 We're back here in Orlando Florida for SAP Sapphire 2012 and John Furrier the founder of SiliconANGLE.com SiliconANGLE.tv and this is going to be all about startups and I'm here with my co-host. I'm Dave Vellante of Wikibon.org. John, we love talking startups. We love talking to VCs. It's your wheelhouse. Silicon Valley, obviously it's a bubble, it's an innovation bubble. As I say, I was on record saying that it's an innovation bubble, which is different from a regular bubble because regular bubble bursts and no one wins. But I think innovation bubble Dave burst, but there's winners. And there's some losers and unfortunately that's the way it is. We're joined with Nino Maracovic from SAP Ventures. Welcome to theCUBE. Thank you. Okay, we have another colleague coming over, Costa from the startup group. He's going to join us. But you're in SAP Ventures. So tell the folks out there, update them on SAP Ventures, the structure, how you guys are affiliated with SAP, how it's formed and then let's talk about the deals. Sure. Well, I'll keep it short. We've been around for about 15, 16 years as SAP Ventures is an institution, but a couple years back we actually restructured our activities into an independent venture fund. So we are now just like any other VC fund that you know of. It just so happens that SAP is our only limited partner, investor, unlike other VCs who have pension funds and diamond funds and have a bunch of them. We have one sole partner, which is SAP. And part of that is because our value proposition in part is to provide the companies that we invest in with an entry into the SAP ecosystem, not just SAP, but SAP partners, SAP customers, the whole SAP ecosystem. Is there a fund? Can you talk about them? How much amount does that work here? Sure. It's a $353 million fund that was established at the very beginning of 2011. That's our core fund. So it's fresh money. It's fresh money. Yeah. It's a core fund. And that is focused on expansion in later stage companies. So we like you to have 5, 10 million revenue run rate and high growth. That's the core focus for that fund. And then we have a separate new vehicle called the HANA real-time fund, SAP HANA real-time fund, which is a $155 million vehicle. And that will be mostly invested in early stage VCs and some early stage startups around the whole idea of real-time applications, big data, and real help for the economy. So what's the lowest you put in for startups? Let's just say we have a startup that's doing real-time data. So if you guys were doing a fund on an interesting startup in the real-time application data, it could be as low as $250 grand a seed investment from this new HANA fund. Now that's going to get kicked off in a couple of months. So it's got to be a separate fund as it can be more like Excel's big data fund where it's kind of like earmarked. It's actually a separate legal fund. It's a 155 million box, which is separate from the 350. But it is kind of like the Excel big data fund, and it's focused on a particular mission. Correct. It's much more focused than the later stage fund, which is much broader. In fact, we've done consumer enterprise deals globally as it's the mandate for the later stage fund, but the earlier stage fund is going to be much more. Now at the recent press event that you guys had in San Francisco, they talked a lot of fun. That was more of a go-to market. Yeah, that's separate from us. That is an SAP initiative. It's a customer focus. It's a soft dollar channel focus. So HANA is actual investments in startups? Correct. In startups and in VCs who will partner with Educate, they can invest in some of these startups. The whole idea is to make this thing leverageable. If I were the bottleneck for every single HANA startup, it wouldn't make any sense. So how would you work with a super angel or an angel group? Sure. Give them some cash or give them some offers? The idea is to become a limited partner and then collaborate with them, educate them on the value proposition, tell them what we're seeing. We're seeing tons of deal flow in the big data space. We talked about Green Plan where investors in Indeka were actually know a bunch about this space, and obviously through SAP, see much more. And then we get tons of deal flow. So the idea is to actually help you channel some of the deal flow to our partner. So that would be an unlimited partner, but actually a source of money. So you'll be a limited partner in these micro VCs? Micro VCs in other early stage, more traditional VCs as well. Nice, that's fantastic. Interesting portfolio. I just noticed Blackduck on to another open source company. We're the second most prolific investors in open source, believe it or not. So interesting, right? I think after Intel, we've done the most open source investors, even eight or nine historically. So quite a bunch. In fact, at the LAMP stack, we've had Red Hat, MySQL, and Zen. So three or four of them. It's pretty cool. So how do you go about determining what you're going to invest in? I mean, obviously there's a strategic implication, but can you talk about sort of kind of a mission and how you would do it? The mission is really to invest in the most innovative and disruptive companies out there and to provide to SAP both financial return and signal into what's going on in the market. So the first screen is a purely financial one. Is this an innovative disruptive company that we can make up a very good return on? And the secondary one, is it innovative disruptive in the broader space? And we actually stretch the definition