the airplane's going down and you're in a board meeting and I got to pick a parachute. There's only three parachutes. Amazon, Microsoft and Google. Which one do you have? You got 10 seconds. To sell too? No, just grab a parachute and you hope that it opens and you live. Pick a parachute. I'm going with Amazon. This one isn't hard. Microsoft and Google. The only person who's going to grab the Microsoft parachute is the guy who's been with Microsoft for 30 years and knows they're not going to let them down. If you're a forward-facing company you're going with Amazon and if you're nuts you're going to grab Google right now. No offense to my friends at Google. Well, so we're sitting here at re-invent so I feel like that's a trick question. Well, that's good. If you're in the Microsoft ecosystem they do take care of their own. They do. Their DNA is tuned to ISVs. They're very good at it. And that's their track record. Well, the one guy says, well it depends. By the time you argue with the parachute the plane's dead. But it does depend on your business. Yes. It's hard not to look at this show and say this is what electricity was in 1920. All right, final question. Obviously Amazon is looking at all steam ahead. Business models are changing. You're starting to see the stop of the stack develop nicely. Moving up the stack seems to be the trend. You got this decentralized market up there. Bitcoin hit 10,000. Lot of smart alpha geeks including some of the guys here at the Cube team is looking at ways to kind of leverage this decentralization trend in a way that's productive. Yet there's a lot of scams out there with these ICOs. Decentralization good or just another infrastructure dynamic. Thoughts on this whole decentralized token economics wave. Obviously the SEC has regulations now in it. Is it disrupting VC? Your thoughts, Nick. Do you remember what HL Mankin said? A fool and his money are soon parted. So I think anyone who sits there and says I understand completely what an ICO is and what I am buying and doesn't view it as something that'll be a tax deduction for next year, I think is going to be in for a bumpy ride. Get out your Gartner hype cycle. And if you don't know what it is, go look it up. And there's a spot right now of where we are in the hype cycle. I think my, the movement of my finger tells you where we are. But this is coming. I heard this comes afterwards. I heard this argument at the web. It's just for kids. No one will ever use the web. Browsers for, KMM is all you'll ever need. Yeah, but guess what? Guess what? 2001 happened before we got to 2017. So let's never forget where we are at that time. ICOs are like subprime mortgages. And I speak Spanish and I can't even read the thing. That is what an ICO is. Certainly hype job. Winter's coming. We'll see. All right, we've got the VCs here. Nick and Sunil, we've got Amplify and Ignition Partners here in theCUBE. More live coverage day one after this short break.