of space from what used to be traditionally more enterprise software maybe ten years ago. We got music. Yeah, it's good music. He has the music levels. To more broadly, to include consumer companies, to include companies that sort of are a hybrid of both LinkedIn, I would argue is a great example, one of our popular companies, right? Sure. And even more specifically in India, we have an investment called JustStyle, which one could argue is a pure consumer play. So your strategic tale is not wagging the dog? Not at all. No, no, no. In fact, is that different than what most corporate VCs in your experience, or is that just a change in the nature of corporate VCs? I think it's both. I think we've been, to be honest, we've been set up that way from day one for the last 15 years, but I think we were way ahead of the curve. I think people for the most part have tried various different things, realized that no matter what they do, if it doesn't make money, it's not sustainable. If it's not sustainable, you're going to be doing it for a couple of years, and the value is going to be gone. So even if it was a great strategic theoretical value for two years, but you stop doing it, there's little value at long term. So we figured out day one that you need to be sustainable, to be sustainable, you need to generate capital with good returns. So we've been generating great returns to SAP for a long time now, and in fact, our funding ourselves, so to speak. Right, right. Okay, so maybe talk about your team a little bit. Sure. What's your mix so far? My over the last six, seven years, we've recruited a bunch of folks with most of whom have previous investment backgrounds from traditional venture funds. We are a global team. We have eight investment professionals, six of whom are in Palo Alto, one of whom is in London, and one involved are Germany's headquarters at SAP. So we cover the globe from those three locations from an investment perspective. We've got six general partners and one director in the team and one associate, and I'm very happy about it. We had a really good time. We work hard and just stop. You know, when you love what you do, it's kind of fun. Yeah, we do. So we led about two-thirds of our last 15 deals, so 10 of the last 15. We tried to remain flexible, though, in that most, if not all, traditional venture funds have a 20% ownership stake requirement and try and really sort of religiously stick to that. We just want to be involved with the best companies, so if it means taking a one- or a five-percent stake or a three-percent stake and only having a five-million investment, we're okay with that. So is the $155 minus the $360? Well, I do a plus, right? So you're adding, I thought, that's four. It will be $500 something, yeah. Okay, cool. So what's your focus here right now? We're in the conversion networking. Clouds are obviously hot. You mentioned that's even violent. Our big areas are open source, mobile, and conversion networking. What do you think about Hortonworks and Cloudera? I'll see, you know, Reddy. Yeah, sure. What's your take on those guys? Look, we just think that this is one of the most exciting spaces. Big data, and HANA will be part of that. The whole real-time push that SAP is having with HANA, frankly, to your point, conversion networking along with the whole infrastructure, where there's the storage layer, the networking layer, it's all getting virtualized, it's all getting sort of real-time enabled. The bottlenecks, the IO bottlenecks are getting eliminated from bottom top of the stack. It's a really exciting time. And the amount of data, obviously, created and being analyzed is just amazing. So, yeah, we're in conversation with all those companies you mentioned, plus many others in this space for a potential investment, and are just very excited about the opportunities that HANA has. Yeah, it feels real, right? It feels euphoric, but also there's a... No, I think the valuations are ahead of themselves, but what is interesting, relative to, you know, and I was an investor in the last bubble, is you would invest in eyeballs and then hope revenues will trail. Here, revenues are happening. It's actually companies are monetizing. Just the revenue multiples that our companies are being invested in and sold that are somewhat high, but, you know, it is true that you have all these megatrends, whether it's the cloud and mobility and all this stuff coming together at the same time, creating, frankly, a perfect storm and a great opportunity, said, for a bunch of companies. Well, you see some pre-revenue exits, right? Like, extremely high. Yeah, absolutely. What do you think about the old surveillance page? Was it Planetier? Was it government-firmed downtown? I'm not that familiar with that. No. They are dominating all the Palo Alto real estate right now. Yeah. They're government's the biggest customer. Oh, Planetier. I'm sorry. Yeah, yeah, of course. Planetier. Yeah, yeah. What do you know about those guys? I mean, they're raising money at valuations that are just unheard of. I mean, the visualization stuff is incredibly cool. I've obviously taken a look at the demo and I've seen them demo in a bunch of conferences. What's the valuation, you know? You know, I think the, I don't have any incident information. I think the last time it was publicly announced at about two and a half billion or something or, but it's way over a billion, certainly, that they raise money at. It's an exciting company. Visualization is a pretty exciting space. You know, other places in the space, including Tableau and some other company. Very interesting. We have some really cool companies on the analytics side too. Currently in our portfolio, not just past, including a recent investment called Altarix. Mm-hmm. That actually is both an ETL tool, a platform to ingest outside and internal data sources and then easily build applications, custom applications on top of that for customer. So if you wanted to build an application that literally would estimate in your company if you changed headquarters, how would the average commuter of the average employee change? It takes literally three minutes to build that application on that platform. Yeah, so it's talking about network as a service, as their business model. Oh, no, that's upon Altarix. Altarix, sorry. Altarix, yeah. Got it. Altarix with a, R-Y-X, with those of you. So the other, I'm sorry, just to finish up on that other thought, I think those are similar focus areas for us as well. One of the other ones is though the consumerization of IT. Think of LinkedIn, think of Box, where you and I as individuals, as individual business users, can swipe a credit card, use a tool, and then once a couple of hundred or a couple of thousand people within a larger organization use the tool, you go and upsell the CIO, whatever, the senior person with a bigger deal. We love that business model. We've missed it in a bunch of complements for sure. I think it's actually quite disruptive. That's not what we're doing. Should we give it up? That's to ourselves. Should we give it up? We tried though. We tried. I just wouldn't take my money. I'll have a work day. You and I, let's say it now. That's a little too close for comfort. I'll completely trash them on stage or I have to worry about their database. Remember? Yeah, yeah, right. Big thing. I don't know what they're using, but they're using it custom. Well, they're using it custom. I'll just do it as it works. It's a custom database. They developed their own. I know. He knew exactly. That also was trash. Michelle knows everything very well. He said, oh, I'm not sure what you're doing, but he went out to trash. I'll just show her. I'm just kidding. Well, so, we'll find out. We'll find out. I'm a critical engine when we suck in all the Twitter data and do predictive analytics in any vertical way. We can do similarization of IT. And we just get all the trend data and I can search people within there and some people. People sort. Yeah. We're a good city group. We're a good city group that we've got. We classify the individual. Yeah. I mean, it's your point about the innovation bubble and it's amazing how much new stuff is coming out. To us, our big trend read on the market is like the first web bubble. Do you really have it? Yeah. It just didn't happen on the evaluation. So, like, we see big data as too disruptive by itself. It's not one here or there. It's not like Web 2.1. It's everything, right? So, like, we think big data is going to create an industry. A brand new industry because it disrupts every part of the value chain. And so, everyone will talk to you whether it's analytics, like a tag-trink, or a gas, every vertical, every activity in the value chain is disrupted by big data. And, you know, I think the ability to instrument your business for the first time in history is never been done before. But I think we're also at the beginning of that trend, right? Because we've talked about the hardware disruption we've talked about now. Let's talk about the database analog in that layer. What's going to happen now is the predictive analytics, actually applications that have a heavy and elite component. So it's not just sort of the ability to crunch a big amount of data, but any industry business insight without having to know what you're doing, without having to allow ClickTech to find it out easily, but actually have applications that sort of practice. They say, oh, by the way, there's something fishy going on. I should take a look at that. That's sort of the next generation of things that we're talking about. Yeah, and I think, you know, I look at how hard it is to do that today, but the demand for that, and we're close on the technology side, so that, to me, says it's going to explode with a whole new set of applications. How about you spend much time, and John and I were out in Cambridge last week, just meeting with big data startups. You spend time in Boston in Cambridge, Mass? We do. You know, we spend, we don't have a dedicated person on the East Coast, but we travel. So we travel, I did a couple hundred thousand miles last year, and so did most of the guys and gals on the team. So we actually travel, and we've spent a lot of time on the East Coast. New York, in some way, is actually, is exciting to become more exciting now than Boston. Yeah, it looks a lot better. We spend a good amount of time in Boston. We have a bunch of portfolio companies in Boston. Okay, well, we're going to go to the keynote. Let's get the loud in here. Nino, thanks for coming on the show. Thank you for having us. Yeah, congratulations. Thanks for having us. Thanks for having us. Have a fun, great job. Thanks. See you right back. We're going to watch the keynote, and we're going to take a break. And after the keynote, we're going to have some commentary. We're streaming it live, so we are not allowed to broadcast the keynote. So we will tweet and bring you an update right after. So stay tuned here. Watch these replays from earlier segments. And right at the keynote, you'll hear Dave and I break down what McDermott said. We'll be right back.